17 April 2018

Zimbabwe: Parastatal Reforms Must Be Pushed Through


Zimbabwe's parastatals, including those transformed in the last attempt at parastatal reform into companies formed with 100 percent State ownership, have by and large been badly managed and run as a haven for the inefficient and well-connected.

Now the new administration is starting a more serious attempt to get these entities back on track and having them run properly and profitably.

The main thrust is to streamline operations, cut bureaucracy, cut administrative costs and boost efficiency. Finance and Economic Development Minister Patrick Chinamasa has given a long list of reforms already agreed by Cabinet and which cover a very wide range of concerns.

Zesa Holdings is one of the worst examples of an entity that provides an essential service having a bloated managerial structure.

When the old authority set up by Parliament was "commercialised" by being turned into a private company 100 percent owned by the Government it was decided, for reasons that are now difficult to understand, to set up a holding company with three subsidiary companies.

Each of those four companies had directors and a full management team, ensuring that a higher percentage of revenue went on top-level administration rather than on skilled staff and essential equipment and maintenance. The old authority managed to perform all the functions more efficiently with just one management team. The Government is going back to the single entity.

There are probably more good reasons than bad reasons to retain the status of a company for Zesa and other similar re-branded parastatals on the basis that the Company's Act has strict laid-down accountancy and other standards that are common to most businesses; having to rely on an Act of Parliament to run a concern opens up the danger that obsolete structures will be called for.

We would like to press Government to consider seriously whether these 100 percent State-owned companies should be allowed to be "private" companies within the meaning of the Company's Act. It strikes us that even though there is just one shareholder, the State and the shares are not publicly traded on the stock exchange, there are good reasons to apply the full accounting rules of non-private limited companies to these entities.

This means that their accounts would have to be prepared according to high international standards, be audited and most important of all be published within three months of the end of the financial year. These 100 percent State-owned enterprises are, in fact, owned ultimately by the citizens of Zimbabwe collectively.

Zesa Holdings, ZBC Holdings, the National Railways of Zimbabwe and several other "companies" fall into this category and rules demanding timeous, audited and properly made-up accounts could easily be extended to the Grain Marketing Board and other pure parastatals that make things or do things and are still governed by Acts of Parliament.

A second change now being pushed through is to collapse the tiny State-owned outfits back into their parent ministries. It is daft that a little company with 10 employees should have an independent existence, again usually living off grants from that parent ministry.

As units in a ministry their top management would be the Permanent Secretary and their accounts would automatically fall under the Comptroller and Auditor-General.

The Government also needs to accelerate privatisation of pure industrial concerns that only moved into State ownership because of UDI sanctions, failures in later years or other odd reasons. The original Industrial Development Corporation was set up to nurture new industries and as soon as they were viable and profitable sell them off, preferably through the stock exchange and use the cash raised to start another new concern.

In other words, the IDC was to be a venture capital concern, rather than the permanent owner of a bunch of inefficient industries.

The final set of parastatal reforms involve those entities that provide a service, without owning assets or actually running an industry.

The most obvious are the collection of authorities that were set up to boost investment and business: the Special Economic Zones Authority, Zimbabwe Investment Centre, ZimTrade and the Joint Ventures Unit.

An investor coming to Zimbabwe needs to go to one officer in one office who can helpfully lay out the packages, advise which ones seem to apply in the particular case, give recommendations about the most suitable and then quickly do any paperwork or checks. While consolidating Acts of Parliament might take time, administrative changes can be done almost immediately and companies can be folded into each other right now.

Cleaning up the State sector rapidly will also give the message that Zimbabwe is serious and that the new Government is a new broom with hard bristles.


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