Senegal - The para-public sector

Document of The World &ink FOR OFFICIAL USE ONLY e Report No. 1619a-SE SENEGAL - THE PARA-PUBLIC SECTOR REPORT June 1, 1977 West Africa Programs Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - CFAF Franc US$ 1 - CFAF 245 CFAF 1 - US$0.00408 Abbreviations ACC - Agent Comptable Central ACP - Agent Comptable Principal BNDS - Banque Nationale de Developpement du Senegal BOM - Bureau d'Organisation et Methodes CEP -- Centre des Etablissements Publics COF - Controleur des Operations Financieres CVCCEP - Commission de Verification des Comptes et de Controle des Etablissements Publics ESGE - Ecole Superieure de Gestion d'Entreprises FCP - Controleur Financier de la Presidence OHLM - Office des Habitations a Loyer Modere ONCAD - Office National de Cooperation et d'Assistance au Developpement OPT - Office des Postes et Telecommunications PAD - Port Autonome de Dakar RCFS - Regie des Chemins de Fer du Senegal SAED - Societe d'Amenagement et d'Exploitation du Delta SERAS - Societe pour 1'Exploitation des Ressources Animales du Senegal SODEFITEX - Societe pour le Developpement des Fibres Textiles SODEVA - Societe de Developpement et dd Vulganisation Agricole SOMIVAC - Societe pour la Mise en Valeur de la Casamance SOFIDAK - Societe pour la Foire Internationale de Dakar SONACOS - Societe Nationale pour la Commercialisation des Oleagineux du Senegal SONED - Societe Nationale d'Etudes de Developpement SOSAP - Societe Senegalaise d'Armement de Peche SOTRAC - Societe des Transports en Commun du Cap-Vert  FOR OFFICIAL USE ONLY SENEGAL - PARA-PUBLIC SECTOR REPORT Table of Contents Page No. Foreword SUMMARY ... .......................................... i-vii I. INTRODUCTION ................................. ....... 1 II. ECONOMIC ROLE OF THE PARA-PUBLIC SECTOR ............. 8 III. THE ORGANIZATION OF THE PARA-PUBLIC SECTOR ........ . 10 A. Evolution of Public Enterprises ................. 10 B. Evolution of Mixed Companies ......... ........... 14 C. Other Agencies Supervising and Monitoring the Para-Public Sector ..................................... 17 IV. PROBLEMS OF THE PARA-PUJBLIC SECTOR .................. 20 A. Government Strategy and Organization .. .......... 20 B. Economic and Financial Problems ....... .......... 23 C. Management Problems ............ .. ............... 27 V. SUB-SECTOR STUDIES ...... ........................... 29 A. Public Service Institutions ... ................. 29 B. Agriculture and Fisheries ................... .... 31 C. Tourism ......................................... 32 D. Other Sectors ....... ............................ 32 VI. THE NEED FOR A FUNCTIONAL APPROACH TO THE PARA-PUBLIC SECTOR ................... .................. 32 A. Sector Strategy .......... ......... 32 B. Monitoring the Para-Public Sector ....... ........ 34 C. Control Function .............. ................. 37 VII. ALTERNATIVES TO THE PARA-PUBLIC SECTOR .............. 39 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2 ANNEXES Page No. ANNEX I: Tables ..................., 42 ANNEX II: Public Service Companies - Case Studies ........ 77 Appendix I - Societe Nationale d'Exploitation des Eaux du Senegal (SONEES) .... .......... 78 Appendix 2 - Regie des Chemins de Fer du Senegal 87 Appendix 3 - Port Autonome de Dakar (PAD) .... ........ 92 Appendix 4 - Office des Postes et Telecommunications du Senegal (OPT) ...................... 98 ANNEX III: Agriculture, Fisheries and the Parapublic Sector ........................................ 103 ANNEX IV: Tourism Sector ................................. 117 ANNEX V: Management Training and Development .... ...... 129 ANNEX VI: Other Nations' Experiences in the Management, Control and Direction of Their Public and Mixed Enterprise Sectors .... ................. 144  FOREWORD A Bank mission composed of Messrs. Jonathan Brown (mission chief), Ousmane Diene (Bureau Organisation et Methodes, Government of Senegal), Patrice Dufour-Le-Chatelier (Young Professional), Raymond Rabeharisoa (Loan Officer), and Charles Vuylsteke (Legal Department) visited Senegal from June 21 to July 9, 1976 to evaluate the para-public sector. Mr. Paul Ballard (Consultant) assisted with report writing. A preparation mission of Messrs. Brown and Willem Bier (IMF) had earlier collected basic data on the sector in April/May 1976. The conclusions of this report, which repre- sent the views of the World Bank and do not engage the Government of Senegal or the IMF, were discussed with Government in November 1976. The purpose of this report is to provide (i) basic information on the para-public sector; (ii) a functional and technical analysis of its organization; and (iii) an estimation of its economic and financial performance, as an input for Government to use in deciding the role public enterprises and mixed companies should play in the Senegalese economy.   SUMIARY i. The Government of Senegal gives the para-public sector (public enterprises and mixed companies ) a key role in its economic strategy. Government participation in the ownership, management and control of en- terprises is only one of a number of ways to promote development, but the para-public sector, if well-run, can be used inter alia to: control key sectors of the economy and services; encourage investment where private initiative is lacking; acquire new technology and managerial expertise; attract foreign financing from private and foreign official sources which might not otherwise come to the public administration; and develop an or- ganizational form which is more flexible than Government's administrative services. Senegal thus far has not defined an overall para-public strategy but has approached the sector on a case-by-case basis. This report analyzes the organization of the para-public sector and its economic and financial relations with Government focusing on four commercial and industrial public enterprises (OPT, OHLM, Senegal Railways and the Port of Dakar), the agri- cultural development agenCies (ONCAD, BNDS, SAED, SODEVA, SODEFITEX and SOMIVAC) and 134 other mixed companies in which Government has a direct or indirect participation. ii. The para-public sector has grown rapidly in the recent past with over half of the 97 companies whose establishment dates are available created since 1973. This growth was financed largely by high revenues from phosphates and groundnuts in the 1973-1975 period and from borrowing on the international money markets. Decreased revenue from these sources may not permit future expansion at such a rapid rate unless the generation of internal funds from the sector improves. iii. Total Government enuitv investment in the para-public sector as of 1976 was CFAF 18.4 billion concentrated in banking, industry, tourism, public utilities and agriculture. Annual Government financial contribution to mixed companies (investments, subsidies, loans and advances) has grown from CFAF 1.4 billion in 1973/74 to CFAF 11.0 billion in 1975/76, while financial flows to the four commercial public enterprises have averaged about CFAF 2 billion in recent years. Governmentt assistance has financed the substantial resource deficit which amounted to CFAF 8.8 billion in 1974 for the whole para-public sector excluding phosphates. iv. While the transfer of funds from Government to the para-public is substantial, it is not abnormal, within the limits of public finance re- sources, for a growing nation to invest in productive projects through public enterprises and mixed companies. However, the important considerations are: (i) is the money used for productive investments or to keep deficitary com- panies going; (ii) are para-public investments adequately screened before they are made and balanced against overall financial resources and alterna- tive investment opportunities; (iii) is the sector monitored by Government to assess its performance; and (iv) does Government have the appropriate con- trol mechanisms to supervise the sector. This report focuses on (ii), (iii)  - ii - and (iv) above and concludes that major improvements are needed, particularly for mixed companies but also for public enterprises. With regard to (i) the lack of data and the newness of the majority of companies make it diffi- cult to come to an overall assessment of the sector's performance although the sector is clearly not self-financing. Such a performance assessment is urgently needed but can only be made if Government establishes a better data collection and analysis capacity. Economic Role of the Para-Public Sector v. As compared to an estimated 17-20% in 1970, the para-public sector accounted for 43% of value-added in the modern sector in 1974, 15% attributed to public enterprises and 28% to mixed companies. Government's direct invest- ments are concentrated in a relatively small number of large companies -- 33 enterprises accounting for 87% of Government's portfolio in 1976. In 1974, 94% of the aggregate value-added of the para-public sector was generated by the 20 largest companies which were responsible for 40% of the value-added of the entire modern sector. The sector's 19,300 employees in 1974 repre- sented 31% of total modern sector employment and its exports were 36% and its current imports were 30% of total modern sector exports and imports re- spectively. Para-public sector short term borrowing has increased at an annual average rate of 64% since 1971 representing more than half of all public and private borrowing. Treasury loans and advances for the sector have become an increasingly serious drain on public finances with outstand- ings increasing from CFAF 2.1 billion in 1970/71 to CFAF 16.7 billion in 1975/76. The share of foreign debt related to the acquisition and exploita- tion of para-public companies climbed from US$9.6 million (16% of total out- standing disbursements) in 1965 to US$163.5 million (67%) in 1975. Para-Public Sector Organization vi. In addition to their supervision by technical ministries, public enterprises were brought under the strict financial control of the Centre des Etablissements Publics (CEP) in 1966. This a priori financial control was necessarily stringent at the time but it has increasingly hampered normal public enterprise operations, especially for those companies whose good performance should entitle them to have a posteriori financial control. The Commission for Auditing and Inspecting Public Enterprises (CVCCEP) has provided in-depth but irregular auditing since 1972 and has brought about important changes in individual enterprises; it has not yet trained a per- manent Senegalese staff. Other measures to assist public enterprises have not worked well in practice, and control generally has been rather repressive probably shielding poor performance and not encouraging better operations by companieso The experiment with Government Commissioners to exercise some of the CEP