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FOR many years now, parastatal and State enterprise reforms have been on the agenda of Government with the clear, ultimate goal of turning them around to profitability.
Considering their importance to the development of the economy, the need for reforms has been discussed at various fora including business seminars while policy pronouncements to drive this important agenda for reforms have also been made.
This week, Finance and Economic Development Minister Patrick Chinamasa told Members of Parliament attending the pre-Budget consultative conference that Government will get rid of or institute radical reforms in under-performing State enterprises.
While we may differ with the first option of closing down under-performing State enterprises, we need to remind the minister that the reforms, which we believe are the most viable option to turnaround the struggling State enterprises; have become rhetoric.
In 2010, Cabinet approved reforms of State enterprises, starting with 10, nothing much has been achieved. This has created a lot of scepticism over prospects for real reforms.
Zimbabwe has more than 70 State enterprises which once contributed 40 percent to GDP. This clearly shows the importance of this sector. As such, the scope for efficiency of the sector to drive economic growth is immense.
Further, parastatals and State enterprises fill in the void of essential service and products by venturing in territories too risky or unattractive to investors yet essential.
It is thus important to remember that the presence of Government in such areas remains of critical importance, but Government needs to ensure that State entities perform.
Corporate deficiency and governance issues have been affecting profitability of the State entities. The institutions have continued to be a drag on efforts to turnaround the economy and continue to burden Treasury by getting support from tax payers’ money.
Some have operated without boards of directors while some have, for years, failed to convene a single statutory annual general meeting. Some have also gone for years without publishing accounts. Parastatals and State enterprises need close monitoring and operational framework that compel them to adhere to basic tenets of corporate management to ensure that they perform optimally to drive the economy.
The Auditor-General’s reports have time and again highlighted the malfeasance in a number of public institutions, but little has been done to make culprits accountable.
It is critically important to note that parastatals and State enterprises are as important, if not more important, as private companies in driving economic growth as they provide the balancing act to allow private investment to grow and flourish. Government needs a system that ensures strategic public institutions carry out their mandate and that there is no disregard of basic tenets of good corporate governance.
What has also been synonymous with parastatals was the appointment of directors with no clue of the mandate of these institutions. In short, some of the appointments were not made on merit.
As such, when talking of State enterprise reforms, these are critical things that we feel Government should consider as a starting point. Government should ensure good corporate governance issues are addressed and ensure they are religiously observed.
The Government needs to strengthen the management of State entities and take a “hands off” approach to managing its interests. Effort should be made to work towards tangible performance deliverables, for which the boards and management must be relieved of their duties if they fail to accomplish them. It is important that Government appoints people with special skills to run the State entities and adopt zero tolerance towards incompetence.
Online Reporter