‘Low tariffs affect parastatals infrastructure’

on the deterioration of key infrastructure which is having an adverse effect on productive sectors of the economy, the African Development Bank has said.
According to the AfDB’s Infrastructure and Growth in Zimbabwe report most infrastructure which falls under the jurisdiction of parastatals has deteriorated due to the structural inefficiencies of the entities.
“In other sectors such as power, rail transport, and fixed line communications, where services are provided by parastatals, prices have been kept low, and as a result, the economic costs of the deterioration have emerged in the form of large and, in some cases, unsustainable operating losses for these parastatals
“The deterioration in the physical infrastructure has been accompanied by lack of progress in building institutional capacities for management and regulation of the basic services associated with these networks.
“Problems in this area stem from a disjointed approach to regulation and oversight among the ministries responsible for these sectors, compounded by a substantial loss of skills in the public workforce.”
Not only has the poor performance of parastatals constrained infrastructure refurbishment directly, but it has also affected infrastructure development generally.
Parastatals also continue to burden an already weak fiscus. For instance, the 2011 National Budget shows that last year six public entities, namely Air Zimbabwe, Agribank, National Oil Company of Zimbabwe, Cold Storage Company, TelOne and Grain Marketing Board, registered interim losses to October of US$46,4 million as operational costs rose to US$250 million in the period under review.
To this extent the sustained deterioration in the quality of infrastructure assets stemmed from very inadequate levels of public expenditures for routine maintenance of the critical economic infrastructure, hence the need to expedite the restructuring exercise of the public entities.
The country has about 78 parastatals and State enterprises, 15 of which have been earmarked for privatisation, 18 for commercialisation, 34 for restructuring and 11 are still under consideration.
Meanwhile, the prolonged neglect of key infrastructure now means the cost of refurbishment and/or development has inflated relative to the country’s Gross Domestic Product, which currently stands at US$6 billion. The AfDB has said Zimbabwe requires around US$14,2 billion for infrastructure projects over the next 10 years.
The financier also lamented the performance of public service providers as a contributing factor to the high cost of doing business in the country.
“In other cases where parastatals provide services, prices may be set at low rates but the indirect costs of service provision may be high.
“These costs arise in a variety of ways, including, for example, from supply problems, such as frequent electrical power outages, dependence on high cost power from private generators, and failure to supply water to firms and households on a regular basis.
“Systematic data on these types of costs are not readily available, but anecdotal evidence confirms the impact of these failures on costs for firms and households,” said the bank.
According to the 2011 World Bank Doing Business Report Zimbabwe was ranked 157 out of 183, while in the Competitiveness Report of 2010 to 2011, the country was ranked 130 out of 139 countries.
Observers contend that although these rankings may not be a true reflection of fundamentals prevailing on the ground, the Government should seek to improve on such rankings insofar as they contribute to investor perceptions of the country.
The AfDB report has undertaken a detailed examination of the development of basic infrastructure for the transport, power, water and sanitation, and information and communications technology sectors in the past decade, as well as the management of the services associated with this infrastructure.