Executives and board members of State Enterprises and Parastatals (SEPs) were warned yesterday that poor performance will lead to their dismissal as the units will now be ranked according to their adherence to corporate governance principles.
At their peak, SEPs contributed 40 percent of the country's GDP in the 1990s, but that contribution has gone down to less than 10 percent owing to a myriad of challenges, mainly poor corporate governance.
In her 2017 audit report, Auditor-General Ms Mildred Chiri said there were 21 State entities failing to uphold good corporate governance while her 2018 report uncovered continued dereliction of duty, especially in accounting procedures and procurement processes.
The rot has continued over the years as nothing much was done to hold the perpetrators to account.
However, speaking at the official launch of the Public Entities Corporate Governance Act yesterday, Finance and Economic Development Minister Professor Mthuli Ncube warned that beginning next year, executives and board members will lose their jobs over low rankings.
The Corporate Governance Act was signed into law by President Mnangagwa on June 8 last year and is part of Government's reform agenda to improve transparency and good corporate governance.
It was promulgated from the National Code of Corporate Governance that was created in 2015.
The Act seeks to, among other things, set up the requirements for good governance of SEPs and ensure that they operate optimally to fulfil their mandates.
In his remarks, Minister Ncube warned boards of SEPs and senior managers not to be found wanting when it comes to corporate governance issues.
"I am glad to note that the State Enterprises Reform, Corporate Governance and Procurement Department in the Office of the President and Cabinet has been conducting dissemination and training workshops for the public entities and representatives from the line ministries," Minister Ncube said.
"It is our expectation that when the rating of the entities in terms of their compliance with good corporate governance takes place as from 2020, no entity shall be found wanting as this may reflect badly on the board and senior management. So better watch out, the rankings are coming and you don't want to be found wanting as a board or senior management charged with leading SEPs."
He said SEPs had a pivotal role to play towards the attainment of goals set out in Vision 2030.
"The new dispensation of the Second Republic requires SEPs, some of whom remain key enablers to business, as well as both domestic and foreign investment, to play a pivotal role towards the realisation of Vision 2030's aspiration of an upper-middle income economy and empowered society.
"Vision 2030 is being implemented through the Transitional Stabilisation Programme (TSP) and will be followed by two five-year plans covering the periods 2021-2025 and 2026-2030.
"The vision can therefore not be attained if public entities do not play their part as enablers of economic growth. It is therefore important that good corporate governance is instilled in public entities in order to ensure that good governance systems are put in place for the good of the country," Minister Ncube said.
Speaking at the same occasion, Chief Secretary to the President and Cabinet Dr Misheck Sibanda outlined provisions in the Act to enhance good corporate governance.
"The Act mandates the appointment of properly qualified boards for SEPs and requires them to establish codes of conduct and ethics and board charters," he said.
"It also requires SEPs to produce and publish strategic plans to assist in coming up with performance contracts and this dovetails well into the Integrated Results Based Management tool that Government has adopted. It also requires entities to publish annual reports on progress made in the implementation of their set priorities and mandates.
"The Act also regulates the tenure of office for board members to two four-year terms and that of chief executive officer to two five-year terms."
Dr Sibanda said board members will be required to declare their assets and any areas of conflict of interest, while annual general meetings of the entities will be expected to be held, to brief their shareholder (the Government) on their performance.
The Act also democratises the appointment to boards, taking into consideration of gender and regional representations.
"The Act forms the backbone of an ambitious SEPs reform agenda. Building on the progress made in Zimbabwe's business climate, including the improvements in the ease of doing business, the Act requires SEPs to adopt best practices in corporate governance," Dr Sibanda said.
"It provides an opportunity for Government, which owns the enterprises on behalf of the citizens of Zimbabwe, to exercise that ownership role more effectively."
Dr Sibanda said SEPs would be required to prepare timely financial statements and present the audited reports to their line ministries.
"The Office of the President and Cabinet requires each entity to make sure that its audited financial statements are sent to the OPC so that Government can consolidate these figures and get a picture of the performance of the whole entity and of its component parts."
The event was attended by various heads of SEPs and development partners.