HomeOpinion & AnalysisParastatals reaping where they haven't sown

Parastatals reaping where they haven’t sown

Ngoni Chanakira


GOVERNMENT does not appear to hav

e a viable plan to rescue the country’s decaying parastatals, most of which are milking billions of dollars from the fiscus without providing sound services.


Although the parasitic behemoths have been draining billions from treasury, government has over the years continued to dither on how to turn around state enterprises that cover a wide swathe of the economy.


While there have been repeated calls for the commercialisation of parastatals, the Privatisation Agency of Zimbabwe (PAZ), another government agency, has been pushing its own agenda of selling the institutions.


PAZ recently earmarked nine parastatals for restructuring and privatisation by 2006. It said the programme was expected, among other things, to attract foreign direct investment, reduce public sector borrowing and access globally competitive technology.


The Minister of Transport and Communications Chris Mushowe is making efforts to rail-road what he terms the “strategic road map for the Ministry of Transport and Communications”. The minister, however, admits that the road map is “rugged”.


Reserve Bank of Zimbabwe governor Gideon Gono in his monetary policy statement review in April tried to intervene when he announced that all parastatals and local authorities could now use the central bank’s productive sector facility at 50% interest a year, if they could produce externally audited financial statements.


Gono asked parastatal bosses to produce turnaround plans mapping the way forward.


Other than the Industrial Development Corporation of Zimbabwe led by Mike Ndudzo, all the other parastatatals are loss-making and have never produced audited accounts.


They continue reaping where they have not sown and sometimes not only demand but also expect regular rescue packages from government when they are in financial troubles.


Addressing parastatal heads about turnaround plans on February 18, Mushowe said as part of the “war cabinet” his mandate was to “fight a winning battle”.


“As part of the war cabinet, I have one and only one choice to be a field commander and naturally you are expected to become serving and dedicated field lieutenants and foot soldiers lest we lose the battle which we cannot afford to,” he said.


The minister said he had about a year in which to execute a vision and mission of the ministry.


“We need to think ‘outside the box’ and be innovative and to plough around whatever obstacles may be in our way — to give meaning, relevance and role prominence to this ministry in the context of its natural economic centrality in the development aspirations of this country,” Mushowe said. “To do ‘business as usual’ is not a viable nor acceptable option for us anymore. We need to re-orient our perceptions and redirect our focus towards the core business for which we are here.”


Analysts have scoffed at Mushowe’s sentiments, pointing out that there was no way he could turn around parastatals in such a short space of time when they are accustomed to abusing facilities and receiving government support.


Economic commentator Eric Bloch says Zimbabwe’s parastatals have a tradition of “spending money” because they continue to receive more even when they do not earn it.


He says parastatals should be made accountable for all their expenditures, something that has been “a mystery since Independence”.


In his monetary policy statement review for the first quarter, Gono said the RBZ was introducing a six- month (to December 31) productive sector facility at 50% interest a year.


The facility was for Air Zimbabwe (maximum of $7,5 billion), ZBC ($7,5 billion), the Zimbabwe Electricity Supply Authority ($30 billion), National Railways of Zimbabwe ($20 billion), Zisco ($30 billion), Hwange ($15 billion), local authorities ($20 billion in total), Zupco ($10 billion), and Arda ($25 billion), on condition each of these institutions produced externally audited set of accounts to December 31 2003 by or before July 31 this year.


“After 31 July, 2004, the facilities will cease to be available to the institutions,” Gono said. “Applications for support must be accompanied by credible turnaround plans to rid themselves of current bottlenecks, including manning levels, and board and management structures which make economic sense. Without these supporting documents, the Reserve Bank will not avail them of the productive sector monies which are cheap and necessary for their turnaround.”


He said at the end of July the RBZ would publicise the parastatals and local authorities that had succeeded in accessing the funds while failure to do so would reflect shortcomings inherent at the institutions that stakeholders would naturally get to know about.


In an interview with businessdigest last month Gono said he had yet to receive turnaround plans from parastatals and local authorities.


“The offer still stands but there are no takers,” he said. “I guess the audited accounts are not available.”


Mushowe in his so-called turn around plan said some of the parastatals were sick.


“I have talked about the dream, the vision, the expectations, but we have sick companies. Air Zimbabwe is not well, NRZ is in distress, all is not well with our telecoms companies; Tel*One and Net*One, the other companies are either coughing or sneezing,” Mushowe told parastatal bosses.


“Recovery of these sick companies depends upon the implementation of an appropriate rescue plan or turnaround prescription which we must embark upon without delay. The strategy for the appropriate remedy should focus on addressing the fundamental problems bedevilling our organisations, tackling the underlying causes (rather than the symptoms) affecting our corporations, and be broad and deep enough in scope to resolve all of the key issues affecting business.”


While Mushowe’s ideas on turn- around programmes have been blasted as vague, the parliamentary portfolio committee on the Budget, Finance, State Enterprises and Economic Development in December said the major problem affecting parastatals was “poor pricing policies”.


They cited Air Zimbabwe, the National Oil Company of Zimbabwe and the Grain Marketing Board as examples of such organisations. They pointed out that the proposals made by Finance minister Herbert Murerwa in his 2004 national budget statement were insufficient to narrow the quasi-fiscal deficits arising from public enterprise operations.


“Further, with no specific implementation measures to ensure discipline, many people will also question the credibility of the fiscal restraint budget proposals,” the committee said. “Have the minister’s cabinet colleagues who are responsible for approving price increases in parastatals been appraised of the need for quick and urgent price reviews? Do their ministries have the capacity or disposition to do it?”


International financial organisations have already advised Zimbabwe that it needs to streamline the public sector and reduce costs through commercialisation and rationalisation.


They have further urged government to accelerate the commercialisation and eventual privatisation of state enterprises to reduce their burden on the trillion-dollar budget.

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