"CONTRACT-PLAN' POLICIES IN THE TRANSPORT SECTOR: A Case Study on Senegal ABDOUL AZIA DIA

Transcription

1 "CONTRACT-PLAN' POLICIES IN THE TRANSPORT SECTOR: A Case Study on Senegal ABDOUL AZIA DIA

2 INTRODUCTION The key words for any policy aimed at ensuring the maximum utilization of the limited resources of African countries should be economy, efficiency and effectiveness. Economic and financial recovery policies are being implemented everywhere in Africa under the auspices of the World Bank and the International Monetary Fund and actual achievements fall far short of expectations. This crisis is therefore affecting all sectors in general and the transport sector in particular. Since States can no longer subsidize the structural deficits of public enterprises operating in the transport sector they have begun to sign contracts with such enterprises under which objectives are set, resources released and performance monitoring mechanisms are established. The current study will basically concentrate on the "contract plan" signed between the State of Senegal and the Societe Transport du Cap-Vert (SOTRAC) which until 1980 had the monopoly of public transport in the town of Dakar and its suburbs. In this chapter, the basic principles of "contractplans" will be recalled but particular emphasis will be put on the SOTRAC "contract-plan". The definition of a "contract-plan" The basic principles of a contract plan entail that the State shall set objectives for the enterprise: (a) Such objectives may be qualitative (improvement

3 of management, development of new markets etc....) or quantitative (increasing productivity or the turnover according to a particular rate, reducing personnel charges, etc.). The objectives and sub-objectives should be quantified so that the assessment of performance will be based on the gap between actual achievements and forecasts; (b) The length of the contract is three years. However, assessment shall be made each year to ensure the correct implementation of the terms of the "contract-plan". The contract-plan may be renewed at the end of the period depending on performance; (c) The objectives of the enterprise for the duration of the contract shall be specifically defined. It may be redefined in the course of the contract by mutual agreement between the two parties; (d) The "contract-plan" shall define the obligations of the public enterprise which may include the following: (i)a commitment to attain sound and balanced management by controlling operating expenditure in general and personnel expenditure in particular; (ii)reorganizing the financial situation to attain a balance between income and expenditure thus enabling the State to abolish or considerably decrease its subsidy; and (iii)improving the quality of service provided to the public; (e) The "contract-plan" shall also define the financial and administrative obligations of the State to

4 the contracting party. The State has thus to release the financial resources required to permit attainment of the objectives set within the stipulated deadlines. The State shall also wipe off its debts to the signatory corporation or recover its debts on the basis of a mutually agreed plan. Any other form of assistance from the State shall be stipulated in the contract. The State may increase the capital of the corporation or underwrite the loans made by that corporation; and, (f) Various other clauses shall be provided for in the "contract-plans" depending on the legal status of the corporation or the nature of its activities. Follow-up, preparation and assessment of "contracts-plans" A committee chaired by the Chairman of the study group on the parastatal sector - Groupe d'etudes sur le secteur parapublic (GESP) and comprising representatives of the contracting corporation, the State Inspection Unit and the Organization and Methods Office shall be responsible for preparing, monitoring and assessing the implementation of "contracts-plans". As indicated earlier on, such assessment shall be done every year. Should problems arise concerning the responsibilities of the contracting parties with respect to the implementation of the contract, the responsibilities of each of the contracting parties shall be specified and appropriate adjustments shall be made. Conditions of success The success of "contract-plan" policies depends basically on: (a) The clear and accurate definition of overall policy in the area of operation of the corporation;

5 (b) The clear definition of the objectives and subobjectives that should be quantified as far as possible; it should also be possible to monitor and accurately assess the objectives and sub-objectives; (c) The respect of the commitments of the State; (d) The amount of managerial autonomy allowed the heads of the public enterprises who should be appointed on the basis of their competence, merits and judged on the performance; (e) The respect of the corporation's commitments; and (f) The availability of reliable and credible data that could be used to draw up management charts. SOTRAC "CONTRACT-PLAN" SOTRAC is a mixed corporation in which the State has majority shares. It has a capital of 2.6 billion CFA francs. SOTRAC had already signed a "contract-plan" with the State for a period The main achievements were the following: a healthier financial situation; the rate of coverage of expenses by direct income increased from 83 to 89 per cent; purchase of 160 vehicles; construction of a second depot at Thiaroye; considerable investment in maintenance and the training of personnel; after inclusion of the State subsidy, there were positive results of 497 million CFA francs in and 189 million CFA francs in However, the corporation's financial situation was alarming because it had to run heavily into debt as a result of attempts to modernize its operations during eh

6 period of the "contract-plan". Nevertheless, the relatively positive results achieved by SOTRAC earned it a new "contract-plan" with the State on 5 June Objectives of the contract The general objectives of the contract-plan are directed towards: (a) Maintaining the achievements of public transport and monitoring transport demand in the light of the financial constraints of the corporation and of State policy in this sector; (b) Striving to achieve gains in productivity and control transport costs; and (c) Improving the financial situation of the corporation. In contrast the specific objectives are geared towards: (a) Increasing its production per kilometer by 6 per cent a year; (b) Reducing State subsidy in the medium term; (c) Moderate growth of 55 vehicles; (d) Focussing on maintenance of existing equipment; (e) Establishing modern management techniques;

7 (f) Strengthening the training programme; and, (g) Achieving 93 per cent coverage rate of expenses by income. Commitments of the State The State shall authorize the replacement of 115 buses and the purchase of 55 new vehicles i.e. a total of 170 buses at a cost of 5 billion CFA francs. As far as expenditure on infrastructure is concerned, SOTRAC may renovate the central workshops, the head office, and the Ouakam depot and the stations at an estimated cost of 1.04 billion CFA francs. SOTRAC may increase the prices of tickets by 10 francs from 1 January 1986 onwards by sector. A similar increase shall come into effect on 1 January 1987, the last year of the contract. Prices of monthly subscription shall be increased in the same proportions. The State and the urban community shall grant an annual subsidy of 900 million CFA francs of which 800 million will be paid by the State. The reason for this subsidy is because SOTRAC provides public services and it cannot charge the real prices. the subsidy should be paid before 31 March of each financial year. some of the commitments of the State that are outlined above are summarized in table I to this chapter. Commitments of SOTRAC With respect to the investments mentioned above, SOTRAC should seek, in liaison with the State, the mode of

8 financing that is most suitable for the financial objectives of the contract-plan. During the period of the contract-plan, SOTRAC should increase its production by at least 100 million kilometers. However, the cost price per kilometer in constant francs should decrease by 2.8 per cent in 1985, 2.7 per cent in 1986 and 3.5 per cent in As far as the personnel of the corporation is concerned, SOTRAC should contract its growth which should not be more than 3,290 in 1987 and establish a training, organization and management programme. The number of employees per vehicle should never be above a ratio of As far as financial objectives are concerned, SOTRAC should attain a balance in its operating account after inclusion of the subsidies granted by the State and the urban community of Dakar. In order to monitor the implementation of the "contract-plan", SOTRAC shall undertake to produce a management chart which will show all the information required and a biannual progress report (See table 2). Assessment and follow-up The follow-up committee is composed of the general management of SOTRAC, the "contract-plans" and follow-up units of the parastatal sector (Cellule des contracts-plans et de suivi du secteur parapublic), the Financial Controller Department (Controle financier), the Organization and Methods Office, the Ministry of Economics and Finance and the Ministry of Trade.

9 The Committee shall meet at least twice a year the first time in April to review progress in the implementation of the contract-plan and the second time in October to consider the performance of the past financial year. If the gaps between forecasts and performance are considerable, appropriate adjustments shall be made. In the event that economic, financial and social conditions make it impossible to fully comply with the terms of the contract, the corporation and the State should mutually agree to revise the contract. CONCLUSION The policy of contract plans introduced by the Senegalese Government is to improve the management of public enterprises. In order to do this, greater autonomy is accorded to the directors of enterprises. Specific objectives are set and the resources needed to attain those objectives are released. Depending on the results obtained, the State may renew the contract, review it or even scrap it. This author has highlighted the basic principles of contract plans and focused on the contract plan of SOTRAC which, together with the Regie des Chemins de fer du Senegal (RCFS) is one of the largest corporation in the transport sector. In this regard, the contract plan policy which up-till now was at the experimental stage is now being generalized. Even though it is too early to draw definitive conclusions from the implementation of contract-plans the author is hopeful that this chapter will stimulate

10 reflection on the concept, policy and application of contract plans to various sectors of the economy.

11 Table 1Indicators on investments to be made in vehicles and infrastructure (a)transport vehicles - mass transit buses 1984/ / /87 TOTAL Number replaced Increase Total number Amount in millions of frs (b)infrastructure Millions of Frs TOTAL Central workshops for renovating bodies Head Office Development of Ouakam facilities Stations The growth rate of potential transport demand is estimated at 6 per cent a year.

12 Table 2Indicators (management) Financial indicators The reorganization of SOTRAC's financial situation should lead to changes in the following financial ratios: 1984/ / /87 Total R1 = Total debts Net worth R2 = Financial expenses Turnover * Gross expected operating performance (in millions of CFA francs) * Performance after subsidies (in millions of CFA francs) * Outstanding debts (in millions of CFA francs) Indicators on staffing strength 1986/ / /86 Maximum SOTRAC staffing strength Indicators on production of services 1986/ / /86

13 Production of services (millions of kms)