Africa: Addressing debt challenges in State-Owned Enterprises

In a concerted effort to tackle the growing challenges of State-Owned Enterprise (SOE) debt in Africa, the United Nations Economic Commission for Africa (ECA) hosted a high-level workshop in Pretoria from 21 to 23 August 2024. The event brought together finance policymakers, industry experts, and international organizations to share best practices and develop strategic solutions for effective SOE debt management across the continent.

The workshop brought together officials from the Ministries of Finance of Cameroon, Ethiopia, Ghana, Nigeria, South Africa, and Zambia, along with representatives from UNDP, the African Forum and Network on Debt and Development, and major state-owned entities. The focus was on enhancing governance frameworks, improving financial oversight, and exploring privatization options.

Participants discussed the critical role of SOEs in driving national development, acknowledging that while these entities have the potential to bolster economic growth and address market deficiencies, they also pose significant risks to government finances. The workshop highlighted that poorly managed SOEs can lead to severe financial burdens, potentially destabilizing national budgets and contributing to the deterioration of sovereign credit ratings.

“In many African countries, SOEs play a vital socio-economic role. This workshop comes at a critical time for Africa’s development, with both SOE and government finances under pressure amid cascading crises and multiple shocks,” said Zuzana Schwidrowski, Director of the Macroeconomics, Finance, and Governance Division (MFGD) at ECA, in her opening remarks.

Ms Schwidrowski noted that “critical public services tend to deteriorate alongside SOEs’ financial difficulties, leading to a downward spiral of weakened service delivery and growth.” That is why ECA organized this capacity-building workshop “to develop practical solutions and options for Africa,” she added.

The discussions also underscored the importance of corporate governance, risk management, and internal oversight as drivers of reform. Participants shared successful approaches to SOE debt management and identified key barriers, including challenges related to mandate delivery and the intricate links between sovereign and SOE credit ratings.

Lee Everts, Chief of the Macroeconomic Analysis Section in MFGD, emphasized the need for a multifaceted approach to address the rising SOE debt. “Financial restructuring, governance and operational improvements, and in some cases, privatization or asset sales, are essential steps to mitigate the risks posed by SOE debt,” she said.

The workshop, organized by ECA’s Macroeconomics, Finance, and Governance Division in collaboration with its Sub-Regional Office for Southern Africa, is part of a broader series of capacity-building initiatives aimed at strengthening public debt management across Africa. ECA remains committed to supporting African nations in implementing innovative and robust solutions to the persistent challenges posed by SOE debt and related government liabilities.

Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).