The Sunday News
Ngonidzashe Chiutsi Business Correspondent
THE Government’s move to reform loss making parastatals and State enterprises is a noble plan as the institutions were not profitably run and continued to bleed the fiscus, economic analysts have said. In his State of the Nation Address in Parliament on Tuesday President Mugabe said Government had embarked on a programme to reform parastatals and State enterprises.
“Another key priority for Government as we strive to return the economy to sustained growth is the reform of parastatals and State enterprises. In this regard, Government has now embarked on a programme of parastatal reform which has prioritised 10 strategic State enterprises to urgent attention,” said the President. “In each case, specialised audits are to be undertaken and various reform and turnaround options identified. Underlining the importance we accord agriculture. The parastatal reform programme is beginning with the Grain Marketing Board and the Cold Storage Company,” said President Mugabe.
Buy Zimbabwe economist Mr Kipson Gundani told Sunday Business that reforming parastatals and State enterprises was critical as most of them were making huge losses and were now a burden to the Government. “The reforms are good so that there is a change of culture in their operations. The parastatals used to get grants and make huge losses. They had become a burden to the national fiscus. There is a need for a change of their operations so that they are profitably run entities,” he said. He added that parastatals’ poor performances were directly impacting on the whole economy.
“Parastatals are utility and economic enablers. Their efficiency or inefficiency has direct impact on the economy especially on the supply side. Most of them are cost drivers. They are into the provision of commodities such as energy, water and transport which are key to the whole economy,” said Mr Gundani. Another economic analyst, Mr Prosper Chitambara, said reforming the parastatals and State enterprises was long overdue as the institutions continued to drain the Government coffers. “It’s important to reform those parastatals because these are important for the development of the economy. For example in China, they contribute 40 percent of the country’s GDP. When they are reformed they can contribute to the fiscus and improve the Government revenue inflows,” said Mr Chitambara
“They also lead to employment creation and investment in the country. But the restructuring should involve key stakeholders such as the workers, management and the Government itself. He, however, expressed skepticism if the Government was indeed reforming the parastatals and State enterprises as the issue had been talked about for a long time. “My major concern is that this issue has been talked about over a long time and even during the Esap and we don’t know whether they are sincere this time but let’s just give them the benefit of doubt,” he said.
There are about 78 State enterprises and parastatals in Zimbabwe. The institutions are operating below capacity and have huge liabilities on their books. For example, NRZ reportedly owes its 5 000 workers about $55 million and requires $2 billion capital injection to turn around its fortunes. So far 10 parastatals have been marked for restructuring and possible privatisation. These are Zisco Steel, Noczim, Agribank, Zimbabwe Power Company, Grain Marketing Board, Cold Storage Company, Air Zimbabwe, NRZ, Tel One and Net One.
Over the last decade, the parastatals and State enterprises have been a burden to the fiscus as they relied on perennial hand outs caused by viability constraints. Economists say State enterprises, when operating efficiently; have the potential to contribute about 40 percent of Gross Domestic Product. President Mugabe said, in his State of the Nation Address, Government had turned the spotlight on corporate governance throughout the public sector, including across all parastatals, State enterprises and local authorities. “It is very clear that, over many years and due to a variety of reasons, the level of compliance with good corporate governance principles at many, if not most of our parastatals/State enterprises, has fallen to levels well below what might be regarded as even “minimally acceptable,” said President Mugabe.
“The extravagance of the remuneration packages and associated benefits which boards and management have blithely awarded themselves, borders on the obscene reflecting avarice and greed, instead of the commitment to serve which we expect, indeed demand, of those appointed to such strategic positions. The launch, in April 2015, of the National Code on Corporate Governance and the current process of integrating the principles therein in the amendments to the Companies Act, indicate Government’s serious intent in this regard.” A recent report by auditor-general Mrs Mildred Chiri also revealed that state -owned enterprises and Government departments were operating in the red, continuously bleeding the fiscus and in most instances failing to adequately provide the service for which they were set up for.
The report noted that, for example, the Grain Marketing Board (GMB)’s failure to timeously pay farmers for maize deliveries was one of the reasons the parastatal is failing to maintain the strategic grain reserves as some farmers preferred selling to private buyers. The report noted that laid down procedures in the management of the grain reserves were not being followed, resulting in weevils destroying grain at some depots. It said poor hygiene, poorly stacked maize, bursting maize bags, shortage of tarpaulins, caking and rotting maize in silos were observed at GMB depots.
