Expert reveals why local firms fail

Business

By LEMACH LAVARI
Landowner companies must invest outside of their places of origin if they are to be sustainable, a workshop has been told.
The PNG Chamber of Mines and Petroleum Media workshop was held on Thursday and Friday in Port Moresby.
Chamber consultant Richard Jackson said landowner companies of the extractive sector had gone out of business because they had failed to spread their investments outside their locality.
Most of the companies operated out of remote areas in PNG where most mine sites are.
“It is impossible for such businesses to be sustainable in those remote areas,” Jackson said.
“The sustainability of these businesses depends on their moving away from their area of origin.”
He said business development officers had a very crucial role in developing successful investment portfolios for landowner companies.
NKW Holdings Ltd community and social responsibility manager Reuben Aila said the management structure of companies was crucial to their performance.
He said the management structure from company chief executives or managing directors to the shareholders was the most-challenging in landowner companies.
Aila said this was where the benefits from the company were transferred to shareholders or were held up at the top level.
“A way forward is simplifying the Companies Act for the landowners to understand,” he said.
“Simplify the Act into the company’s constitution.
“Based on that, you derive a charter specifying the roles and responsibilities of shareholders and board of directors.
“Once the governance structure is in place, the company can proceed into investing in other areas such as agriculture and fisheries.”
Aila suggested that companies outsource the management of finance to an independent third-party.
He said this was to ensure accountability.
Aila also said shareholder structures for benefits distribution were important to spread benefits from the companies.
He said these must be done in continuous consultations with shareholders so that a best model could be arranged for every company.

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