dyton mupawaenda
WITH one quick flick of the knife, President Mnangagwa this week sliced through the Gordian knot of vested interests, bureaucracy and lack of drive that has bedevilled a large chunk of State-owned enterprises for far too long.
Twenty of them were moved to a revamped and upgraded Sovereign Wealth Fund, the Mutapa Investment Fund, where they will be expected to use their often incredible assets to start generating wealth for the people of Zimbabwe.
All 20 are supposed to be revenue-producing and profitable, raising their own capital and paying the interest or dividends needed to the providers of that capital, often the State of Zimbabwe itself when it comes to shareholding.
In fact hardly any do, the main exceptions being led by the Kuvimba Mining House set up in President Mnangagwa’s first term with Government shares as the initial holding of the old sovereign wealth fund, but with a large injection of private capital as well. The dividend cheques were the first income earned by that fund.
Most of the entities being transferred are those former parastatals that were converted into companies in a large batch a little over 20 years ago in what was called “commercialisation”.
Most retained the mindset of a parastatal under the appropriate line ministry, and wanted their capital and, all too frequently, some of their operational costs coming from the taxpayer via the national Budget through the relevant ministry. This was not an advance.
There are also those, like Cottco, that were privatised or partially privatised, with shares being sold to others or on the open market, but which never really succeeded.
Cottco, for example, has seen the Government converting the debt it holds into shares with the Finance Ministry having to provide the bulk of the money the company needs to buy the cotton on time from the farmers.
This has been done, which is why cotton farmers are now profitable again, but it was not the original intention when the old parastatal was commercialised.
The choice of entities transferred to Mutapa Investments is interesting not just in what was transferred, but what was not.
For example from the Zesa Holdings stable, the Zimbabwe Power Company, the owner of Hwange Thermal and Kariba South Power Stations, has moved across, while the transmission and distribution company, the owner of the national grid and the network that gets power into businesses and homes, was not and remains in Zesa Holdings, which under the changes is now largely a transmission and distribution company.
This in many ways was anticipated in the original split of Zesa. While a single entity had to own the grid, both the backbone and the distribution grid, the power company was to be just one of the suppliers of power to that distribution company for on-sale to consumers, along with private power stations and imports as there was no need for any monopolies in generation.
NetOne is already in competition with a larger private-sector company, and even TelOne these days no longer has a legal fixed line monopoly with the advent of the cable services that have grown up.
The movement of so many entities into Mutapa does also make it easier to convert the original theory of bringing in outside investors into reality, since the decisions will now be made on financial grounds, rather than on trying to maintain a sort of semi-parastatal status.
There has been talk, for example, of bringing in other investors into the National Railways of Zimbabwe to rebuild this company into something that can provide the sort of services that a fast industrialising country reliant on efficient and inexpensive movement of bulky mining, agricultural and manufactured products around the nation, the region and to the export ports, needs. This is something the new board of Mutapa is going to have to think about.
There are other examples. The Industrial Development Corporation, for example, was originally set up as a parastatal to provide venture capital services.
The idea was that the IDC would help establish and incubate a new industry, holding the shares, but as it became profitable it would be able to unload these shares, at a healthy profit, and invest the money into the next new concern that needed a start-up incubator.
Instead under UDI, it accumulated concerns abandoned by their original owners and never really built anything up to sell off at a profit.
While President Mnangagwa’s decisive and revolutionary action was done through his authority under the Presidential Temporary Measures Act, Parliament will obviously be asked to make these permanent, along with any improvements that come up during the debates or which are sought after initial experience of the new fund.
Fairly obviously the success of the new Mutapa Investment Fund will depend on the two top managers, the chief executive officer and the chief investment officer, and the other eight board members with the 10 of them constituting the actual board.
Considering the sort of assets involved, and for a start these are the entire railway network, some seriously competent people are needed. The jobs and posts are not sinecures and are not rewards for past service.
The 10 people involved have to be the sort of people who could run very large and profitable private investment funds with performance contracts for both themselves and those who run each of the companies owned by the new fund.
The Ministry of Finance and Investment Promotion has been set up as the administrator of the laws involved, and has a major role in recommending and advising the President on who should be on the board, although the President has the last word, as is necessary when we are dealing with such a major concern.
There has been criticism and exhortations from President Mnangagwa on how some of the State entities, including some of those now transferred to the Mutapa Investment Fund, are run or not properly run.
This, among other factors, must have governed the reasons for the new system and on choosing who was moved across from a line ministry.
It should be noted that the Government is not abdicating its responsibilities. A vast amount of infrastructure and services are not being transferred even though they are also held at partial arms length.
For example, no one would suggest moving hospitals into a wealth fund, since they need to remain non-profit making and probably need to include State funding through the budget.
Even outfits like the Grain Marketing Board, which is supposed to be viable if not profitable, remain with the relevant line ministries as a service provider and a vehicle for implementing Government policies.
A sovereign wealth fund, or more precisely now with the new name, a national investment fund, is common in several countries and some of these have been built up to ensure that the citizens of those countries have a direct and income-producing investment that can be used for further development and can used to help ensure necessary services continue during bad times or when some critical natural resource is exhausted.
Online Reporter