Some developing African countries, including Nigeria, Gambia, Ghana and Kenya, have developed performance contract systems to manage productivity of their public sectors.
But what is performance contracting? This has been a subject of considerable debate among scholars and human resource practitioners.
Simply put, a performance contract is a freely negotiated performance agreement between the government, acting as the owner of the agency, and the agency. It specifies the intentions, obligations, responsibilities and powers of the parties. It addresses economic, social and other tasks to be discharged for economic gain.
OECD defines a performance contract as a range of management instruments used to define responsibility and expectations between parties to achieve mutually agreed results.
Performance contracting has been used in about 30 developing countries in the last 15 years, many of them in Asia, South America and Africa.
The results of performance contracting have been mixed. In some countries, there has been a general and sustained public enterprise improvement. In others, public enterprises have not responded or have been prevented by government policies from responding.
In Africa, public enterprises are suffering financially. Many are seeking financial assistance. Their problems stem from unclear and conflicting objectives, and a lack of autonomy and accountability. In implementing performance contracts, the common issues to be addressed include:
- To improve performance to deliver quality and timely services to citizens.
- To improve productivity in order to maximise shareholders’ wealth.
- To reduce or eliminate reliance on the exchequer.
- To instil a sense of accountability and transparency in service delivery and the utilisation of resources.
- To give autonomy to government agencies without being subjected to the bureaucracies and unnecessary procedures.
Two countries in Africa – Ghana and Swaziland – have experiences that provide critical lessons on how you could and how not to deliver performance contracting in the public sector:
In a little more than a decade, Ghana transformed the structure and strategy of its rural water supply sector. By 2000, district assemblies and communities played a significant role in planning supplies.
It all started with an extended dialogue with the major stakeholders in the sector, out of which a new rural water and sanitation policy was developed. The policy was then implemented in several large pilot projects, supported by a number of external agencies.
The lessons from those projects were incorporated into the national performance contract programme. The success of this approach was due to the fact that national and international NGOs were contracted to build the capacity of local-level NGOs and CSOs.
The Community Water Supply Agency (CWSA) was created as a facilitating agency rather than an implementer. CWSA, as a semi-autonomous public-sector agency, signs an annual performance contract with the State Enterprise Commission. It is committed to staying efficient and lean, below a staff of 200, and highly decentralised to its 10 regional offices.
The evolution of contract plans in Swaziland can be traced back to the early 1990s, a period that witnessed the promulgation of the Public Enterprise (Control and Monitoring) Act of 198. The latter sought to establish viable control mechanisms for Swaziland’s Parastatal sector amid a national outcry that public enterprises were continuing to be a financial and administrative burden on the government.
However, the performance agreement of the early 1990s failed to achieve its stated objective, which was to improve the performance of the public enterprises. This was because of widespread use of consultants in the formulation of contract plans, including the determination mechanisms for their monitoring and evaluation. Public enterprise management did not develop the necessary sense of ownership and commitment to the sccess of the enterprise contracts.
Use of outside consultants, experts or advisors in the formulation of development plans, especially from developed countries, has shown that while they may be knowledgeable about certain issues and areas that are generic to their field of specialisation, they sometimes lack an intimate knowledge of the unique socio-political and economic circumstances confronting individual countries, especially those of the developing world.