State-Owned Enterprises (SOEs) in Ghana are facing severe financial distress, with a staggering GH₵232.69 billion in liabilities and a total revenue of GH₵103.79 billion in 2024.
Despite possessing substantial assets that contribute significantly to Ghana’s nominal Gross Domestic Product (GDP), these enterprises are struggling to achieve profitability.
The State Interests and Governance Authority (SIGA) presented a bleak financial report, revealing that while SOEs contribute significantly to the national economy, they are unable to sustain their operations without accruing massive losses.
The total operating expenses of these enterprises reached GH₵105.54 billion, exceeding their revenue and resulting in a cost recovery ratio of only 0.98.
Concerning financial losses
A major cause for alarm is the profit after tax, which recorded a significant loss of GH₵8.54 billion, highlighting persistent financial inefficiencies.
This loss is a drastic increase from the previous year’s GH₵1.36 billion deficit, indicating a deteriorating financial position.
SIGA’s analysis of key financial indicators also painted a worrisome picture.
The Return on Assets (ROA) for SOEs was reported at -8.1%, while the Return on Equity (ROE) plummeted to -8.1%, both figures indicating negative performance.
Gender representation in SOEs
Beyond financial concerns, the report also shed light on gender representation within SOEs.
It revealed a stark gender imbalance, with 76.03% of employees being male and only 23.97% being female.
This data has reignited discussions on the need for increased female participation and gender equity within state-owned enterprises.
Implications of SOE financial woes
The continued financial strain on SOEs has significant implications for the economy and public sector governance:
Increased fiscal burden
With liabilities reaching GH₵232.69 billion, the government may be forced to divert funds from critical sectors like healthcare and education to sustain these enterprises.
Job security concerns
SOEs employ a large workforce, and their financial struggles may result in job cuts, affecting thousands of employees and their families.
Potential privatization or shutdowns
As President Mahama has indicated, underperforming SOEs face potential mergers, privatization, or closure, which could lead to job losses and economic disruptions.
Gender imbalance in workforce
The report highlights a significant gender disparity within SOEs, with men constituting over 76% of the workforce.
This calls for urgent policy interventions to promote gender diversity and inclusivity.
Impact on Ghana’s economic growth
With SOEs contributing 25% to Ghana’s GDP, their financial instability could slow economic growth and limit resources for infrastructure and social services.
Policy shift towards accountability
The report strengthens the case for recent government initiatives to improve financial discipline, enhance performance management, and enforce strict regulations through SIGA.
Enforcing financial discipline
The alarming losses and inefficiencies have reinforced the government’s resolve to overhaul SOEs.
With SOEs struggling to break even, the government is under increasing pressure to introduce accountability measures that will ensure these enterprises deliver value to the state.
The financial losses reported by SIGA highlight the urgent need for decisive action, with measures such as restructuring, performance monitoring, and even privatization on the table.
What lies ahead?
The SIGA report is expected to play a critical role in shaping government policy on SOEs moving forward.
With Ghana’s economy at a critical juncture, the financial viability of SOEs is not just a matter for policymakers but a concern for all Ghanaians.
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