The Sunday Mail
Economic reforms being undertaken by the Government include transforming State-owned enterprises and parastatals into efficient entities that can drive economic growth. Forty-one entities were initially targeted for various interventions that include liquidation, partial privatisation, privatisation, commercialisation and departmentalisation. Though Covid-19 has thrown spanners into the works, encouraging headway has been made so far. Our reporter DEBRA MATABVU last week spoke to Secretary for State Enterprises Reform and Corporate Governance Unit in the Office of the President and Cabinet Mr Willard Manungo on the progress, challenges and prospects for the programme.
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Q: Government, under the Transitional Stabilisation Programme (TSP), is reforming State-owned enterprises. How is the programme being implemented?
A: Government has, under the TSP and the national Vision 2030, been pursuing the State Enterprises and Parastatals reform through the implementation of various entity-specific and sector-wide reform initiatives that include promoting good corporate governance practices in the State enterprises and parastatals sector; undertaking an overall strategic portfolio review; conducting forensic audits where the need arises in some State enterprises and parastatals; departmentalisation of identified State enterprises and parastatals; reviewing the State enterprises and parastatals ownership model; and facilitative public procurement procedures.
Q: How far have you gone with the reforms? What is the latest in terms of progress?
A: The progress on the implementation of reforms has not been uniform across the designated entities. In particular, commendable progress has been noted in all the entities that were designated for departmentalisation and liquidation. Some progress has been observed on entities earmarked for partial privatisation, in the face of a myriad of both internal and external factors.
The factors that have negatively impacted on the partial privatisation of designated entities include protracted procurement procedures required for the engagement of transactions advisors; lack of resources to fund transactions advisors’ fees, especially fixed fees that are paid in foreign currency, and this led to the cancellation of consultancy tenders for TelOne and NetOne, and ZIMPOST; slow progress in the resolution of legacy debts for major entities such as TelOne, Ziscosteel and NRZ (National Railways of Zimbabwe); and Covid-19 restrictions and the global economic downturn that have severely impacted on the processes to identify and engage foreign investors.
However, notable progress has been realised for parastatals earmarked for departmentalisation. The National Indigenisation and Economic Empowerment Board (NIEEB), Board of Censors, National Library and Documentation Services and National Liquor Licensing Authority were absorbed within their respective line ministries.
Lotteries and Gaming Board and National Competitive Commission retained their status. On New Ziana, the Government is still weighing the way forward and a decision will be announced once the considerations are complete. At the tail-end is the progress of the entities that were designated for mergers, namely the merger of Powertel, Africom and Zarnet, as well as the merger of Postal and Telecommunication Regulatory Authority of Zimbabwe (Potraz) and Broadcasting Authority of Zimbabwe (BAZ).
Government is seized with working on the modalities to implement these reforms.
Q: Government targeted to reform 41 parastatals. Which ones have been successfully reformed to date?
A: A lot of ground has been covered so far and some of the work that has been done includes the unbundling of the CAAZ into the Civil Aviation Authority of Zimbabwe and the Airports Management Company, which has been completed. It resulted in the appointment of the respective boards. The physical transfer of the identified assets and staff to the respective entities is currently underway. The Airports Management Company is currently seized with the process of recruiting the senior management team, which could not be availed from the current staff compliment.
Silo Foods Industries (SFI) is now registered as a subsidiary company of GMB with effect from April 1, 2019 after the de-merger of the GMB. Cabinet approved resumption of the development financing role of the Industrial Development Corporation of Zimbabwe (IDCZ).
This got traction with the Treasury allocation of $240 million in the 2020 National Budget. With regards to Willowvale Motor Industries and Deven Engineering, the IDCZ technical committee completed the bids evaluation, and recommendations of the winning bidders have been submitted to the Minister of Industry and Commerce for consideration before onward submission to Cabinet.
Significant progress has been made on the partial privatisation of the Infrastructure Development Bank of Zimbabwe, Agribank, Petrotrade, TelOne and NetOne.
Engagement of financial advisors has been completed, except for TelOne and NetOne.
The advisors are working on production of the requisite transactional documents, including due diligence reports, valuation reports and tender documents. As for Agribank, Cabinet recently made a decision for the reforming and restructuring of the bank to also embrace the concept of a Land Bank.
Cabinet approved the offering of NetOne and TelOne as a single package given the strategic interdependence and synergies of the two companies. Formal requests to co-operating partners have been made with the view of harnessing the vast experience of that constituency in providing transactional advisory services in the privatisation of telecommunications companies around the world.
This is being explored to the benefit of the country’s privatisation programme.
However, due to the Covid-19 restrictions, the pending visit by cooperating partners representatives, who are based in South Africa, to discuss the modalities of engagement has been put on hold. Transactional advisors for the partial privatisation of POSB were appointed, with the consultancy contract having been finalised and signed.
It is now expected that work to identify a strategic partner(s) will commence immediately and completed within the next eight months. In the second quarter of 2019, Government granted several mining concessions under Zimbabwe Mining Development Corporation (ZMDC) to local and foreign investors.
The joint venture agreement between Zimbabwe Consolidated Diamond Company and Alrosa was signed in July 2019.
This agreement gave birth to the establishment of Alrosa Zimbabwe Limited — a joint venture company between Alrosa and ZCDC — with a mandate for the exploration, development, mining and marketing of diamonds in the country. Other various joint venture partnerships are being explored and considered for the other claims under ZCDC.
The Zimbabwe Investment and Development Agency (ZIDA) is now functional with the board and chief executive officer, while the recruitment of other staff is now underway.
Q: Which parastatals have managed to successfully attract suitors?
A: As highlighted earlier, a number of parastatals are earmarked for strategic partnerships. A number of these entities have appointed transaction advisors to spearhead the process of strategic partners identification processes . . . Entities in this category include Silo Foods, Infrastructure Development Bank and Agribank, among others.
For Silo Foods, serious investors have shown interest to invest in the company.
Government is reviewing the expressions of interest from these investors and decisions on this will be communicated in due course.
Q: Recently, Finance and Economic Development Minister Prof Mthuli Ncube indicated that there were global experts who were set to be roped in. Who are these experts and have they been roped in as yet?
A: The Government has been clear from the onset that comprehensive parastatal reforms require the roping in cooperating internal and external partners. To this end, the Government has benefited from the technical and expert assistance from the African Development Bank (AfDB) under the Institutional Support for State Enterprises Reform and Delivery Project (ISERDP).
Under this programme, the bank funded the completed performance review of Allied Timbers and has further committed funds for the transaction costs for the partial privatisation of Allied Timbers.
The bank provided funding for performance reviews of SIRDC (Scientific and Industrial Research and Development Centre (SIRDC), ZINARA (Zimbabwe National Road Administration) and ZMDC, Agribank, SMEDCO (Small and Medium Enterprises Development Corporation) and IDBZ.
In addition, under the same programme, the bank availed funding of the roll out of the new Public Entities Corporate Governance Act.
Similar arrangements have been made with the World Bank under the ZIMREF project, which has resulted in the bank availing funding for technical and expert assistance in the crafting of the Corporate Governance Act, Public Procurement Reforms and Public Entities Reforms.
Last but not least, the European Union has assisted the Government by funding the performance reviews of ZimParks (Zimbabwe National Parks and Wildlife Authority), Forestry Commission, Environmental Management Agency and CAMFIRE under the EU-funded Technical Assistance Support to Natural Resources Management (TANRM) Zimbabwe.
In line with international best practices in State enterprises and parastatal reforms, Government is enlisting the services of independent transactional advisors in the roll out of the reform agenda. Funding for the transactional advisory costs is being mobilised from both domestically and also from the assistance of cooperating partners. In this regard, Government has been able to acquire the services of recognised financial advisors with a global footprint to help in steering the parastatal reform process.
Q: How much has been set aside for the whole exercise?
A: As highlighted above, the mobilisation of funding for the SEPs reforms is being sourced from domestic sources as well as from the assistance of cooperating partners. At this point, I cannot pre-empt the figures as these are determined by the complexity and nature of the work to be done through the bidding process.
However, Government will be transparent enough and disclose the costs of each and every transaction as the implementation is rolled out.
Q: How far has Government gone with ZESA re-bundling?
A: All groundwork on the re-bundling process for the ZESA group has been completed by the technical committee. Government is finalising contract negotiations with transaction advisor who is coming in to assist with implementation side of the re-bundling process.
Q: Do you have a target for this year as far as restructuring is concerned?
A: The Government is pursuing the targets for reforms in earnest. However, there has been inevitable Covid-19-induced delays. It is now anticipated that the process will stretch beyond 2020. In particular, the partial privatisation and offshore capital raising initiatives have also been affected as some investors worldwide are in a state of panic, hence most of them have adopted a wait-and-see, and an inward-looking attitude.
Further, in cases where the investors have been identified, the Covid-19 travel restrictions are affecting investor engagement processes such as the undertaking of due diligence.
