CABINET has approved a new Corporate Governance Framework (CGF) that will among other reforms compel state-owned enterprises to submit annual audited reports to government, a minister has said.
This development is likely to affect state-owned enterprises that have kept a tight lid on their financials for years.
Gorden Moyo, State Enterprises and Parastatals minister said cabinet on Wednesday gave the green light to proposals seeking more accountability and effective governance of state-owned companies.
Moyo said the framework will be launched later this year.
The new measures if implemented would bring more scrutiny to CEOs of parastatals who have in the past been criticised for milking perennial loss-making entities through hefty and unsustainable remuneration packages.
Moyo has since his appointment as State Enterprises minister blamed poor corporate governance at state enterprises for slowing down economic recovery. Government this year projects an 8,1% Gross Domestic Growth on the back of a rebound in agriculture.
The minister said the new modus operandi for state enterprises seek to increase to 40%, the contribution of parastatals to the GDP, a figure that almost matches the contribution of the entire mining sector to the economy.
Business organisations also blame beleaguered state-owned utilities such as Zesa and local authorities responsible for water provision for retarding economic turnaround.
“I am glad to announce that the government of Zimbabwe as of yesterday, Wednesday the 13th October, approved a corporate governance framework for state enterprises and parastatals,” Moyo said.
“The CGF will be implemented in tandem with relevant Acts of Parliament governing state enterprises and parastatals and also the Companies Act, as it is complimentary. It is the conviction of the government, that the corporate government framework will create a new management culture and paradigm for our SEPs and improve the development of the economy as a whole.”
According to a draft document of the corporate governance framework, financial statements of a state enterprise or parastatal shall be audited annually by the Comptroller and Auditor-General or a nominee from that office.
The policy document is also expected to bring to finality controversial appointments of CEOs. The minister however failed to disclose what government had decided on the remuneration of CEOs.
“The board shall appoint the MD/CEO/GM/DG and other designated posts on a renewable performance- related contract in consultation with the responsible minister and in accordance with provisions of the enabling legislation,” reads the seventh draft of the CGF.
“The board secretary shall circulate to members materials such as financial reports, relevant committee minutes and other background materials fourteen days before scheduled meetings and during months when the board is not scheduled to meet.”
On disclosure of interest, the CGF recommended that heads of state enterprises must disclose in writing to the board, the responsible minister and the Minister of State Enterprises any connection with the state enterprise or parastatal (or any related company) shares, debentures or any changes in respect of those particulars prescribed.
“Every director shall withdraw from proceedings of the board or committee when a matter in which he/she has an interest is considered, unless the other members decide that the member’s direct or indirect interest in the matter is trivial or irrelevant”.
Loans made directly or indirectly to non-executive directors, according to the draft document, are prohibited unless the granting of loans is the core business of the entity and subject to the rules and procedures applicable to the granting of such loans.