The Sunday News
Continued from last week……………………
A CURSORY analysis of the legal and institutional framework shows that in addition to profitability, SOEs are subject to broad mandates such as the public service obligations and broader social and industrial policy goals. Available evidence indicates that when SOEs have such multiple, ambiguous, or conflicting objectives, a practical consequence is that CEOs, board members and politicians tend to abuse them for private and political gains under the cover of their different policy goals and mandates.
In Zimbabwe the State exercises its ownership responsibilities through multiple actors such as line ministries and a number of other Government bodies over and above the board of directors of SOEs.
To structure this complex web of accountabilities in order to ensure efficient decisions and good corporate governance is a challenge.
Arguably, conflicts between the State’s ownership functions and its policy making and regulatory functions arise and leave the SOEs vulnerable to being used to achieve short-term political goals to the detriment of its efficiency.
Moreover, the State often assumes functions that should be carried out by the board, such as appointing and dismissing the CEOs and approving budgets and investment plans.
This provides scope for political interference and inconsistencies in direction and approach and has opened opportunities for corruption.
Thus, working with unclear strategies and multiple lines of accountability, CEOs within SOEs become hostage to politics and conflicting bureaucratic interests, resulting in a situation where multiple agencies and ministries vie to influence SOEs management while ultimate accountability for decision-making is non-existent.
Because of this opaqueness in reporting structures it might be difficult for some of the SOEs to meet the targets that have been set up under Zim Asset as competing and conflicting interests of patronage and political survival on the one hand and performance and good service delivery on the other are like oil and water.
To break the backbone of corruption, financial mismanagement and tendencies of slackness in any public enterprises and ministries, we have to take on board principles and practices that self-induce good behaviour, integrity, commitment and greater accountability by public sector officials.
Implementation of Corporate Governance Code (Zim Code)
The Minister of Finance and Economic Development in a document entitled Corporate Governance and Remuneration Policy Framework for chief executive officers of Parastatals, State Enterprises and Local Authorities presented the following measures and these were later followed up by the Vice-President Emmerson Mnangagwa who launched the Zimbabwe Corporate Governance Code (ZimCode ) in April 2015:
(1) That Board members be selected on grounds of merit, based on a clearly defined capability matrix and skills mix, in areas such as legal, finance, marketing, audit, technical, human resources, strategic and economic planning;
(2) That a 50:50 gender representation and regional spread be factored into the selection of Board members;
(3) That a Corporate Governance and Delivery Agency be established within the Office of the President and Cabinet to coordinate and monitor compliance with the Corporate Governance Framework and the National Code of Corporate Governance in Zimbabwe (ZimCode);
(4) That a systematic programme for the induction and training of Board members be carried out under the auspices of the Corporate Governance Delivery Agency;
(5) That line Ministries should at the time of appointment of the Board clearly spell out the Mandate of the Board for the period of office;
(6) That all Boards be appointed for a four-year term, which is renewable once;
(7) That no Permanent Secretary should be a member of a Public Enterprise Board, but that Ministers should appoint appropriately qualified and experienced persons from their ministries to sit through deliberations of the Board and to report to the Ministry the gist of the Board’s deliberations; and
(8) That all State Enterprises and Parastatals should hold Annual General Meetings which meetings should be attended on the Government side by representatives from the Office of the President and Cabinet, Treasury, the parent Ministry, the Auditor and Comptroller General, and other stakeholder ministries.
It is also hoped that with the interviews that were held for members of ZACC, investigations, prosecutions and convictions of perpetrators of graft will be done quickly as happened with the case of Air Zimbabwe senior staffers who were jailed for an effective seven years.
Performance-based contracts
One would advocate for a move towards performance-based and time-bound contracts for all top managerial posts in public enterprises. This would serve to drain away any mentalities of entitlement, where officials may fail to see the merits of good corporate governance, blinded by the opium of assured permanence of their jobs.
This would need a rethink and redrafting and amendments to the Labour Act in order to make it easier to hire and fire poorly performing executives and in also putting a cap to their salaries or pegging salaries against the performance of their entities. Share options and profit share schemes are also other ways of motivating better performance of SOEs executives.
With the introduction of Special Economic Zones under Zim Asset it will be necessary to have productivity based salaries where employees in both the private and public sectors would be paid according to their production and not Poverty Datum Line related salaries, the latter which seems to favour employees’ well-being without taking into cognisance affordability of companies to pay and the profitability of enterprises.
By paying employees according to performance and the number of hours they actually produce, it will free the workers to work in more than one place thereby increasing productivity and leading to more employment generation which also lead to better money circulation. For a developing country like Zimbabwe with very high rates of unemployment, labour law flexibility might be the best of way of getting more people absorbed into the formal sector and employment and then with time issues of salaries can then be looked at with a view to increasing them in line with productivity and ability of businesses to pay.
Externally Audited Accounts
Government should make it mandatory that each parastatal, municipality or a cost-centre in Government ministries, produces yearly audited sets of accounts, with failure to do so triggering swift and specific remedial measures.
Production of externally audited books, supported by strategic plans that are painstakingly followed through with implementation, primes the public enterprises for full commercialisation and privatisation.
The situation where SOEs can go for many years with their books not being audited cannot be allowed and should be nipped in the bud. Such moves will create transparency and limit the malpractices going on in local authorities and SOEs.
Board independence and effectiveness
Boards of public enterprises have got to also assume a more prominent role in shaping and directing the strategic maps for parastatals. Gone are the times when boards’ preoccupation was to brood and fret over the past, only passing cursory remarks about the future. The new world-order demands that boards of directors be visionary and proactive, living their organisations in the future through agile, tactful and strategic thinking. It is also critically imperative that ministries, particularly Permanent Secretaries, desist from routinely intervening and meddling with strategic decisions and operations of public enterprise boards and management. Such practices only serve to compromise the strategic role and independence of boards and management which all goes to undermine delivery of their Mission Statements.
Appointment Criteria of Board Members
Nepotism, is another devil whose head must be crushed decisively, if public enterprises and ministries are to discharge their mandates effectively.
Association of Public Enterprises
One of the reasons why the majority of private sector corporates progress faster on matters of efficiency and good corporate governance is that they work in unison through formation of associations and groupings that steer and promote strategic debate and sharing of best practices in areas of common interest. It is, therefore, high time that our parastatal community form their own association which meets regularly to advance their strategic interests and parade practices of good corporate governance. There is a need for the creation and sustaining of awards for the Parastatal of the year, as well as Municipality of the year. Equally important, the same measuring stick and award forums should be used to name and shame worst performers who should be slapped with penalties for poor delivery.
Conclusion
A country that lacks transparency and accountability is likely to have corruption drowning and crowding out all developmental efforts thereby leading to poverty and instability in the social, economic and political realm. The existence of such deficiencies as corruption therefore creates and leads to an environment of bad economic governance. That is to say, they contribute to an unstable macroeconomic framework; a lack of transparency and lack of efficiency in fiscal, monetary, and regulatory policy; frequently unsustainable budget deficits; wasteful expenditure and imbalances in sectoral allocations; and unpredictable decision-making processes that affect national economic activities. It is in line with this that Zimbabwe has come up with a Corporate Governance Code known as ZimCode in order to curb excesses in SOEs and the private sectors. Lessons drawn from such profligacy as the Salary gate scandal cannot go unchecked and it is also hope that the perpetrators of these corrupt tendencies will not be let off the hook easily but be prosecuted and sent to prison in order to set a good example to would be offenders. A new culture of transparency and accountability needs to be inculcated among the people in order to foster a new generation of a corruption free society that seeks the development of the country first above personal aggrandizement. In order for Zim Asset to achieve its noble goals ZimCode should be ably implemented and not be left to gather dust in some executive office and only be remembered when yet another major scandal has hit the headlines.
Butler Tambo is a Bulawayo based Policy Analyst who can be contacted on [email protected] or +263 776 607 524 or by liking the Facebook Page Public Policy Research Institute of Zimbabwe for more interactions with the author.
