The Sunday Mail
Business Reporter
Ongoing State enterprises and parastatal (SEPs) reforms continue to face strong resistance from line ministries.
The restructure of SEPs is envisaged to improve their contribution to economic growth.
In an assessment of progress made under the State Enterprises Reform Framework (SERF) that was approved by Government in April 2018, the Ministry of Finance and Economic Development highlighted a number of reasons why reforms have not taken off as expected.
There are growing concerns inordinate delays in reforms would leave investors questioning Government’s commitment to the programme.
Implementation of the State Enterprises Reform Framework is centred on, among other things, promoting good corporate governance at SEPs.
It is also meant to review the ownership model.
While some entities will be privatised or sold, others would be refocused as has been done to Agribank, Grain Marketing Board and the Civil Aviation Authority of Zimbabwe, among others.
However, this is but a fraction of the scope of the programme, which covers institutions such as
ZESA, TelOne, NetOne, Petrotrade, Willowvale, Chemplex, Protraz, ZMDC, POSB, IDC, ZUPCO and IDBZ, among others.
However, line ministries, which have the responsibility to drive the reform programme, are understood to be frustrating progress.
“Tendencies to protect vested interests of line ministries, SEPs boards and management are working to reverse some approved reforms,” reads part of the Economic and Fiscal Report for Year 2020 released by Treasury last week.
Before Government took the bold decision to reform these entities, most of them were plagued by corporate malfeasance, which included abuse of funds by some ministers and directors.
Some of the cases are now before the courts.
Other SEPs have been set back by onerous debts, which make them unattractive to potential investors.
Treasury believes that given the country’s huge debt stock, it would take innovative methods to deal with the debt overhang.
The process to engage transactional advisors has also been met by procedural challenges leading to delays, Treasury adds.
Further, some potential investors failed to deliver on their investment proposals.
“Some transactions were cancelled after establishing that the investors lacked the required capital,” said the report.
Treasury now hopes an enabling legal framework for privatisation will be put in place to avoid some of these implementation challenges.
Failure to reform SEPs, means they will continue to rely on Government for “implicit subsidies, regular bailouts or recapitalisation.”
“ . . . delays in the implementation of SEPs reforms present costs to the SEPs, Treasury and the economy at large.”
Without the necessary reforms, Government will lose out on revenue flows through taxes and dividends, including exposure to fiscal risks associated with underperforming SEPs.
In addition, delays would deny SEPs benefits that come from the creation of new market frontiers,
access to modern technology, all of which would ordinary drive SEPs to profitability.
But Government is presently reviewing the current SEPs Decentralised Ownership Model with a view to adopt a more centralised ownership model.
“This is envisaged to provide support for effective SEPs overall performance oversight and implementation of reforms,” Treasury says.
A version of this article was first published in our sister paper www.ebusinessweekly.co.zw
