Debts hamper parastatal reforms
THE restructuring of Zimbabwe’s State-owned enterprises, which have for years been a burden on the fiscus, is being hampered by debts, the Financial Gazette’s Companies & Markets (C&M) can report.
Government owns more than 90 State enterprises and most of these have failed to support economic recovery and have perennially depended on the fiscus.
State enterprises and parastatals are grappling with high overheads, inter-parastatal debts, maladministration, under-capitalisation, corruption and lack of corporate governance which have negatively impacted on their operations.
And yet these have the potential to contribute 40 percent to the country’s gross domestic product. Instead, most parastatals have failed to make meaningful contribution to the economy and are essentially draining the fiscus.
Now, government has targeted to restructure 10 of the State enterprises and parastatals before 2018.
These include Air Zimbabwe (AirZim), the Cold Storage Company (CSC), the Civil Aviation Authority, the National Railways of Zimbabwe (NRZ), Agricultural and Rural Development Authority and the Grain Marketing Board.
Last week, secretary for Corporate Governance , State Enterprises and Delivery Unit, in the Office of the President and Cabinet, Stuart Comberbach, said State entities played an important role in ensuring the successful implementation of government’s economic blueprint called the Zimbabwe Agenda for Sustainable Socio-Economic Transformation but “effective restructuring and turn around may well take some time”.
“We are all aware of the identification, by Cabinet, of 10 key State enterprises for prioritised restructuring and of the slow but nevertheless encouraging progress which is being made with regards to that process,” said Comberbach.
“Given the size, structure and operational complexity of some of these entities, not to mention the legacy debt issues associated with many, effective restructuring and turnaround may well take some time,” he said.
Several entities were once earmarked for restructuring or privatisation.
These included NRZ, ZESA Holdings, AirZim, Agricultural Bank of Zimbabwe, GMB, POSB, Zimbabwe Grain Bag, NetOne and TelOne.
NRZ requires in excess of US$2 billion to turnaround; it requires replacement of its old infrastructure, including railway tracks, telecommunication signals and wagons, which have outlived their lifespan.
Its resuscitation would increase the movement of goods by rail within Zimbabwe and in the region, earning significant revenue in the process and helping in efforts to grow the economy.
AirZim has also been a chronic loss-maker.
Former energy minister, Dzikamai Mavhaire, in 2014 reversed the Electricity Amendment Act passed by Parliament during the inclusive government.
The Act was meant to restructure ZESA and its units to make them profitable.
The power utility was to be dissolved and the National Grid Services Company (NGSC) formed in its place, with the Zimbabwe Electricity and Transmission Distribution Company being unbundled and its transmission functions transferred to NGSC while the distribution functions were to go to a new company called Zimbabwe Distribution Company.
CSC, once the leading meat supplier in Zimbabwe and the region, including to the European Union, has essentially collapsed due to mismanagement, corruption and lack of innovation.
Privatisation of State-owned enterprises has failed to materialise despite several promises by government to accelerate the process in order to stem the drain on the fiscus.
Only a few firms have been privatised since Zimbabwe liberalised its economy in the 1990s.
These include Dairibord Holdings Limited, which was the first to be privatised in June 1999, from a portfolio of about 40 public enterprises back then.
The company has since progressed, despite problems related to the current performance of the economy.
Other entities to emerge out of the privatisation programme include Cottco, CBZ Holdings, Rainbow Tourism Group and the diversified financial services group, ZimRe Holdings Limited.
Follow us on Twitter @FingazLive and on Facebook – The Financial Gazette