PEMC engages PEs to comply with new Act and budgeting framework By Laura Pillay |25 August 2023
PEMC principal analyst Colette Jean-Louis making a presentation (Photo: Laura Pillay)
The Public Enterprise Monitoring Commission met with board and management personnel from public enterprises yesterday, to provide a comprehensive overview of the provisions of the newly enforced Public Enterprises Act 2023, and the requirements in preparing the 2024 to 2026 budgets.
This was done in two sessions, held in the morning and afternoon, at the STC conference room.
In light of the enactment of the new Act, the focal point for the second session was the changes introduced by the Act, and the implications of its provisions. Through the presentation, the Public Enterprise Monitoring Commission (PEMC) provided a comprehensive overview of the recent revisions, including its new roles and responsibilities.
Acting chief executive of PEMC, Kalum Bandara remarked that there were a number of loopholes in the old law, as well as a number of areas that needed to be improved.
The Act which came into effect on June 1, comprises new provisions, aimed at strengthening the governance structure of public enterprises (PEs). With its enforcement, all public enterprises are governed and monitored under the same process, regardless of which law they are established under.
The new legislation introduces new procedures for the appointment of boards of directors (BoDs) and chief executive officers (CEOs), with the former being appointed by the National Nominations Committee, while the latter will be appointed following a competitive recruitment process.
PEMC is progressively advocating for results-based management and visionary resource allocation in PEs. As such, BoDs and CEOs are expected to sign performance contracts with the responsible minister and BoDs, in accordance with the new legislation.
With the new requirement for SOEs to have a medium-term financial strategy (MTFS), the morning session centered on the budget preparation requirements. BoDs and PE management are encouraged to formulate budgets and projections that are directly linked to their mandate, strategic priorities and geared towards achieving set targets established by the BoDs.
“The way they used to prepare the budget, for most PEs the focus was very short-term. When they focus on the short-term, the volatility is very fragile and they tend to forget their mandate, and instead tend to focus on survival,” said Mr Bandara.
“With the new way of budgeting, the MTFS, we are focusing not only on short-term survival, but also on growth and sustainability. They will outline their mandate, their mission and vision, and their projected financial statements. It will help the government to get a clear idea of how much dividends to expect from the PEs, while the public can get an idea of the tax implications for the PEs,” Mr Bandara stated.
Mr Bandara added that the new budgeting framework is flexible and long-term oriented, catering for risk-management, with each enterprise responsible for listing the potential risks which could impact on the achievement of set targets.
According to Mr Bandara, the new provisions empower BoDs and give them more room and authority to manage the enterprises. The BoDs bear the responsibility of approving the PEs’ budget, and devising strategies towards delivering on the mandate.
To ease the budget preparation process, PEMC has made available a template, the MTFS, to PEs comprising all the necessary requirements. The finalised budgets will be submitted to PEMC who will in turn submit it to the Ministry of Finance, National Planning and Trade for approval by Cabinet, and subsequently, the National Assembly.
There are presently 27 PEs which are guided under the new Act. Banking and financial institutions, namely, Nouvobanq, Seychelles Commercial Bank and the Housing Finance Company are excluded.
