By Andrew Kunambura
Government has dissolved boards for the Zimbabwe Electricity Supply Authority (Zesa), the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) and the Zimbabwe Power Company (ZPC).
This would allow for the establishment of a single board under the Zesa umbrella to manage Zimbabwe’s public energy sector.
According to the Confederation of Zimbabwe Industries (CZI), the country’s power utility — Zesa Holdings — has been struggling to generate sufficient electricity to meet demand.
This deficiency resulted in a $224m loss in 2016.
In a statement yesterday, Finance and Economic Development minister Patrick Chinamasa said the dissolution of the boards was in line with new parastatal reform regime necessitated by the desire to revive the parasitical, loss-making State enterprises.
“Government has been consistent in emphasising the critical contribution expected from the State Enterprises and Parastatal (SEP) sector towards the revival of Zimbabwe’s economic fortunes and in this regard has for some time been pursuing a programme of SEPs reform designed to enhance performance, improve service-delivery and to bring more order, discipline and rationality to the sector as a whole.
“This includes, promoting good corporate governance in the SEPs sector, undertaking an overall strategic portfolio review, individual SEPs performance reviews and, conducting forensic audits where the need arises in some SEPs,” said Chinamasa.
“The 24th November, 2017 inaugural statement and the more recent State of the Nation Address delivered by President Emmerson Mnangagwa, together with the 2018 National Budget have served to inject additional weight and greater urgency to this programme of reform, and have underlined the need for government to significantly accelerate development of a SEPs short and medium term reform framework that would guide the implementation of the national SEPs reform framework.
“This framework has been developed by the arms of government mandated to oversee SEPs governance, performance and reform, namely the corporate governance unit (CGU) within the Office of the President and Cabinet (OPC), the ministry of Finance and Economic Development and the State Enterprises Restructuring Agency (Sera) on the basis of a comprehensive diagnostic analysis of the overall sector.
“In order to facilitate this task and so as to lay a sound, evidence-based foundation on which to conduct the analysis and to develop effective reform strategies, the OPC issued Cabinet circular No. 19 of 2017, which directed line ministries to produce detailed self-assessment and proposed turn-around strategies for all SEPs under their respective purview.
“Line ministries have since responded to this directive, providing relevant data which, in turn, has used to develop a memorandum recommending State enterprises reforms. The memorandum was considered by Cabinet on April 10, 2018,” he said.
The board will be allowed to engage strategic partners under ZPC operations where necessary.
The strategic and Zesa-specific activities of Powertel, said Chinamasa, will be incorporated under ZETDC while excess telecommunication capacity will be included in the merger between State-owned telecommunications units, Zarnet and Africom.
The three firms, Powertel, Zarnet and Africom will be merged.
Another parastatal which will undergo reform is the Civil Aviation Authority of Zimbabwe (Caaz) which will, subject to the passage of the promulgation of the Civil Aviation Amendment Bill, be unbundled into a Regulatory and Airports Authority.
The Small and Medium Enterprises Development Corporation is to be merged with Empower Bank and Development Bank that will have a unit focusing on small and medium scale enterprises and Youth Development programmes will be established in addition to a separate Women’s Bank.
Companies to be liquidated are National Glass Industries and Motira.
Chinamasa disclosed that government has also resolved to fully and partially privatise 14 State enterprises namely the Zimbabwe Grain Bag, Ginhole Investments, Zimpost, POSB, Infrastructure Development, Road Motor Services, Tel-One, Net-One, Telecel, Zupco, Willowvale Mazda Motor Industry, Chemplex Corporation, Deven Engineering, G&W Minerals.
In October 2017, the president and cabinet office reported a loss of $270m from 38 of the 93 parastatals.
The initial budget deficit target for 2017 was $400m. However, due to the country’s weak economic performance, it experienced a ballooning budget deficit of $1,82bn — or 11,2 percent of GDP — in 2017.
The chaotic takeover of white-owned farms in the 2000s exposed the country’s budget to severe financial pressures, leaving the newly-elected president with the responsibility of easing fiscal spending in order to save the country from a worse economic state.
NKC African Economics analyst Masego Ntsoane said privatisation has for a long time been regarded as a remedy to address the country’s economic situation.
In the 2018 budget, the government announced that all “technically insolvent” enterprises will be shut down.
After taking over from Robert Mugabe, Mnangagwa found himself in a tight position having to fulfil his promises of redressing the economic turmoil the country is facing.
The reforms highlight how Zimbabwe’s new top leadership is determined to shake up the State sector
“The list of companies to be privatised displays the severity of the country’s desperation to break free from the economic crisis,” Ntsoane said.
“While the extent of the privatisation drive is indicative of the severe fiscal headwinds the country is facing, it is also a further sign that … Mnangagwa is breaking away from the pernicious economic policy approach adopted by his predecessor. Initial signs are positive that Zimbabwe’s economic policy landscape will change to become friendlier to investment and business.”
Veteran economist John Robertson said: “I am in full agreement with the decisions to privatise all these organisations.
“Most need to be placed on a firm commercial footing first, which would require the appointment of interim managers who would be empowered to dismiss all unnecessary staff and install efficient management systems.
“If, with better management, the enterprises showed good prospects of being run at a profit, invitations to purchase shares would receive good responses.
“Government should welcome interest from abroad and it should place no barriers to discourage foreign investors.
“If government remains determined to have shares in these enterprises, those shares should be a small percentage of the total, never a controlling interest.”
He said government’s main function should be to improve and perfect the investment environment, to facilitate investment and not to involve itself in regulations other than those needed to ensure that the Rule of Law applies equally to everyone. Daily News