Govt abandons Agribank, POSB privatisation
GOVERNMENT has shelved plans to privatise two State-controlled financial institutions, despite being severely constrained to prop-up struggling parastatals, the Financial Gazette’s Companies & Markets (C&M) has learnt.
This emerged against the backdrop of remarks by Finance and Economic Development Minister, Patrick Chinamasa, that government would keep some parastatals for public interest, and could only consider strategic partnerships for others.
This is contrary to earlier pronouncements by government that it was committed to the privatisation of State-owned enterprises, most of which have huge debts, to make them viable.
As late as 2010, government came up with a model for the restructuring, commercialisation and privatisation of State enterprises because they continued to drain the fiscus.
Under that framework, the process for the privatisation or commercialisation of several parastatals had commenced.
But C&M understands that the State Enterprises Restructuring Agency (SERA) was last year directed to halt negotiations with strategic partners for POSB Bank and Agribank, after government opted for the recapitalisation route.
Both banks were the subject of takeover rumours under a strategy that would see government hiving off at least 49 percent shareholding in a number of loss making State enterprises. There are between 97 and 105 parastatals in Zimbabwe.
A significant number of them are insolvent, or are teetering on the brink of collapse due to extensive mismanagement, corporate governance deficiencies, corruption, fraud and a generally hostile market triggered by a worsening economic downturn.
Two weeks ago, C&M reported that 15 of the State firms defaulted in a broad range of taxes due to government, with nearly US$500 000 in unremitted taxes by parastatals last year alone.
The situation among parastatals has resulted in public pressure for government to move out of business and concentrate on creating policies and an enabling environment for business in order to grow the economy, create employment and boost revenue through increase in taxes.
But this week, impeccable sources said Agribank and POSB had been removed from a list of State firms previously earmarked for privatisation.
The State also has a controlling interest in the Infrastructure Development Bank of Zimbabwe, which is tasked with the insurmountable task of rebuilding an ageing infrastructure requiring over US$20 billion to rehabilitate.
“SERA was at an advanced stage of looking for a partner for POSB but they were told to stop,” an official familiar with developments told C&M.
“They were also negotiating for strategic partners for Agribank but government said let’s look for funding and recapitalise Agribank,” the official said.
The official could not disclose the extent of funding required for the two institutions, or the nature of the private partners they were trying to identify.
In June, government injected US$30 million into the agro-focused Agribank, which has also secured an additional US$20 million from the Africa Export and Import Bank to support agriculture.
But official reports in possession of C&M indicate that SERA, which has been at the heart of a string of restructuring and privatisation deals concluded recently, including energy projects worth about US$1,5 billion, had prepared documents for Cabinet approval with regards to Agribank.
It had engaged advisors and prepared due diligent reports for a deal that would have seen a strategic partner taking over 49 percent shareholding in the struggling bank.
C&M understands that SERA had prepared a memorandum approved by Cabinet last year, to dispose government’s 49 percent shareholding in the bank to an undisclosed strategic partner.
POSB, which paid a surprise US$313 000 dividend to government two weeks ago after notching US$1,2 million profits during the year to December 31, 2014, had also been earmarked for privatisation as the State battled to trim its portfolio of parastatals and save millions in funding from Treasury.
With a strong network countrywide, POSB is one of key public financial institutions, driving several government transactions such as payment of pensioners, and is known for its relatively reasonable interest rates that have helped hundreds of small scale enterprises to soldier on in a hostile investment climate.
It was established in 1904 to mobilise savings for national development. POSB has been one of the few, professionally run public institutions in Zimbabwe. But it still surprised Chinamasa when the company paid a dividend.
When I heard that you (the bank) had secured a meeting, the usual suspicion was that most people who come through my door are coming with complaints and not good news,” Chinamasa said at the handover of the US$313 000 cheque.
In a recent interview with C&M, Chinamasa ruled out privatisation of several parastatals.
He said government could, however, entertain partnerships with private investors to form joint ventures with the State, which controls 100 percent shareholding in the majority of the public enterprises.
“We are looking at all parastatals to see which ones are better placed to be in the private sector entirely,” he said.
“But some like the NRZ — those are ours. For some like the airline, we are looking at joint ventures. We are looking at recapitalising the NRZ. It is futuristic; it can be sooner rather than later. We want to restore it to what it used to be. It is work in progress,” said Chinamasa.