Govt warned over debt assumption

HARARE - National Assembly speaker Jacob Mudenda has warned the government against warehousing State enterprise debt as this was burdening hard-pressed taxpayers.

Mudenda said there was need for new laws to hold management at parastatals accountable for the accumulation of debts.

“Government has been taking over these debts but then chief executives at the parastatals must account for these debts and come up with ways of paying them back,” he told delegates at the Zimbabwe National Chamber of Commerce annual congress last week.

“A good example that comes to mind right now is the Hwange Colliery Company $65 million debt set to be assumed by government. The gesture is a useless move because the assumption is only being done on paper,” he added.

Mudenda noted that debt was being taken over in book value with the money never finding its way to creditors.

“This money does not make its way to the Zimbabwe Revenue Authority or the National Exchequer Account.

“So, basically what is happening is that they are trying to fill a bottomless hole with water. Not only is it useless, but it also needs to be revised,” he said.

The national assembly speaker’s remarks came in the wake of government’s stance adopting debt accrued by  State-owned enterprises in a move to window dress the books and make firms attractive to potential investors.

Last year, the Reserve Bank of Zimbabwe Debt Assumption Act was passed in a development that government assuming over $1,35 billion in debt on behalf of the central bank. The Act was passed despite the fact that government currently lacks means to finance the servicing of the debt.

Apart from this, the ministries of Mines, Industry and Finance are in the process of crafting a Bill for the assumption of Zimbabwe Iron and Steel Company (Ziscosteel)’s over $370 million debt to make the Kwekwe-based steel manufacturer attractive to potential suitors.

Fixed phone operator, TelOne, has also approached government for it to warehouse the operator’s over $320 million legacy loans, with a Bill to this effect now advanced.

Furthermore, government is in the process of taking over Air Zimbabwe Limited’s $140 million debt as it has kept potential investors at bay.

Government also inherited over $23 million in a loan advanced to private firm, Farmer’s World, and paid $12 million to the creditor, China Exim Bank, after it came in as the loan guarantor following the company’s failure to meet its repayment obligations.

However, analysts have pointed out that debt assumption at the various State enterprises is only cleaning balance sheets and not internal processes that led to the initial chaos.

Comments (1)

Mr speaker you are very right managers at government owned companies should manage their debts on their own and government should not shoulder them unnecessarily as it enhances nonperfomamnce. A good example you gave is the Hwange Colliery case whereby managers are failing to handle creditors and are now hiding behind the government protection of which is worsening Colliery's fortunes.

Wkumaracha - 19 July 2016

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