Effect Of Corporate Governance on the Performance of State-Owned Enterprises in Zambia

Abstract

A state-owned enterprise (SOE) is a legal entity created by a government to engage in commercial activities on behalf of the government. State-owned enterprises are an important part of most economies and make an important contribution to national development processes. In Zambia, state-owned enterprises operate in key sectors of the economy, including agriculture, forestry, energy, financial services, manufacturing, mining, real estate, tourism and ICT. The Auditor General's latest report named 13 state-owned companies as having suffered losses of K1,854,902,817 during the reporting period. The 2022 Auditor General's report also highlighted a number of financial and operational challenges, showing that the performance of state-owned enterprises in Zambia remains unsatisfactory. Therefore, this study was formulated to examine the impact of corporate governance on the performance of SOEs.  A sample of 147 respondents was selected from 33 state-owned enterprises using the Taro Yamane formula, resulting in a 100% response rate. A mixed methods approach was used and the data was analyzed using SPSS from which correlation and summary coefficients were used to measure the relationship between the variables. The correlation coefficient of 0.612 from the SPSS results indicated that there is a strong positive relationship between the structure and appointment of the board, internal controls and the performance of SOEs. Furthermore, the R-squared (determination coefficient) of 0.375 from the SPSS results suggests that the performance of SOEs is improved by good corporate governance, which is 37.5% influenced by the structure and appointment of the board and internal controls and 62.5% can be linked to other factors that were not taken into account, such as micro and macroeconomic factors, lack of employee motivation and poor work culture in state-owned enterprises, among others. Therefore, the board should consist of members who have knowledge of the industry in which the SOE operates, and they should be appointed according to the policies of the respective SOE so that they can provide strict internal control systems that can benefit the better performance of state-owned companies.