THE PROBLEMS OF FINANCING GOVERNMENT CORPORATIONS IN GHANA
Government Corporation or parastatals are partly or completely financed by government. Some of these government funded parastatals operate in some private fashion. Government presence coming only in the form of control, directive and subvention. Example mass transit services of state or local government.
This research proper is on the “problems of financing government corporation (Tracas as a case study) in carring out this research, I intend to find out the extent to which commercial bank finance activities of Tracas, to ascertain the effect of inadequate funding of the corporations to provide adequate security on the obtaining of loan, to determine the extent to which the high interest rate charge by commercial bank affect the loan securing habit of the corporations. In the literary opinion, I intend elaborate on government participation in public corporation, the rationale, financial problem of the corporation and inadequate funding and it impact on corporation. The research methodology of data collection, presentation analysis and hypothesis testing will be primary and secondary data and also chi-square method.
It is expected that the finding will help to see the aspect of commercial funding of other corporation and TRACAS since lack of funding will militate against the operations of corporation. In the process of carrying this research, I am expected to face with some problems like time constraint, financial problem and unavailability of data. But inspite of this problems I will be able to gather some information which could solved the problem hampering the growth of the nation through the effectiveness of the government to Finance Public Corporation.
TABLE OF CONTENTS
1.1 Background of the study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research questions
1.5 Research hypothesis
1.6 Significance of the study
1.7 Scope and limitations of study
2.0 Review of related literature
2.1 Overview of government corporation finance
2.2 Government participation in public corporation
2.3 Rational of public enterprises
2.4 Problems of public enterprises
2.5 Issue of financing government corporations
2.6 Features of public corporation and their impact on their
policy and financial situation
2.7 Financial problem of public corporation
2.8 Commercial bank financing and interest rate
2.9 Inadequate funding and its impact on corporations
RESEARCH DESIGNS AND METHODOLOGY
3.1 Source of data
3.2 Location of data
3.3 Research population
3.4 Description of respondent
3.5 Procedure in collecting data
3.6 Validation of instrument for data collection
3.7 Method of data analysis
DATA PRESENTATION AND ANALYSIS
4.1 Analysis and interpretation of questionnaire
4.2 Testing of hypothesis
4.3 Statement of hypothesis 1
4.4 Statement of hypothesis 11
4.5 Statement of hypothesis 111
FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Summary of findings
Appendix A – Letter to respondents
Appendix B – Questionnaire
Public corporation are enterprises, which are partly or wholly owned by the government, which private enterprises have been unable to take care of due to lack of adequate capital.
Government have generally started playing a major role in economic development and in starting large enterprises in public sector. Many parastatals come into being when it was believed that rapid economic development required the state to take on the role of an entrepreneur/should also be know that government involvement in running public sector help in shaping its economy. Government ownership of these enterprises is to help improve its social and economic well being of her people and those amenities that the entrepreneurs cannot provide.
In any organization, there are so many components put together that make for an effective performance. One of the se components is fund. The problem that arises is the adequacy of the fund for effective oiling of the operations of an organisation, throughout its lifetime. Many organisations which started well at the initial stage have failed by the wayside die to shortage of available funds.
Public enterprises could be classified into four categories, according to the degree of government participation in ownership and intervention in management. We have the governmental departments or ministries and agencies like INEC, NBTE. Government invested enterprises where the government held at least 50% of the equity and appoint management. Subsidiary company of government invested enterprises which allow the government to invest indirectly through government invested enterprises and others. And also government back enterprises where the government hold less than 50% of the stock. In developing nation there is a general believe that government should own and control enterprises; and government gave majority control of them appoint top management.
Over the past decades, the number and variety for public enterprises in developing country like Nigeria, the overall performance of these enterprises have been rather disappointing. They have suffered staggering loss thereby becoming a major drain on national budgets and the principal sources of heavy external borrowing. They have equally failed to generate the expected job opportunities. The public enterprises have been pioneers in strategic and technology intensive field and through the price of public sector product such as coal or electricity have also had a significant impact on overall price levels.
However, the following have contributed to the poor performance and poor efficiency in these enterprises:
- Obscure and sometimes conflicting managerial goals.
- Inadequate management accountability and autonomy.
- Excessive government accountability and autonomy.
- Excessive government interference in day to day management
- Poor personnel and incentive system
- Inappropriate pricing and credit policies
- Poor financing
The have contributed to poor performance of public enterprises. The financing and management of these parastatals caused a serious problem in our economy. Its only very few government enterprises that are independent in the issue of financing, other solely depend on government. The fate is yearly tied on the national budgets because they are financed by way of grants, subsidies or loan from government, if budget is delayed or cut down proposed expenditure, the funds of these enterprises will also be affected. This will determine their performance for that very year whether surplus or deficit is to be made.
1.1 BACKGROUND OF STUDY
The transport company of Anambra state Limited (TRACAS) was launched on 12th September 1988 by the military governor of Anambra State Col. Robert Nnaemeka Akonobi under the auspices of the Federal Urban Mass Transit Programme (FUMTP). This programme is aimed at alleviating the transportation problem of the people, which was occasioned by the dearth of commuter vehicle (buses, cars).
To ensure that the TRACAS was incorporated on the 8th December 1988. the government has 30% share while remaining 70% will go to the public. Staff will also own shares in the company. The motto of the company is ‘’service and comfort’’.
THE COMPANY’S FLEET
The transport company of Anambra State Limited has a fleet of 70 vehicles as the time of writing this project, comprising the following:
- 10 Peugeot 504 pick up van
- 10 Peugeot J-5 bushes
- 20 Mercedes benz 6080 buses
- 10 Mercedes Benz 0365 buses
- 20 L300 Mitsubishi buses
A. INTRA-CITY SERVICES
The intra-city service is in operation in Enugu and Onitsha, in Onitsha the company operation nine routes. Each of these routes is depicted with a particular number/colour for easy identification by commuters.
While on the inter-city service, seven major routes are operated to major town in the state they are:
Awka – Ekwuluobia
Awka – Enugu
Awka – Onitsha
Awka – Nnewi
Awka – Nnobi
Awka – Abakiliki
Awka – Nsukka
B. THE COMPOSITION OF THE BOARD
The composition of board is a follows:
- The commissioner for works, housing and transport Anambra State.
- The commissioner for works, housing and transport Anambra State.
- The general manager of the company
- The accountant of the company
The commissioner is representing the government while the other two are representing the company. The management team is appointed by the board of directors. The composition is as follows:
- General manager
- Deputy general manager
- Operation manager
- Public relation officer
- Purchasing officer
- Administration manager
As the time of writing the project work the above board members are in office. The company has the following departments.
- Administration department
- Account department
- Traffic department
- Stores department
- Workshop and engineering department
- Security department
- Internal audit department
- Planning and monitoring department
C. ORGANISATION CHART OF TRACAS
Sources: Tracas Journal
1.2 STATEMENT OF THE PROBLEM
The problem facing government parastatals are of difference factors. The major of which is the lack of adequate financing. Due to inadequate fund, government parastatal tends to operate at a low capacity or inefficiency thus making services being rendered to the general public poor.
Transport company of Anambra State for instance has been having problem of financing: is it because government does not finance them the way they should? Does the poor financing effect their earning for transportation and other source of revenue? Is it because of poor state of economy that government earning from both domestic and foreign sources were affected, and government subvention to corporation were fell drastically?
1.3 OBJECTIVE OF THE STUDY
The purpose of this study is to know the financing problem of Government Corporation, which actually have hindered their efficiency and profitability and ways it can be solved. The objectives are
- To highlight the importance of adequate funding of Transport Company of Anambra State to the improvement of services offered to its customers
- To determine the extent to which the high interest rates charged by commercial bank affect the loan seeking habit of Transport Company of Anambra State.
- To ascertain the affect of inability of Transport Company of Anambra State to provide adequate security on the obtaining of finance.
- To ascertain the effect of inadequate funding of transport company of Anambra State on its activities and performance.
- To determine the extent to which commercial bank finance the activities of Transport Company of Anambra State Limited.
1.4 RESEARCH QUESTIONS
From the foregoing, this study will provide the answers to the following question:
- What effect does funding of Transport Company of Anambra State to provide and adequate security affects the obtaining of loan?
- To what extent does commercial bank finance the activities of Transport Company of Anambra State?
- Does the high interest rate charged by commercial banks affect the loan seeking habit of TRACAS?
- Does adequate financing of TRACAS have any significant importance on the improvement of its services to customers?
1.5 RESEARCH HYPOTHESIS
H0: Insufficient finance from commercial bank does not significantly affect the activities of Transport Company of Anambra State.
H0: Inadequate funding of TRACAS has no significant effect on its activities and performance.
H0: The inability of TRACAS to provide adequate security does not significantly affect its ability to obtain loan from financial houses.
H0: The high interest rate charged by commercial bank have no significant influence on the loan seeking habit of TRACAS.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this research study tends to enrich the researcher with unravelling the funding problems of the corporation (TRACAS) in particular and other corporations in general. It is significant to study the aspect of commercial funding of TRACAS since lack of funding will militate against the operations of the corporation and hence the general public who are the beneficiaries of TRACAS will be left unsatisfied.
It is also of significant to study this aspect of research because lack of funding will ground operations in Transport Company of a Anambra State. This will make members of the staff redundant. TRACAS as we all know play an important function in providing means of transportation for the corporation, to go out of operation due to lack of adequate funding will be a big blow to the state government.