The Strategy and Governance of SOEs in Africa: Lessons Learnt and Policy Implications

A widely held view is that state-owned enterprises (SOEs) are disastrous for economic development on conceptual and empirical grounds. And indeed, there are prominent examples that confirm how bad they are. However, this paper attempts to turn some of this on its head and argues that, despite obvious evidence that many SOEs are awful, there are good reasons and sound evidence to support a very different argument. With a focus on the challenges and lessons of the governance of SOEs in Africa, this paper argues, first and foremost, that ownership per se does not tie up firmly with corporate performance as much as universally supposed. But more than this, SOEs are at the heart of transformation and economic catch-up, as they have been in many places – a perspective underpinned by the developmental role of the state in accelerating capitalist development. SOEs are playing increasingly prominent roles worldwide in the early twenty-first century. Second, developing productive and high-performance SOEs requires a more disciplined state that promotes the constructive political condition for the productive role of SOEs, restrains harmful political interventions, and articulates the public policy purpose of the SOEs. Third, a vibrant SOE sector necessitates enhancing the governance system – both the supervision and administration of SOEs – and developing corporate governance within each SOE that constantly evolves with the best international experiences. Fourth, firms’ performance requires a complex and painstaking effort to build capabilities and strategies specific to the industry in an increasingly intense international competitive force. However, this undertaking is more complex than often thought, and the governance of SOEs and a disciplined state are necessary, but inadequate. This paper presents empirical evidence, draws lessons from across the continent, and combines these with learning from international experience. It builds on a qualitative and comparative research approach, utilising a mix of document reviews and selected qualitative interviews, with a particular focus on policy lessons. SOEs are dominant players in South African and Ethiopian economies and are suitable cases from which to extract policy lessons.