'Privatise all 78 loss-making parastatals'

HARARE - As Zimbabwe pursues a turnaround strategy for its hamstrung economy, privatisation and commercialisation of government entities, also known as parastatals, could prove critical to its success.

Having gobbled billions of dollars from the fiscus over the past 30 years, Zimbabwe’s parastatals have struggled to remain afloat mainly as a result of an inter-parastatal debt of over $1 billion, mal-administration, under-capitalisation, corruption and lack of good corporate governance negatively impacting on their operations.

Regardless of the privatisation success of the Cotton Marketing Board into the Cotton Company of Zimbabwe and the Dairy Marketing Board into Dairibord, now a Zimbabwe Stock Exchange- listed company with a market capitalisation of close to $60 million, government has remained adamant on calls for the remaining entities to follow a similar route.

This is however despite the promulgation of a restructuring policy for the 78 government entities by the then State Enterprises minister, Gorden Moyo.

“You have to realise that Zanu PF does not want those parastatals privatised. Zanu PF was and is still using them to siphon funds and reward its own through them. You will realise most MPs from the party are former board members of these struggling institutions,” Moyo said.

“A policy was adopted by Cabinet on how to structure all parastatals and we identified 10 in the first phase of the plan. All this has not happened, just a few such as the National Oil Company of Zimbabwe were privatised but Zisco, despite approval of its $750 million deal with Essar, everything was stalled and to this day as you know nothing has changed. Air Zimbabwe and NRZ were also meant to have been affected by the policy,” the Makokoba legislator said.

He noted that during his tenure, challenges posed by government’s bureaucratic system resulted in the Attorney General’s (AG) office stalling various strategies mooted to bring sanity to the various entities.

“The biggest challenge was that various policies we put in place but would never see the light of day because AG’s office sat on them, such as our planned corporate governance policy for the various government entities and their restructuring,” the former minister said.

“All these died in the AG’s office. My ministry was sterile. We carried a title but could do nothing because we did not have the powers to execute plans. Policies were made, clear policies but as you know my ministry was responsible for policy formulation and planning but never a doing ministry, with the responsibility belonging to the various line ministries,” he said.

Leadership policy shortfalls, Moyo said, will provide a challenge on the current governments plans to revive State enterprises.

“The current government will not be able to turn them around as they are responsible for their problems. Ideally they should follow the corporate government framework which will ensure that board members and those that lead them are professionals, individuals with the prerequisite skills require in that particular institution,” he said.

“Government has to accept it does not have the capacity and the resources be it financial or human."

“There is a serious leadership deficit in those institutions and our policy aimed to address that. We need to professionalise them. Government has no capacity to run institutions such as air Zimbabwe and NRZ but needs to allow other players with the required capital, expertise and skills.”

Moyo said the continued pursuance of policies such as the indigenisation policy which required that foreign-owned firms cede a controlling 51 percent stake to locals and corruption would remain a hindering factor to potential investors.

“We did generate a lot of interest from investors but the line ministers demanded kickbacks from the prospective partners, scuttling the deals. What it needs to do is change its policy on indigenisation if it aims to attract investors so that it’s not blanket, but is applied depending on what one has put in,” he said.

Moyo urged government to follow the South African model on how to deal with parastatals.

“It (government) can have a ministry which all parastatals fall under, allowing for their effective administration and they should only be strategic ones. For instance South Africa has a ministry of State Enterprises. Strategic institutions such as Grain Marketing Board can be retained, but it’s others such as the Pig Industry Board.

“Government does not have a role in the pig industry and should move out,” he said.

“It should only retain interest in institutions of a strategic value to the State. Look at China, all these companies that are coming into the country are parastatals but the difference is they are privatised and professionally run, thus looking for opportunities outside their country.

“Let’s have the right mix of skills, capital and technology and things might change.”

Independent economist Vince Musewe said private investor funds will be critical in the viability of State enterprises.

“Investors are critical in injecting new money into these entities. But they will not invest in loss making companies despite the monopoly that they have. First, they must be turned around otherwise they will be bought for peanuts if privatised,” he said.

The economist said the recent decision by Energy minister Dzikamai Mavhaire to declare a legal nullity on the Electricity Amendment Act passed by Parliament during the subsistence of the inclusive government this year would hinder its efficiency.

“Zesa is not a viable entity as it stands today. Former Energy minister Elton Mangoma was on the right track. This decision will continue to cost companies and consumers going forward,” Musewe said.

The Electricity Amendment Act passed earlier this year, aimed to separate the electricity transmission and distribution business of Zesa in order to create an electricity bulk supply market that will facilitate and support the entry of independent power producers.

Zesa was meant to be dissolved and the National Grid Services Company formed in its place, with  ZETDC being unbundled and its transmission functions transferred to NGSC while the distribution functions remain in ZETDC, with the overall aim of increasing  access to available electricity and overall efficiency.

The country which has an installed capacity of just above 1 900MW is currently battling power outages with Zesa’s reliable generation capacity standing at a mere 1 320 megawatts against demand of 2 200MW.

The country’s sole rail operator, National Railways of Zimbabwe (NRZ), currently in urgentneed of hundreds of millions of dollars in funding, recently sought to retrench over 80 percent of its workforce, 6 000 employees to leave it with 1 000 employees, as part of efforts to reduce its bloated wage bill.

NRZ which used to operate a viable rail operation, catering for both goods and passengers is now a shadow of its former self and in need of over $2 billion to rehabilitate its entire rail road network.

According to the Zanu PF 2013 election manifesto, the revolutionary part targeted to unlock over $7 billion from idle State enterprises and parastatals, with $2,5 billion from those in the energy and power sector and $1,6 billion from those aligned to the transport sector.

State enterprises, according to government figures, have a potential to contribute 40 percent to the country’s Gross Domestic Product if operated in viable manner.

Officially opening the First Session of the 8th Parliament of Zimbabwe in the capital Harare, President Robert Mugabe weighed in on calls for reforms in government-owned entities.

“Heads of all parastatals and local authorities will henceforth be required to sign performance contracts and to adopt results-based management approach in order to engender accountability for results and ensure efficient service delivery,” the president said.

The World Bank estimates that Zimbabwe requires more than $33 billion for infrastructure projects over the next 20 years to turn around its economic fortunes, stating that $11,3 billion is required for electricity generation-related projects alone,13,4 billion for transport infrastructure development, at least $6,8 billion and $1,8 billion should be channelled towards telecommunications, water and sanitation infrastructure.

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