Zimbabwe: Analysts Speak On Privatization of State Entities

President Emmerson Mnangagwa (file photo).
15 June 2020

President Emmerson Mnangagwa has hinted of an imminent shift in provision of public services as government moves to dispose state owned enterprises, in pursuit of its liberalization policies.

In his recent national address, President Mnangagwa said the government reform programme will continue in earnest, including privatization of 'bloated' state owned enterprises.

He said the reforms embarked on by the new dispensation, under the mantra Zimbabwe is open for business, will now seek to expedite investment commitment into real employment opportunities.

"It is time to accelerate our development. From the pains of the pandemic we must find new impetus in rebuilding.

"The liberalization of our economy must continue in earnest. This includes privatization of bloated state industries which must be now expedited.

"Investment commitments must now be turned into tangible jobs.

"Reforms stuck in the wheels of bureaucracy must be unleashed, catalyzed and implemented," said President Mnangagwa.

However analysts have questioned the prudence of privatizing parastatals when their underperformance is mainly caused by governance oversights and weak policies.

State Auditor General, Mildred Chiri in the 2018 audit report on State Enterprises and Parastatals noted that state entities continue falling short and have largely remained unaccountable.

Chiri issued adverse opinions for several state entities for failing to adhere to governance principles in managing procurement of goods and services, employment costs, revenue collections and debt management.

Chiri, in the audit, recommends that SOEs embrace provisions of the Public Entities Corporate Governance Act and incorporate them into their existing structures and processes.

"Governance issues have continued to dominate my report constituting 80% of my total findings... lack of due diligence when procuring goods resulted in some cases of payment made without delivery.

"I envisage a situation where performance of State Enterprises and Parastatals will greatly improve if my recommendations and provisions of the said act are implemented", reads part of the report.

An economist with the Labor and Economic Development Research Institute of Zimbabwe (LEDRIZ) Dr Prosper Chitambara cautioned that privatization should not be a 'one size fits all'.

In his analysis, Chitambara contend that reforms or privatisation of SOEs is not the solution and if adopted, is phased or targeted leaving utilities providing essential public goods like electricity (ZESA) and water (ZINWA).

"There should be no one size fits all in terms of reforming our SOEs. We must implement a different strokes for different folks approach based on social dialogue with the key stakeholders in each SOE.

"Privatisation is not necessarily the panacea and it's not every SOE that needs to be privatised," said Chitambara.

Professor Tumai Murombo, a board member of the Zimbabwe Environmental Law Association (ZELA) critiquing privatization or nationalization of the mining sector in particular, says neither option is foolproof outside implementation of a strong legal framework.

He said privatizing a government entity, like the Zimbabwe Consolidated Diamond Company (ZCDC), without a strong legal framework and political will to enforce, cannot guarantee improved productivity.

Professor Murombo said creating and implementing an enabling legal framework for sustainable extraction of maximum value from minerals in Zimbabwe, is more important to enhance accountability and transparency.

"It's neither here nor there because even if you nationalize without the principles of good governance a country will still not benefit from its resources.

"If you privatize and you still as the government, the public and community affected you do not hold private actors accountable, you will still suffer a loss for your resources.

"It all depends on how effective are your transparency and accountability mechanisms that enable and empower the government and regulators to enforce all the laws and regulations against the company whether its state owned or a private player.

"The political will to enforce these principles of good governance are more important in terms of accountability," said Professor Murombo.

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