adminKudzanai Gerede
As Government is grappling with the headache of diminishing revenue figures on its balance sheet, one of its biggest undoing has been an indifferent attitude towards the day to day running of the State Enterprises and Parastatals over the past decade or so which used to contribute significantly to national coffers.
State Enterprises and Parastatals (SEPs) used to be key economic drivers before the turn of the millennium, sustaining livelihoods of millions in the country through direct and downstream employment with a contribution of about 40 percent to Gross Domestic Product.
Strategic SEPs like the National Railways of Zimbabwe (NRZ), Grain Marketing Board (GMB) and Cold Storage Company (CSC) were huge foreign currency earners for the country as their footprints were dotted across the African continent and penetrated overseas markets.
NRZ used to be the heart beat of Southern African trade as it strategically connected markets within the sub-region, thanks to its efficient railway infrastructure, and the CSC supplying quality beef to the European market. The GMB’s then capacity to buy grain from local farmers ensured that its reserves were in full stock exporting massive volumes of grain, a feat which earned the country the pseudonym; Bread Basket of Africa.
Today, government seldom realises a penny from these public institutions as most of them operate in the red with a huge gap for recapitalisation yearning for government financial intervention. This is despite the fact that government has constantly been allocating funds into these moribund institutions with the hope to resuscitate them.
These SEPs have been waning due to a myriad of challenges, chief among them poor corporate governance, corruption, lack of finance to recapitalise them and viability challenges.
Addressing industry stakeholders and experts at the State enterprises and parastatals reform and data collection workshop recently in Harare, acting Minister of Finance and Economic Planning Walter Chidhakwa boldly asked if Telone or CSC was a privately owned company would it be what it is today? His answer was definitely not.
The sole reason why some SEPs will not have been in a dire state they are today had they been privately owned is simply because the private sector is profit oriented. This has been the difference between public institutions in the country and their counterparts in the private sector.
Whereas board members and chief executives of SEPs pocket in excess of US$ 100 000 from the public entity and still go on for years, private sector cannot afford such luxuries as that would mean the demise of the business.
The Auditor -General’s report released last year bear testimony to gross mal-administration in State enterprises.
Most of the SEPs management did not even submit their income and expenditures accounts statements as requested by auditor-general office translating to government, the chief shareholder in the institutions not aware of both current and fixed asset value in these entities.
The state enterprises and parastatals reform and data collection workshop is expected to give government a clear picture on which course to take regarding each of the State enterprises.
Getting baseline data is the building block for monitoring compliance to good corporate governance within public sector and for recapitalisation purposes but due to the slow pace in the finalisation of data collection on assets, liabilities, incomes and expenditures government cannot continue offering an olive branch to perennial loss making enterprises.
Most of the country’s State enterprises now need to redefine themselves and reconsider their business models if they are to stand the competitive nature of the modern economy.
This comes at a time when Government is muting centralising the responsibilities of day to day running of the SEPs to a central agency, scrapping the load from line ministries. This will not be a new idea as SEPs in the country were once administered by the Parastatals Commission in early 1990s. This will however need some thorough mindset shift.
“Changing accustomed ways of working is never easy and giving up a long standing ownership relationship might not be attractive, on the other hand transferring the headaches of SEPs accountability to a centralised agency might have its attractions and might free up valuable capacity in the ministries, removing their debts might also be attractive, there are challenges to the change but we know the present system is not working,” said Minister Chidhakwa.
Economic analysts say most of the SEPs in the country have found it hard to stand the test of time simply because they have failed to redefine themselves to remain relevant and competitive.
“The growth of private sector has been a game changer for most state enterprises,” notes economic analyst Chris Chenga.
The telecommunications industry for instance has been dominated by private players like Econet and Telecel before its recent acquisition by Government, a sector Government had enjoyed monopoly since the days of PTC which was responsible for the fixed telephone booths across the country up to the days of Telone before mobile operators had been fully established.
It also applies to the CSC which monopolised the meat processing sector even prior to independence as all cattle ranchers would supply the state enterprise capacitating it with huge reserves to feed European markets. The liberalisation of the economy in the 1990s saw small competitive abattoirs open up and CSC soon lost ground as public sector structures began to weaken spurred by corrupt tendencies, poor corporate governance and lack of innovative thinking to sustain the competition among others.
Some sections have also called on Government to partner private investors in some of these SEPs in order to resuscitate operations, with the NRZ in mind. The national rail transporter is in need of over US$2 billion to operate to full capacity and its services already have a ready market to transport coal in Hwange, sugar in Triangle and commodities in mining towns which is being currently done by haulage trucks which is very costly for companies.
However Minister Chidhakwa recently expressed reservation on privatising SEPs, citing that they were the mainstay of development in any given country. Historically, state enterprises come from strong public sector structures which form the basis for development of economies. Governments would set up SEPs through investment of huge capital on infrastructure in areas that private sector or individuals could not invest in.
Today worldwide SEPs might have been surpassed by large multi-billion private corporations, but they cannot be wished away because they now look after infrastructure which may not be as profitable but are necessary as pillars of development.
Redefining the mandate of some of our SEPs might do them well as circumstances which led to their formation might have completely changed over the years leading to most of them struggling to deliver services mandated to them.
The CSC for example, formed prior to the 1950s was set up to supply industrialised South Africa with beef as the local market was still largely rural and reared its own livestock to meet its meat demand. It later became a meat supplier of note in the whole country as urbanisation intensified up until private abattoirs flooded the market.
For the growth of private sector abattoirs feeding the local market, CSC should now consider redefining its mandate into an export commission of the country’s preferred non-GMO meat products to regional and overseas markets for it to remain relevant and profitable.
Minister Chidhakwa also concurred with the notion, citing the Minerals Marketing Corporation of Zimbabwe as an example of a State enterprise which needed to be redefined as its mandate is no longer as necessary as it was when it was established.
“Minerals have off-take agreements even before you started mining them so what is the role of MMCZ? It should not exist in its current form,” said the minister.
Currently the State enterprise (MMCZ) is in the process of mutating its mandate in Parliament and analysts are of the view that it rather take up the duties of being an exploration company. With the corporate governance framework finalised that will guide public institutions in running SEPs and other public offices, the future of SEPs may well be posed for better times.
Online Reporter