State firms lose Sh400 billion, but it’s not all doom and gloom

Dar es Salaam. Seven State-owned enterprises collectively incurred a loss of nearly Sh400 billion in 2022/23, according to the latest report by the Controller and Auditor General (CAG).

However, there seems to be light at the end of the tunnel as losses registered by some of the entities went down sharply compared the preceding financial year.

Also, the number of reports with unqualified (clean) audit opinions increased to 99 percent of all reports during the period under review.

This suggests that the number of reports that were issued with qualified (unsatisfactory) audit opinions by the CAG during the period was only one percent.

The 2022/23 report, which was submitted on Thursday to President Samia Suluhu Hassan by CAG Charles Kichere at Chamwino State House in Dodoma, shows that three of the loss-making entities have seen their losses go down. They are Tanzania Railways Corporation (TRC), National Health Insurance Fund (NHIF) and Tanzania Telecommunications Corporation (TTCL).

TTCL made a loss of Sh19.23 billion in 2021/22, but the firm lost only Sh894 million in 2022/23, a reduction of 94 percent.

In essence, the company, which received Sh4.55 billion in government grants in the period under review, could be on the right path to the break even and start making profits soon.

TRC recorded a loss of Sh190.01 billion in 2021/22 fiscal year, but the amount dropped by 47.32 percent to Sh100.70 billion in 2022/23.

Mr Kichere said NHIF also saw its loss decrease to Sh156.77 billion in 2022/23 from Sh205.95 billion.

“The fund suffered a loss because it has yet to be paid Sh208 billion by the government. Efforts are being made to clear the debt, but the fund is bearing a big financial burden. Pensioners and their spouses are also benefiting from NHIF without contributing anything, causing a loss of Sh84.7 billion annually.”

The burden of non-communicable diseases caused NHIF a Sh137.8 billion loss, Mr Kichere added.

Losses posted by Air Tanzania Company Limited (ATCL), Tanzania Railways Corporation (TRC), Tanzania Posts Corporation (TPC) and Tanoil Investment Ltd rose in 2022/23.

ATCL, which has received substantial funding through the government’s ongoing revival strategy, saw its loss surging by 61 percent to Sh56.64 billion, compared to Sh35.2 billion of the previous years.

“The loss widened even though the company received government grants worth Sh31.55 billion to boost its operations,” said Mr Kichere.

The government has been injecting money to revive the national carrier whose business is linked to tourism activities.

Tanoil recorded a loss of Sh76.56 billion, rising from only Sh7.84 billion that was reported previously.

Mr Kichere said the company’s loss is associated with the blockage of its oil after failing to pay the oil suppliers. He also attributed the loss to the high cost of oil storage which more than doubled to Sh12.9 billion. The company also sold only 112 million litres of oil compared to 262 million litres previously.

TPC recorded a loss of Sh1.34 billion during the 2022/23 financial year compared to a profit of Sh16.21 billion that was generated after selling its properties.

“The government should now ensure that the state entities are managed by professional and business-minded employees for efficiency. The government should also ensure it oversees its firms by appointing board members who are professionals in the respective sectors and business skills,” Mr Kichere said, adding that the corporations have managerial challenges.

The CAG’s report also shows that out of the 1,209 audit reports, 1197 received unqualified opinion.

This represents 99 percent of all reports. Nine other reports received qualified while one and two reports received adverse and disclaimer audit opinions respectively.

Speaking after receiving the CAG report, President Hassan emphasised that the reports aim to enhance transparency and accountability in the government and its institutions.

She stated that favourable reports contribute to the country’s advancement in ratings.

“The investments we are making in these institutions instil trust among citizens and are recognized regionally and internationally. Moreover, these investments lead to enhancements within the government and public agencies, consequently reducing losses,” the Head of State said.

President Hassan highlighted that the CAG reported a notable increase in unqualified (clean) audit opinions by 99 percent. This, she said, was encouraging.

“The reports aid in revenue collection by closing corruption loopholes. I commend the PCCB (Prevention and Combating of Corruption Bureau) for its novel approach to engaging with citizens to identify and address issues. Additionally, the CAG has identified challenges and proposed solutions,” she added.

Experts say good governance was key to the country’s development.

An associate professor from the University of Dar es Salaam, Abel Kinyondo, highlighted the detrimental impact of poor governance on various institutions, emphasizing the need for reform.

“It is important for these institutions to adhere to principles of good governance if they are to achieve financial sustainability. Management changes may be necessary to ensure effective governance and profitability,” he said.

The chief executive officer of the Institute of Management and Entrepreneurship Development, Dr Donath Olomi, echoed similar sentiment, emphasizing the necessity of robust management systems. “Government involvement in instituting strong management practices or engaging private sector partnerships can enhance governance and profitability.”

Independent financial analyst Christopher Makombe underlined the urgency of addressing inefficiencies and mismanagement in public enterprises to mitigate economic and social costs. He advocated for rigorous scrutiny of performance and governance structures, emphasising merit-based appointments to governing boards.

Mr Kichere revealed while delivering the report commendable adherence to accounting standards, with the majority of audit reports being clean. However, he urged continued efforts to implement recommendations for efficient government spending and development.