New law shakes up parastatals

President Emmerson Mnangagwa has placed limits on the terms of office of chief executives and board members of State enterprises and Parastatals (SEPs), while also binding them to performance contracts.

Appointments will be on merit, and board members will be dismissed if they fail to draw up a strategic plan, or fail to comply with it.

Permanent secretaries are no longer allowed to sit on the boards of public entities, and remuneration has been capped for appointees.

These provisions are contained in the Public Entities Corporate Governance Act, which was gazetted on Friday.

A Corporate Governance Unit, a department in the Office of the President and Cabinet, is being established to monitor and evaluate the performance of public entities and their leadership, with its head holding the same rank as a Permanent Secretary.

Bosses at SEPs will have to declare assets and business interests exceeding $100 000 to the Office of the President and Cabinet, and failure to comply will result in disqualification from working as a senior officer or to on the board of a public entity.

Board members will serve for a maximum of eight years, no one will sit on more than two boards, and the primary basis for all appointments will be merit.

Ministers are required to notify the Corporate Governance Unit, in writing, and the justification for the appointment.

Payments to board members will be premised on the the entity’s financial capacity and the standards observed at organisations of a similar size and nature.

Board members will not be allowed to access loans or any other credit facility from SEPs, and anyone in breach of this will be fined and/or imprisoned for a year.

CEO’s will be appointed on merit via an interview process, be evaluated annually, and serve for a maximum of 10 years.

Section 17(1)(c) reads: “ … no chief executive officer shall, even if his or her performance has met such standards, be re-appointed after the tenth annual review, unless the President’s approval of the re-appointment is obtained.”

Similarly stringent conditions apply for other senior executives at SEPs.

The total remuneration and benefits bill should not exceed 30 percent of the organisation’s revenue or operational budget for the prior year.

Section 22(1) of the Public Entitites Corporate Governance Act says, “The board of every public entity shall, in accordance with this section, draw up a strategic plan for every public entity for which it is responsible, to (a) set the entity’s objectives and priorities for a period of between two and six years, as the board may decide.”

The Corporate Governance Unit will compile a report on the SEPs sector by October 1 of each year, and Government should present it in the National Assembly for scrutiny within 30 days.

President Mnangagwa has made SEPs reforms a priority of his economic turnaround programme, and Government has started merging, realigning, strengthening and liquidating entities.

Last week, Vice-President Constantino Chiwenga said, “A robust SEP sector is key to the country’s efficient allocation of resources, competitiveness, economic development, and poverty alleviation.

“Against this background, it is common cause that the economic performance of some SEPs in Zimbabwe has deteriorated to unacceptable levels where decisive action to turn them around or close them down if they are of no strategic significance have become necessary.

“The SEPs, therefore, need to operate in an environment where good corporate governance practices prevail. SEPs should be subjected to effective oversight and enforcement in order to maximise their contribution to the competitiveness and development of the Zimbabwean economy.”

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  • Gushungo WekuGP

    This is good law. I feel it should extend to ministers and mayors

  • BINYA

    This is good law. It makes the management of parastatals work hard to achieve goals and profitability. I work for a transport parastatal but the management always doctor revenue figures to please ministry of transport authorities i recommend for them to audit them.

  • Judgement day

    Plan followed by action (implementation) without delay is the best operandi. Do not waste time with these wonderful reforms. Go ahead.

  • zimbotry

    The President should be under the same performance criteria….