The Sunday Mail
Zack Stan Murerwa
A complete turnaround of our economy will not be realised if urgent attention is not given to the Parastatal Reform Programme.
The programme must be dynamic and not piecemeal, complete and not experimental, rapid and not dependent on bureaucratic protocols and procedures. Over 80 percent of Zimbabwe’s roughly 100 State enterprises and parastatals are not commercially viable and are draining the fiscus.
In fact, we would be better off with some of them completely closed. In Africa south of the Sahara, State enterprises in performing economies are contributing 23 percent to 27 percent of GDP. In Zimbabwe, we estimate they are contributing as little as six percent; down from 36 percent in 1985.
The following summarises challenges of parastatals: l Lack of effectiveness/performance/value for money for audits. Audit is currently on compliance; l Poor state of infrastructure and equipment;
l Effects of loss of critical skills and expertise. Parastatals have been affected by brain drain; l Non-compliance to good corporate governance practices;
l Inadequate fresh capital injection from the shareholder. The economic downturn has affected these institutions; l Lack of access to lines of credit, which is affecting the whole economy;
l Low capacity utilisation, particularly in industry;
l High operating costs, especially wage bills;
l Poor debt recovery strategies;
l Legacy debt and high inter-parastatal debt; and
l Cumbersome procurement procedures.
While the Public Entities Corporate Governance Bill is welcome, implementation of the proposed law must be swift and strictly monitored.
Boards must have continuity.
The new political dispensation has brought much hope. However, new ministers have always wanted to appoint their own boards and this can break continuity.
We need to move away from politically-preferred candidates to technocrats and non-bureaucratic personalities driven by the desire to strategically turnaround operations and achieve results.
We have historically, by design or by accident, entangled ourselves in an intricable legal web in the form of parent Acts which form and govern parastatals’ operations.
And some Acts are now irrelevant and archaic.
The Parastatal Reform Programme would be incomplete if these laws are not changed and aligned not only to our Constitution but to current global economic dictates.
I have read with interest experiences in Kenya, Rwanda, Ethiopia and China where parastatal reform programmes have succeeded.
Strategies included privatisation, closure and refocusing core activities of parastatals.
Why, for example, should enterprises such as TelOne, NetOne, Petrotrade, Allied Timbers, NHS, Hwange Colliery and Cold Storage Co not operate in terms of the Companies Act and still declare a dividend to Government?
Government would still retain its shareholding, with the enterprises allowed to operate as private companies. This kills the culture of red tape associated with Government procedures.
With privatisation, the enterprises would be able to enter Private-Public Partnerships, technical partnership and project management agreements – all of which would be investment strategies.
The reality on the ground is that most of these parastatals are financially incapacitated to finance their projects. Therefore, investment partners and PPPs will be inevitable for large projects.
The big advantage is the State would still maintain control, owning the resultant infrastructure.
Thus Government should allow Build-Own-Operate-Transfer arrangements for some projects, and build-lease-transfer provisions for others.
I have read suggestions that some non-performing enterprises be turned into Government departments.
No!
This is simply transferring a burden to the already burdened civil service. Zimbabwe needs to be competitive globally, and we need to meet our economic challenges head-on.
The concerned parastatals are infested with personnel whose work ethic, orientation and commitment are out of sync with the ever-changing macro-economic dynamics.
Some salaries are high and yet performance is low. We say no to magnanimous practices where there is mediocre performance. There is need to revisit performance contracts, terms of office and work ethics.
In his inauguration speech, President Emmerson Mnangagwa said: “Flexibility must be built in our operations so that the machine of Government does not become one huge, ponderous stumbling block to decisions that must be made and communicated expeditiously.”
Parastatals must move away from this syndrome. This should be done immediately or else more damage can be done.
In his 2018 National Budget Statement, Finance and Economic Planning Minister Patrick Chinamasa remarked: “Our public enterprises remain a drawback through their inefficiencies, with their contribution to the economy down from around 60 percent to current levels of about two percent.
“Their inefficient operations are a drain on the Budget; over and above serving to worsen the high cost of doing business in the economy. Last year’s financial audits indicate that 38 out of 93 public enterprises incurred a combined US$270 million loss, as a result of weak corporate governance practices and ineffective control mechanisms.”
The Parastatal Reform Programme must move with speed, including closing institutions that are in a state of virtual insolvency.
Zack Stan Murerwa is an economist and consultant based in Harare who writes in his personal capacity. He wrote this article especially for The Sunday Mail
