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The problem with Zim’s parastatals

By Langton Mutoya

A company is a legal persona, who at law is accorded similar privileges that are enjoyed by natural persons. Ironically, a company acts through natural persons, mainly the Board of Directors which is the arm that governs and controls the body of a company. To achieve the company’s goals and objectives, the directors must exhibit certain required attributes, play certain aptitude roles and perform certain fiduciary functions and responsibilities. A balanced board should be composed of persons with traceable good leadership qualities and core competences required by the enterprise, such as accounting or financial expertise, legal skills, business and managerial experience, industry knowledge and strategic planning experience.

Ideally, state-owned enterprises (SOEs) should be governed as astute legal entities, most importantly in which the state would be a major or a majority shareholder. Their major mandates are to provide useful services to society and contribute significantly to the improvement of the economy. In that regard, SOEs operate the state’s commercial affairs, often with public policy objectives as their main targets. SOEs and parastatals are expected to play some key roles in promoting socio-economic development by providing a wide range of products and services to the nation. They are critical in the provision of public and social infrastructure services essential to humanity such as food, water, electricity and health, to mention just a few. Over the past decade, these presumed benefits were reportedly not extended to the intended beneficiaries of Zimbabwean citizenship.

The main objective of SOEs is to create public value and growth of the economy. To achieve the objectives of public value creation and good growth, the SOE of this 20th century should therefore develop the following fundamentals: be actively monitored and managed through establishing clear purpose and mission for the SOEs that are linked to desired societal objectives and outcomes. These should clearly be understood by the SOEs line ministries and related executive management as spelt in the Act. In this context, active monitoring and management requires that those in leadership, particularly the board of directors and the executive leadership, demonstrate that they are clear to what they are supposed to be doing, they have capacity to execute their mandate, they are capable and committed to maintain their integrity.

In addition, state ownership status should be continually monitored and evaluated to ensure that value continues to be delivered. The SOEs should develop and maintain sound internal management in order to achieve efficiency and effectiveness. Internal management should leverage technological and service innovations to deliver products and services, which meet user needs within these ever changing times. Intuitively, the SOEs should leverage its external influence by co-creating value with other development partners, stakeholders in society and driving good growth, linked to its purpose, mission and strategic objectives. In this way, SOEs can truly become catalysts for sustainable public value creation and development.

Sadly, over the past decade this public value creation was missing within the several SOEs. Media was awash with negative stories and bad publicity about these SOEs. It is, therefore, my perception that the negative reputation accrued by parastatals over decades contributed to their decay and alleged irrelevance. Even in the various media platforms and even among political arena, all the problems in state enterprises are attributed to poor leadership, maladministration, mismanagement, alleged incompetence and escalating corrupt tendencies, while the comatose state of private industry in the same economy the magnitude is explained differently and in minority.

In a bid to resuscitate the ailing and decaying SOEs, the government promulgated the new governing law under the Public Entities Corporate Governance Act [Chapter 10:31]. Zimbabwe is known for crafting beautiful blueprints which historically suffer stillbirth or fade into oblivion without anybody giving attention to them. I recall the publication by the government in November 2010 of the Corporate Governance Framework for State Enterprises and Parastatals which sets out governance issues relating to this sector of the national economy which suffered the mentioned fate. It is unbelievable that some key SOEs in Zimbabwe have been running for over six months without both the board and substantive CEO. Some have their boards fired, creating a discourse to the guidelines of the good corporate governance practices.

It, therefore, follows that the reform of leadership and governance practices and systems is key to the revival of SOEs in Zimbabwe. The new governance administration need leadership and executives who have a committed mindset and correct attitude to their bestowed fiduciary responsibility and a moral responsibility to employees. The moral duties enumerated find expression in the concept of ubuntu (hunhu) which is expressed as umuntu, ngumuntu ngabantu, meaning “I am because you are, and you are because we are”. This is what it should be in any enterprise, anything short of that is dereliction of duty and is costly to the enterprise and economy at large.

It is in my opinion, necessary to examine why SOEs and parastatals in Zimbabwe were failing to fulfil their mandates, so as to rectify the situation and cause the sector to fulfil its responsibilities in this changing world. This contribution is, therefore, aimed at provoking patriotic citizens to take a more analytical view of the new law than we have received from the press and the private sector. The provocation that unveils the attitude and character of SOEs management principles in this changing world. It is a shame that SOEs are in the public press solely for wrong reasons ranging from corruption, misappropriation of financial priorities, maladministration in procurements, abuse of office to sexual harassment at workplaces. Moreso, running without substantive key figures such as CEO or the non-executive board.

Public Entities Corporate Governance Act [Chapter 10:31] like the leadership in these entities will not survive my criticism. Perhaps this will make the Act relevant and implementable in a manner that it was crafted for. In this narrative, I will discuss only one criticism of the Act. In my opinion, the Act assumes that public entities operate within their own macro-economy. It implies therefore that, for them to produce great results, SOEs need remedies quite separate and different from those being suggested for the rest of the corporate sector. The implied immunity put these SOEs in comfort zone which in this new political governance or administration, I believe the majority of populace don’t condone.

My personal view is that, public entities have to contend with the very same challenges which face private companies for the simple reason that, they operate within one economy and therefore have to be competitive to survive. Most of the corruption allegations which have affected public entities largely arose from shrinking opportunities, a collapsed job market in the entire national economy and the perceived political shield from the political allies so to say that seem to armour SOEs leadership. The major question that comes out of this observation is: What happened to the opportunities that once subsist within these SOEs? I challenge the academies and research institutions to carry an investigation, inquiry, study or whatsoever method that can benefit our beloved Zimbabwe.

Holding other factors constant, I applaud the current governance for the democratic space and efforts it is making in creating an enabling investment and business environment. It is a true fact that business thrives in an enabling environment created by the government. In this manuscript, the role of government in business is briefly outlined just for background. In principle, government must create an enabling environment in which business can thrive, participate through state enterprises in the development of the economy and provide the necessary infrastructure and basic services such as electricity, water and communication facilities. These provisions are necessary for the efficient functioning of business. Government must also actively combat corruption through legislation and the establishment of effective anti-commissions. The enactment of Zimbabwe Anti-Corruption Commission (Zacc) is a welcome development.

Expectation was, Zacc would initiate the legal processes and take them to a fair conclusion. Perpetrators must be brought to book. The tone must definitely start from the top and be consistently applied across the divide despite political affiliation, race, tribe, colour or creed.

Even the government itself should be brought to account for its promises to the citizenry. This directly instils confidence to the corporate world. It is my opinion again that, cases of corruption attract existing punitive measures and those cases should be concluded with the transparency that they would have been brought during apprehension. One wonders whether these cases are being concluded or perpetrators are seen walking scot-free.

It is my belief that state enterprises of this 20th century face many challenges of leadership and governance. In my general day to day observation and experience of working in SOEs, I am convinced that political interference, corruption, and non-adherence to good corporate governance practices cause SOEs to fail. Good corporate governance frameworks hypothesize that successful SOEs would have achieved a balance of public and private interests and are commercially run with minimum or without major political interference.

It is my humble submission that the Public Entities Corporate Governance Act [Chapter 10:31] be implemented in its full context and that it would not use the provisions, paragraphs and sub-paragraphs selectively to address these and other not mentioned challenges in this manuscript. It is public knowledge that, these various acts were formulated to solve, and correct the misdemeanours that have been in existent within the SOEs for decades. Given the opportunity to implement the SOEs and other related Acts on behalf of the government, the following would be my road map.

l Retire all SOEs senior management who have serviced the enterprise for five or more years.

l Retire all existing Board of Directors and facilitate appointment of new boards with balanced qualifications.

l Ensure that the Annual General Meetings provided for in the Act are implemented.

l Implement provision of the Public Finance Management Act [Chapter 22:19] which set a deadline of SOEs to submit annual financial statements for external audit on or before the 28th February of each year and ensure the audited financial statements are published soon thereafter.

l Implement the performance-based contracts and that should be the basis of renewal of senior management annual and subsequent contract of employment.

l Would mould through succession plan and appoint highly trained and efficient managers and employees who are willing to have their country at heart rather than those who prioritise personal gain ahead of national interest.

l Provide framework of leadership through setting business strategies, vision, mission, objectives and aims and detailed short-term plans [extracted from long term plans] including rescue procedures when the company is financially distressed. Resources mobilisation strategies plan to be a requirement.

l Establish an efficient and reliable whistle-blowing system to guard against corporate misdemeanours, sexual harassment and corruption.

l Put in place systems to manage the company’s information, including ICT, so as to provide an integrated reporting system which is holistic and governed by proper disclosure channels.

In this regard, there is need for to set up proper and clear structures that would ensure clear lines of responsibilities, proper accountability, clear communication procedures and any political intervention that could be necessary. Ideally, line ministries should not interfere on matters that should be dealt with by enterprise management and the board to allow for effective organisational performance.

l Establishing procedures for appointing and dismissing the chief executive officer of the enterprise and putting in place a proper framework for the appointment of other executives and their succession plan. It is my personal opinion that the incoming CEO be given an opportunity to assemble his own executive directorate and or management. This may reduce anticipated claims of sabotage by surviving directorate and the risk of being embroiled in the existing succession wars. Other schools of thought may argue on the basis of the going concern of the organisation, but with clear strategic plans everything will be possible.

In conclusion, this narrative is a professional challenge to the government and entire citizens of Zimbabwe to ensure that there is leadership hygiene in the governance of the SOEs. There is need for restructuring of the SOEs and facilitate recruitment and realignment of leadership with the right attitude and sound mind-set that focus towards development and growth of these state-owned enterprises. The country has so many relevant frameworks, statutes and regulations that the current SOEs leadership decided to ignore for reasons better known to themselves. A professional submission is further directed to the relevant ministries to promote implementation and monitoring of these standing governance legislature. With regards to the appointment of the non-executive board members of the SOEs, government should through the established department under the Office of President and Cabinet – Corporate Governance Unit process the submissions of the professionals who meet the criteria for appointment to SOEs boards with speed so that they start to serve the nation towards resuscitation of the SOEs to rediscover the sound governance and service delivery so required. Lest we forget: Section 194 of the Constitution which provides in regard to public entities that public administration in all tiers of government, including institutions and agencies of the state, and government-controlled entities and other public enterprises, must be governed by the democratic values and principles enshrined in the constitution. Asante!

l Langton Mutoya can be contacted on 263 77 270 2361 or email mutoya2007@yahoo.com

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