State-owned enterprises saddled with losses

He noted that eight enterprises had debt ratios of more than 50% implying that their total assets were not sufficient to cover their total debt.

He identified those enterprises in red in terms of debt ratios as NHCCL, UEGCL, UETCL, UEDCL and NWSC indicating that more of these enterprises’ assets are being financed by debt.

On a positive note, some entities have reduced their debt-to-asset ratio in the year under review compared to 2015/16.

For state entities with more than 50% debt ratio, the AG says, there is need to strengthen their internal operations and ensure proper balance of use of debt.

The other indicator that the AG considered was; Return on Assets (ROA) – a measure for the profitability of an enterprise relative to its total assets and how efficient management is using the enterprise’s assets to generate earnings.

The AG report indicates that some enterprises performed worse in FY2016/17 than the previous year on ROA. These includes; Kilembe Mines Limited, Nile Hotel International Limited, NEC construction Works and Engineering. Overall, compared to the previous year (2015/16), 11 entities had improved their ROA, the AG report reads in part.

“Government should review the poor performing entities with a view of coming up with a strategy to revamp performance or else recommend divesture,” he said.

One of the components in the revamping strategy, the AG says, would be for government to capitalize and revamp the operations of some of these enterprises since its policy to invest in critical sectors of the economy makes a lot of sense.

Responding to the issues raised by the AG, Finance Minister in charge of investments, Evelyn Anite, told The Independent that the government respects the AG report findings and would study enterprises and make necessary adjustments regarding their operations.

She said that the Ministry of Finance, the Office of the Prime Minister and that of Public Service are working on proposals for possible merging of some of the state enterprises and agencies as directed by President Yoweri Museveni towards the end of last year.

“The Auditor General’s report is coming as a reinforcing measure or tool in line with the President’s directive,” Anite said.

Independent experts hold similar views but differ in some ways. William Nyakatura, the corporate advisor at the African Alliance Uganda Limited and Lawrence Bategeka, the Member of Parliament for Hoima Municipality and vice chairperson for the committee on national economy in Parliament told The Independent that closing non-performing enterprises would not be a viable option as it would not only increase unemployment but also create a monopoly market for private players.

“State enterprises have to be there to check prices in the market,” Nyakatura said.

Bategeka said: “Divesture was advanced for clear reasons and that has never gone away; instead of us having these loss making enterprises, we would rather have alternative ways of delivery of those services through private sector partnerships.”