Caiphas Chimhete
24 October 2009
PRIVATISING loss-making parastatals before the resolution of contentious issues threatening to tear apart the inclusive government will see most of the state assets going for a song, economic experts have warned. The warning comes after the inclusive government said it was compiling a list of State enterprises for privatisation, commercialisation or restructuring to ensure viability.
But economic analysts said no investor would want to put money in a politically unstable nation which does not respect property rights.
They said investor confidence further plummeted when MDC-T partially withdrew from the coalition government citing President Robert Mugabe's flagrant disrespect of the Global Political Agreement (GPA).
A position paper by the Catholic Commission for Justice and Peace in Zimbabwe (CCJPZ) released last week says the country's risk factor would affect the disposal of the state enterprises.
The paper by CCJPZ national director Aloius Chaumba and economic and trade justice consultant Charity Manyeruke says in the absence of meaningful progress on political reforms, the enterprises will be disposed of at heavily discounted prices as investors factor in a significant premium for country risk.
They said the resolution of outstanding political issues was a key confidence building measure that will help further unlock the much-needed external funding support in the form of credit lines.
"Our view is that the conclusion of political and governance issues should precede the proposed divesture from state enterprises," they said.
"Proceeding with the disposal of assets under the current circumstances will not serve the best of the interest of the public."
Some of the outstanding issues include the re-appointment of central bank governor Gideon Gono, the appointment of Attorney General Johannes Tomana and continued persecution of MDC-T officials.
Insiders said government would target loss-making parastatals for privatisation or partnerships.
Public enterprises which are owned 100% by the government include the National Railways of Zimbabwe, Zimbabwe Electricity Supply Authority (Zesa), Grain Marketing Board (GMB), Air Zimbabwe, TelOne, NetOne, Industrial Development Corporation, Zimbabwe Mining Development Company, Minerals Marketing Corporation of Zimbabwe and National Oil Company of Zimbabwe.
In an interview Chaumba said the companies must be evaluated before they are sold.
"Thorough evaluation of the companies must be made first before they are disposed of to ascertain their net worth by reputable, independent chartered accounting firms to minimize the tendency to award these to the usual cronies of the present system currently obtaining," he said.
Chaumba said targeted enterprises must be placed on a recovery path before putting them up for sale to yield better returns.
Prosper Chitambara, an economist with the Labour and Economic Research Institute of Zimbabwe (LEDRIZ) concurred that it was not the best time to sell state-owned companies.
"I don't think they fetch the real value because of the low investor confidence and the fact that we are coming out of a global recession," Chitambara said.
"They also need to deal with the root causes of the poor performance ... as you might know some were affected by political interference."
He said the government was under pressure to raise funds because treasury was broke since the country has been failing to attract investment for the past decade.
However, Chitambara urged the government to treat each company differently as well as involve the other social partners such as labour and employers.
LEDRIZ is a think-tank of the Zimbabwe Congress of Trade Unions (ZCTU).
Another economist who requested anonymity urged the government to spare public utilities such as Zesa and water reticulation saying privatizing such entities would push service delivery beyond the reach of ordinary people.
But the Minister of State Enterprises and Parastatals, Gabbuza Joel Gabbuza said government was forging ahead with privatisation, commercialisation and restructuring of state enterprises.
He said the listing of targeted companies has already been completed and the Finance Minister Tendai Biti will soon present it to Cabinet for approval.
"We are not going back on that but whatever we are doing is in the interest of the public," said Gabbuza. "We will not just dispose companies of strategic importance. Companies will be treated separately."
He said most of the parastatals were operating at between 8% and 20% capacity.
Most parastatals have been surviving on the central bank's quasi-fiscal bail-out packages abandoned by the coalition government as it seeks to stabilise the economy through the Short Term Emergency Recovery Programme (STERP).
They also feared that the companies would be snapped up by a few politically-connected individuals if not properly implemented.
"The whole disposal process should be guided by a credible and transparent policy framework to avoid benefiting a well connected few," said CCJPZ.
"An independent firm of experts such as chartered accountants could be engaged to advise and provide oversight over the whole process."
Zimbabwe is recovering from a devastating economic crisis that was marked by the world's highest inflation rate, shortages of foreign currency and the closure of companies, which pushed unemployment past 90%.
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