The Causes of the Institutional Ineffectiveness of the Public Enterprises Governance System: An Exploratory Analysis Within Congolese Public Enterprises ()
1. Introduction
While it is difficult to assess the astronomical number of writings on the governance of large companies, it is clear that there is a shortage of work specifically on public companies in Africa, in this case in the Democratic Republic of Congo (DRC). However, it is this type of (public) company that is increasingly recording underperformance in Africa (Kataba & Matukama, 2022; OCDE, 2019).
One of the main causes is associated with poor quality institutions (World Bank, 2016). The question of the quality of institutions (Demirgüç-Kunt & Maksimovic, 1999) therefore arises acutely when it is decried in certain reports1 that do scientific work (Kataba & Matukama, 2022). The scientific work that has looked into this bears witness to the financial management of such companies facing a lack of rigor and non-compliance with legal texts, affecting several companies in the DRC2. For the authors mentioned above, such dysfunctions are attributable to endogenous factors (constant deterioration in the performance of the labor factor, negative operating results) and exogenous factors (lack of good governance practices).
While it is true, as we have just demonstrated, that the dysfunctions observed within public enterprises have attracted the attention of researchers, very few “scientific lenses” have studied such dysfunctions when it comes to university governance in the DRC (Bongo, 2015). Problems related to excessive political interference, board passivity and a lack of transparency have resonated widely in state-owned companies. This way of managing has meant that the members of the management committee of these public state establishments increasingly lack independence. In the DRC, these institutions face the incompleteness of school programs, repeated strikes by teachers, and late payments by employees in localities far from payroll centers (Marc & Franck, 2023). The main central question addressed by this article is: why is the institutional system of governance of Congolese public enterprises ineffective?
The objective of the article is to analyze the causes of the institutional inefficiency of the governance system of Congolese public enterprises. In short, it is a question of studying the causes behind the underperformance of Congolese public enterprises. Scientific works or reports on the governance of Congolese public enterprises, the findings, reveal an alarming governance of the companies concerned. We would like, through the results of this study, to oxygenate the political measures that can improve the governance of fragile states such as the Democratic Republic of Congo (DRC).
The remainder of the article is organized as follows. The first section focuses on the conceptual framework of the governance of public enterprises, in which we attempt to define public enterprise, explore the governance of public enterprises in Africa, and finally identify the financial and organizational dysfunctions at the origin of the underperformance of Congolese public enterprises. The second point presents the empirical protocol of the research the third section presents and discusses the results of the empirical investigations and the final section briefly concludes by stating the managerial implications, limitations, and some perspectives for future research.
2. The Conceptual Framework of the Governance of Public Enterprises
The conceptual framework of public enterprise governance is divided into three essential points. First, we attempt to shed conceptual light on the public enterprise followed by an exploration of governance. Finally, a presentation of financial and organizational dysfunctions is made to understand the institutional inefficiency of the corporate governance system.
2.1. Public Enterprise: A Distinct Concept from Private Enterprise
Baa and Chattoraj Kumar define the public sector as the segment of the economy that includes all enterprises owned and controlled by the state (Baa & Chattoraj, 2022). State control is particularly widespread in developing and emerging countries (OCDE, 2015). Public enterprises are very numerous and cover, among others, community services and infrastructure sectors such as electricity, gas, natural resource extraction, transport, and telecommunications.
For Edoun, these are economic units with legal and economic autonomy carrying out industrial and commercial activities and whose share capital is held in whole or mainly by a legal person under public law, occupying a major place in the economic development policy of States (Edoun, 2015). In contrast to the goal of profit maximization, public enterprises pursue several specific objectives, namely: services being offered free of charge or at a reduced cost (Guilherme, 2022).
For the European Union (EU), a public enterprise (also state enterprise) is “an enterprise over which the State or other territorial authorities can exercise directly or indirectly a dominant influence by virtue of ownership, financial participation or the rules governing it”. However, the public enterprise remains difficult to define, given the absence of a universal model, both national and international, of the notion (Jospin et al., 2024). In the context of this study, we favor the term State-owned enterprise which is the design of the Organization for Economic Co-operation and Development (OCDE, 2015). This definition takes into account different characteristics: recognition of the status of the enterprise within its legislation, significant participation by a State, and finally the presence of economic activities (OCDE, 2017).
2.2. African Exploration of Public Enterprise Governance
Since the work of Berle and Means (Berle & Means, 1932), corporate governance has remained a topical subject due to its essence and role. It should be remembered that the debates on this issue have their roots in the various financial and stock market scandals that have marked the contemporary era (Vivendi, Enron, WorldCom, etc.). This is why today, the term “governance” is omnipresent in the literature and is defined in various ways.
Following the financial scandals that have just broken out in the USA (Enron, Worldcom) and France (Vivendi, France Telecom), several countries have established texts that advocate the principles of good governance. These include the Vienot report of 1995 and 1999 which organizes the functioning of the board of directors by defining the rights of independent directors but also their duties and obligations towards the board and shareholders; the OCDE principles constituting the principles of good governance; the NRE 2001 law; etc.
Although the governance of private companies has always been a major concern for international organizations, it is noted that the governance of public companies also occupies a prominent place in the formulation of good governance principles (OCDE, 2017). Despite the formulation of these good governance texts, several authors (Mutize & Tefera, 2020; Bakamana, 2021), observe that most public enterprises in Africa are underperforming with multiple causes.
The Congolese context, our experimental area, is a fertile ground for verification given the causes presented above. Jacquemot thus believes that fragile states such as the DRC constitute a textbook case to demonstrate the reluctance to practice good governance (Jacquemot, 2010). The dysfunctions at the heart of these companies are, however, contrary to the definition of governance proposed by Shleifer and Vishny according to which “governance brings together how the company’s capital suppliers can ensure the profitability of their investment” (Shleifer & Vishny, 1989). More broadly, Charreaux defines corporate governance as the set of mechanisms that have the effect of delimiting the powers and influencing the decisions of managers, in other words, which govern their conduct and define their discretionary space (Charreaux, 1997). The author also believes that the contribution of managers’ human capital is treated as a transaction in its own right, which requires the implementation of specific management procedures. Among these mechanisms, the formation of human capital is likely to improve performance (Nkakleu & Manga, 2015).
2.3. The Performance of Congolese Public Companies Is Subject to Organizational and Financial
Difficulties. The problems of underperformance of Congolese public enterprises have financial and organizational origins. According to Jospin et al. (2024) and Sindayigaya (2023), if the inefficiency of the governance system of Congolese public enterprises is primarily attributed to the inefficiency of its institutions, several other factors are at the root of their poor results (Jospin et al., 2024; Sindayigaya, 2023). The State, seeing these companies crumble under underperformance, through the reform of July 7, 2008, recommended providing them with private management (Kataba & Matukama, 2022) which is inspired by New Public Management (Pesqueux, 2006). Despite the multiple reforms3 taken by the Congolese State. The 2021 report on the financial situation of Congolese public companies in different sectors shows that Institutional and financial problems continue to undermine public enterprises in the DRC. Mehdi and Abdelhakim (Dinaoui & Diftar, 2023) point out that these have a plethora of staff, poor management, disinterest of the State shareholder in their day-to-day management, and a lack of transparency in their financial information. On the other hand, state public institutions are facing organizational difficulties. It has been noted that since the 1980s of the economic crisis, national education has collapsed due to the lack of public funding (OCDE, 2024). The weight of public enterprise debts on Congolese public finances4 was consistent. Due to financial difficulties, Kataba and Matukama (2022) reveal that several Congolese public companies have recorded negative operating results (Kataba & Matukama, 2022). The 2021 report on the financial situation of Congolese public companies shows a lack of publication of financial information by public companies. According to the 2023 finance law, several of these companies have achieved less than 40% of their objectives in 2022, representing an underperformance of at least 60%.
For many authors, the underperformance recorded by Congolese public companies is caused by organizational problems (Shamba, 2007; Bongo, 2015; Marc & Franck, 2023). In line with these organizational causes, we find the embezzlement by leaders on the financial situation of Congolese public enterprises). Dinaoui & Diftar (2023) note an excessive number of staff, poor management, disinterest of the State shareholder in day-to-day management, and a lack of transparency in the financial information of Congolese public companies (Shamba, 2007). Mudumbi (2023) for his part indexes the occupation of positions of responsibility without qualifications, the lack of viable infrastructures in academic training, and the promotion by academics of success through the least effort (Mudumbi, 2023). In Congolese public establishments, the education system has pursued its mission by inadequately equipping classes, massifying classrooms through direct household financing (David et al., 2023), and using the resourcefulness economy.
Authors such Marc & Franck, (2023) note that the governance of public secondary schools is confronted with the incompleteness of school curricula, recurring strikes by teachers, and late payments by staff in localities far from payroll centers (Marc & Franck, 2023). At the University of Kinshasa for example, one of the oldest university institutions in Congo, Mudumbi (2023) states that its governance system faces a lack of quality of teaching and a recurrence of internal conflicts (Mudumbi, 2023).
Dinaoui and Diftar (2023) also describe the Human Resources Management (HRM) policies implemented in Congolese public companies. Referring to the 2021 report on the financial situation of these companies, we note an imbalance in the staff structure between a small number of technical staff and a large number of administrative staff. According to Jacquemot (2010), Congolese public companies are resistant to good governance practices (Jacquemot, 2010). It is precisely the failure to apply the principles of good governance that is at the origin of the poor performance recorded by Congolese public companies (Kataba & Matukama, 2022). The repercussions can easily be seen in the high level of corruption, poor quality of electricity, and low level of education. Tsiboe et al. (2021) conclude that it is because politicians are omnipresent in Congolese public enterprises that there is a resurgence of embezzlement and appointments of members of management committees in public institutions by political affinity or ethnic descent (Tsiboe et al., 2021). The board of directors, as a governance mechanism, is the body that must nevertheless enforce good governance practices. However, based on the aforementioned 2021 report, it is clear that there is a lack of transparency in the financial information of Congolese public companies, which are accused of not transmitting their financial statements to state control authorities.
Faced with these problems, Fotso (2011) believes that the board of directors of public companies must have an audit committee capable of limiting mismanagement errors (Fotso, 2011). Congolese public companies are being criticized for their poor results culture (Kataba & Matukama, 2022). The board of directors, through the nomination committee, must therefore implement good ethical and transparent governance practices to improve the performance of Congolese public companies. The responsibility of political institutions is also creating an attractive business environment, enhance the efficiency of resource allocation, and reduce corruption (Charreaux, 1997).
3. The Methodological Device of the Study
This research addresses the issue of institutional inefficiency in the governance of Congolese public enterprises. The lack of exploration of such a problem in the Congolese context led us to opt for an inductive qualitative approach (Corbière & Larivière, 2020). Wacheux (1996) reminds us that the choice of a methodological approach actually depends not only on the state of advancement of theoretical knowledge on the subject but also on the object pursued by the researcher. The state of progress of knowledge on the question of the institutional inefficiency of the governance system of Congolese public enterprises is still at a stage of accumulation of facts and data (Shamba, 2007).
Our study aims to make an inductive analysis based on a study of multiple cases of Congolese public companies. This strategy is widely recognized in management science and particularly in the field of qualitative research (Rispal, 2002). We used it because of its relevance for the empirical study of new phenomena (Yin, 2003) and in particular unexplored ones (Dumez, 2021).
It is particularly favorable because we seek to understand the phenomenon in its original context, what is the Democratic Republic of Congo (DRC). For Wacheux (1996), The qualitative case study is appropriate when the research question begins with “why” or “how”, which is well in line with the central question of this article formulated as follows: Why is the institutional system of governance of Congolese public enterprises ineffective? The answers to this question help us understand the root causes that make the governance system of Congolese public enterprises ineffective. Individuals are our unit of analysis and the choice of sampling mode is reasoned. Purposive sampling consists in particular of collecting data on a multiplicity of testimonies and cases within the same area of action and according to different contrasting services or directions (Shamba, 2007). We, therefore, conducted semi-directive interviews with 12 Congolese public companies distributed as follows: 02 companies belonging to the air transport sector, 01 mining company, 01 company specializing in the supply of water, 01 public company specializing in the production and distribution of energy, 01 oil company, 01 public company specializing in insurance and 05 Congolese public universities.
The profiles of the respondents are also diverse: Rector (01), Director General (06), Secretary General (01), Budget Director (01), Academic Secretary (01), Financial Director (01), Director of Academic Affairs (02), Director of Human Resources (01), Deputy General Director (02). The use of purposive sampling is motivated here by the fact that as in many African countries (Nkakleu & Manga, 2015), employees and managers are generally hostile to surveys and polls. Almost all respondents have higher education degrees. Our sample size was determined based on the principle of theoretical saturation which states that: “when the addition of interviews no longer enriches the model developed… in practice, 7 to 12 interviews generally allow this saturation to be achieved” (Shamba, 2007). The theoretical saturation threshold was reached in this study on the 21st interview. The interview guide served as a guiding data collection tool and was structured into 05 main themes as presented in Box 1 below:
Box 1: Prototype of the semi-directive interview guide
Prototype of the maintenance guide
Theme 1: The effectiveness of institutions on governance practices;
Theme 2: Governance of public enterprises and financial difficulties;
Theme 3: Public enterprises and organizational dysfunctions;
Theme 4: Governance of public enterprises and the challenges of social responsibility;
Theme 5: Governance of public enterprises and performance factors;
Source: authors from literature.
The collection of interview data followed several processes: thanks to a research certificate issued by the University of Yaoundé II (Cameroon), we have previously submitted interview requests to the managers of each targeted Congolese public company. This collection was finally carried out between August 2023 and November 2023 in the cities of Goma and Kinshasa. It should be noted that despite having a research certificate for the collection of our data, we were faced with the reluctance of several companies, which justifies the reluctance of employees and managers in surveys and polls in certain African countries (Nkakleu & Manga, 2015). Faced with this situation, we resorted to our agent hat.5 In the Congolese State, our political proximity with senior officials of the public companies studied, and our relational consistency.
The data analysis opted for a thematic content analysis. More precisely, we have articulated the technique of verbatim and the analysis of the Nvivo software version 10 to bring out the results. Yin (2003) emphasizes that such a strategy of triangulation of data analysis tools makes it possible to increase the internal and external validity of research (Table 1).
Table 1. Summary of interviews conducted.
Surveyed |
University |
Public
Ministry |
Maintenance code |
Total |
Rector |
01 |
0 |
01 |
01 |
General manager |
05 |
06 |
DG |
06 |
Secretary-General |
01 |
0 |
SG |
01 |
Budget Director |
01 |
0 |
DB |
01 |
Academic Secretary |
01 |
0 |
ITS |
01 |
Financial Director |
01 |
0 |
DF |
01 |
DAAC |
02 |
0 |
DAAC |
02 |
HRD |
01 |
0 |
HRD |
01 |
DGA |
02 |
0 |
DGA |
02 |
TOTAL |
15 |
06 |
- |
21 |
Source: authors from the field.
4. Results of Empirical Investigations and Discussion
The research question posed in this article was: Why is the institutional system of governance of Congolese public enterprises ineffective? In response to this question, our results highlight several causes. They show in particular that factors linked to corruption, the complexity of regulatory texts, and the non-application of legislative texts on governance are at the origin of the poor performances achieved by the public companies studied.
4.1. Corruption: A Bottleneck in Corporate Governance
Our results found, like several studies on the DRC (Bakamana, 2021; Jacquemot, 2010), that corruption is the main cause of the dysfunctions observed in the governance system of Congolese public companies, it affects strategic sectors such as universities and the mining sector. For the respondent interviewed in the Congolese mining company in our sample, “The audit firms set up are associated in a network and have not noticed the alleged corruption within Gecamine during a period of five years that I have been there. These are sums paid into unknown accounts and the sale of Gecamine concessions without procedure” (DGE6). In the university sector, one respondent justified the use of corruption in these terms: “If corruption is a catch-all word that individuals and unionized workers tend to use to exploit the loopholes in the state system” (SAU1). For the Director of the fourth public university in our sample, he observed that although corruption is sometimes punished, its detractors are released after a few days in prison: “measures are taken and broadcast on television and radio channels, trials are held even for days, decisions are made and people are taken to prison but at the end after a few days they are released from prison, some even after a few months they still hold positions of responsibility” (DGUNI4).
4.2. The Complexity of Regulatory Texts and Their Inapplicability
In addition to corruption, other respondents believe that regulatory texts are complex, which leads to the failure of the governance system of Congolese public companies. Indeed, for the respondent interviewed in the Congolese public company specializing in the air transport sector, this complexity is due to “(…) The controversial attitude of the State, often confusing its three roles of Public Authority, Shareholder, and Customer; The persistence of economic models inherited from the colonial era and the economic and social weight of ancillary and related activities with closed capital where the Congolese State is the majority shareholder” (DGMP6). For the respondent interviewed in the oil company in our sample, such a situation justifies why: “The legal texts and ordinances promulgated in the management of public companies do not facilitate our company from creating value” (DGAMP5). The financial director of the 10th public company in our sample mentioned in his speech the fact of lack of ethics in the dissemination of financial information of public companies: “I will admit to you that despite the codes of ethics regarding transparency of financial information in Congolese public companies provided for by the regulations, we are still faced with pressure from the hierarchy, such as the general director, who sometimes asks us to make financial arrangements in his favor and not to disclose certain information such as the amount of maintenance of service vehicles, housing allowances that we inflate at the accounting level at the request of the Director” (DAFMP18).
If the results found show that corruption constitutes the main institutional cause of the institutional inefficiency of the corporate governance system, the results also show that the non-application of legislative texts on governance is a brake on the effectiveness of the governance system of Congolese public enterprises, in this case, those in the higher education sector which are public universities.
These results show that the quality of institutions has an influence on corporate governance (Demirgüç-Kunt and Maksimovic, 1999). Indeed, the general director of the fourth Congolese public university in our sample interviewed states through statistics: “In 2021, the Court of Auditors did not receive its financial statements from any public company”. According to the recent Council of Ministers, the latter reveals that out of 20 public companies whose directors had appeared in the council invited by the latter and I was part of, only 8 filed their financial statements with the CPCC in 2019, or 40%; 9 in 2020 or 45% and 8 in 2021 (DGUNI4). In the case of the public companies studied, the non-application of regulatory text hinders economic and social development (Nga Nga & Ebele Ombede, 2021). Regarding the human resources policy of Congolese public universities, the Director of Human Resources testifies in his remarks about non-compliance with recruitment practices: “We all know that recruitment must be done on the basis of qualifications, experience, training, except that there are several of our agents who have been recommended by very powerful politicians who can make us lose our position. In this case, when we have this type of file, we take charge of them without looking at the recruitment texts. This way of doing things unfortunately degrades the performance of our company because many do not achieve the objectives due to their lack of qualifications” (DRHU5).
4.3. Neutralization of the Governance System by the Theory of Rooting
Our results reveal that rooting through the neutralization of governance principles is a highly prized governance mechanism in the public companies in the air transport and mining sectors of our sample. Indeed, for the Deputy General Manager of the sixth public company interviewed: “(…) for us Managers, this neutralization of governance mechanisms is, therefore, a strategic decision for us, because it can allow my colleagues who develop it to have greater decision-making autonomy” (DGAMP6). We found that this practice according to the manager of the second university studied is also recurrent: “There is also a problem of political networking that has already taken root and that creates bonds of camaraderie between us, the fact of belonging to the same political party. I often find myself in difficulty, how could I spread the shortcomings and faults of my colleague with whom we constitute a family, it is family management in fact” (DGUNI2). The director of one of the public companies in the sample justifies the application of this neutralization by not taking into account qualifications, experience in the recruitment and appointment process within the company, friendly and political networks being means which promote rooting: “We must speak of Comrade of a political class or a university network or the family genealogy of a name always spoken and known rooted since” (DGMP4). This governance through the neutralization of the governance mechanisms in place is the consequence of the underperformance achieved by Congolese public companies (Kataba & Matukama, 2022).
In line with the causes that explain the inefficiency of the governance system of Congolese public enterprises, the results also show that some respondents insisted on the lack of involvement of lower management in decision-making in such commercial enterprises and higher education.
4.4. Lack of Involvement of Lower Management in Decision-Making
In public companies in the commercial and higher education sectors, the results show that lower management is excluded from decision-making. For the respondent from the sixth public company in our sample, it is the application of authoritarian leadership that explains the lack of involvement of employees in the management of Congolese public companies: “And I think that today, at a time when we are questioning a certain number of capitalisms, returning to the person, it gives meaning and that is, in fact, the reason why we have kept the title of Manager or member of the Board of Directors (…)”. (DGMP6). This manager justifies his argument by the fact that the participation of the company’s lower management makes it possible to achieve the set objectives: “human capital is, therefore, a driving force for the transformation of the company, and the company must be the driving force for the transformation of human capital” (DGU2). For authors such as Mcshane and Glinow (2022), decision-making occurs at all levels of an organization and is not limited to senior management (McShane & Von Glinow, 2022). Our results show that lower management in public companies does not participate in decision-making. However, employees have the power to make decisions concerning, for example, the launch of new projects, presenting certain problems related to customers without consulting their superiors (Sev et al., 2022).
5. Conclusion
This article aimed to explore the causes of institutional inefficiency in the governance system of Congolese public enterprises. The results generally showed that the institutional inefficiency of the governance system of the Congolese public enterprises studied is underpinned by financial and organizational causes. The results initially focused on endogenous and exogenous causes including corruption, the complexity of regulatory texts, and the non-application of texts established by the institutional authorities responsible for controlling, supervising, and sanctioning public companies. Secondly, the results highlighted the absence of regular publication of financial information and the achievement of negative operating results by public companies explaining their underperformance. Finally, the recruitment of managers, chairmen of the board of directors, and deputy general managers the lack of independence of the directors appointed within public teaching universities, and the omnipresence of politics in the management of these companies make them more inefficient. In terms of managerial implications, our study is likely to “oxygenate” Congolese public policies with regard to strategies capable of improving the much-criticized performance of these companies. It is important that the Congolese authorities follow the recommendations contained in the 2021 report on the financial situation of companies in the Congolese State portfolio by strengthening the monitoring and evaluation of these companies. Like all scientific research, this study lacks a generalization of all results that opt for a qualitative approach and focus on the cities of Goma and Kinshasa alone. However, the generalization of the results remains possible if future work combines the qualitative approach with the quantitative approach thanks to a larger sample of Congolese public companies.
NOTES
1This is the 2021 report on the financial situation of Congolese public companies.
2National Electricity Company (NEC), the National Railway Company of Congo (NRCC), and the Commercial Port and Transport Company (CCPT).
3These include, among others, the 1989 and 2013 reforms on public institutions; the uniform act adopted on 17 April 1997 on public enterprises, relating to company law and economic interest groups.
4See the 2023 DRC Finance Law; the 2021 report on the financial situation of Congolese public enterprises.
5The first author of this article (a doctoral student) is a Congolese higher education official with a master’s degree in governance and finance and 22 years of professional experience to his credit. This author’s civil servant status made it easier for us to collect data, particularly in the Congolese public universities in our sample.