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Happiness Zengeni My Two Cents
RECENT revelations about the lavish salaries and perks being enjoyed by CEOs and other top managers in Government parastatals at the expense of service delivery and viability certainly leave more questions than answers as regards whether State Enterprises can in fact operate viably.
While the “salary-gate” scandal can easily can easily be explained by the classical economics theory of moral hazard that gives rise to the agency problem between shareholders (Government and the public) and managers of enterprises. The classical economics agency problem tries to explain problems caused by asymmetric information and the lack of alignment of economic objectives of owners and managers of business leading to the pursuit of self interest by the managers at the expense of the shareholders interest, leading to inevitable conflict.
However, a closer analysis of the scandals not only reveals a shocking misalignment of objectives of top management and the companies they were tasked to run but that these entities actually generate and control vast amounts of resources which if properly harnessed and correctly applied can actually significantly resolve some of our economic problems.
State enterprises, which generally have potential to generate 40 percent of the country’s gross domestic product, used to be cash cows back in the day.
However in the last twenty years or so they have never declared dividends except ZMDC. Rather, they have relied on Government handouts. The Industrial Development Corporation of Zimbabwe is the worst culprit. Imagine the size of its balance sheet. This is an entity with different business interests across all sectors and none are generating cash but every month perks are going to its management.
Instead of helping prop up the fragile economy and facilitating industrialisation where private sector would dare not invest, the mega bucks directors are in it only for themselves really
The other problem in State entities is the lack of accountability, proper corporate governance and oversight systems and the absence of performance management systems. This means that if a parastatal does not perform no one is fired.
As such, the remuneration system is completely divorced from performance targets, which should be the basis for rewarding hard working directors who deliver expected results.
Events around “salarygate” are akin to a situation where some build while others destroy yet get handsomely rewarded for such retrogressive and barbaric acts of ego-centricism.
Then there is the problem of anti-selection or adverse selection which results in Government through the politicians (ministers who appoint boards and management) rewarding allegiance and “political correctness at the expense of performance of an individual.
Under such an arrangement, as long as the appointee is loyal to the master, the superior turns a blind eye to performance and this has come at the expense of the entire nation.
Quite disturbing in such situations is also the fact that only a few of these gross underperforming parastatal and State enterprise bosses get outrageous salaries and benefits from loss making institutions that have mastered the habit of surviving on fiscal handouts collected from struggling tax payers.
In light of these saddening developments unfolding among us and right in front of our wide open eyes, is it not time that we demand both term specific and performance based contracts from the heads of parastatals and State enterprises who should also have national loyalty at heart?
Government should be uncompromising in the appointment of competent, ethical people to boards of any State entity or where the State has interests and these individuals should have clean and squeaky clean trade records.
It is possible to get both performance and loyalty. Each board must have suitability criteria for each member based on a capability matrix and required skills mix on the board.
A board must have a balance LEGAL, FINANCE, MARKETING, AUDIT, TECHNICAL (ENGINEERING) Human Resources , Strategic/Economic skills etc. In our case it must also look at regional/ethnic and gender balance. Political alignment is the last thing and it’s not important for effectiveness . . . Actually using ZBC or even Zimpapers as an example, editorial policy is driven by strategy and by management not the board. The board is there to drive performance.
Surely the government must now realise that blind loyalty can be costly?
In China and Russia you must be both loyal and competent to hold positions of such high responsibility. Loyalty on its own is not enough, but in Zimbabwe we had allowed criminality to become so ingrained it appeared normal.
Government needs to look beyond the usual suspects. Perhaps contract independent consultants or even the Public Service Commission to invite Zimbabweans who think they can sit on the various boards to “APPLY” send their CV’s and then go through a rigorous process.
That’s what they do in South Africa. They appoint Board Members the same way executives are employed.
Leaving ministers to singularly appoint board members is directly promoting corruption as it creates a patronage system. Parastatal Boards can report to ministers but they should be appointed independently.
With that being said, herein lies the main topic for this edition. With revenue collection likely to decline further because of the contracting private sector and significant foreign direct investment unlikely to come in the near future; the public sector is all the Government has at the moment. Cleaning up its systems and making this sector work, will immediately move Government from being a revenue collector to a revenue generator. Overall, the resources are there, what is missing is the catalyst. The land is there, the minerals are there even the animals, birds, flora and fauna . . . All is there. What is missing is the money. And the money will only come once Government gets the public sector right.
My Two Cents conclusion is taken from edited views that have been moved on a FinX column.
Making people believe (ku believesana)
One familiar quote, heard often times shows exactly what people think of this economy. “We are at the end of our string . . . there is nothing more we can do.” Many economists are predicting doom and gloom, more of it if you are in the mould of the usually grumpy former Herald Business editor, Dr John Robertson. And if the economy hasn’t hit rock bottom in some sectors of the economy (bearing in mind sectors such as education are always the last hit), it has slowed down significantly in many of them.
When the ghetto youths talk about ku believesana they are in essence referring to how a person can convince his peers that certain things really work. It’s simple for them really. Amongst themselves if they believe that they can create beats off a tin gallon and go somewhere with it then who else can stop them. Never mind the fact that it will only end up as a pipe dream. Yet efforts are made at that particular time to look for the tins.
In the same vein if Pastor Shingi Makandiwa, using God’s name can increase the height of a person, anenge atoti believesa kuti that’s the truth.
So this is where the economy is at the moment. Government has the unenviable task of making us believe or rather convincing us that there’s a way out of this because (to go back to the ghetto slang, once more) taka sticker!
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