GOVERNMENT will go after heads of parastatals and State enterprise executives who received salaries and benefits beyond the threshold set for bosses of public entities, Finance and Economic Development Minister Ignatius Chombo, said during one of his first public addresses in his new role yesterday. Minister Chombo said the era of extravagance by State enterprises and parastatals against poor and declining performance, which saw 93 of them raking up $270 million in losses in 2016 while their contribution to gross domestic product has plummeted to 2 percent from 40, had gone.
He revealed this while addressing a workshop on enhancing board effectiveness and performance management of parastatals and State enterprises organised by the Office of the President and Cabinet. Poor performance of the majority of State entities, which used to contribute an estimated 40 percent of Zimbabwe’s gross domestic product, has been blamed for the slow progress in efforts to turnaround the economy while they continue to rely on support from cash-strapped Treasury. The Finance Minister said Government was not in a position to continue bailing out underperforming public entities or those that have outlived their usefulness, with President Mugabe recently expressing his frustration and eagerness to act on the rot within state entities.
In demonstrating his desire to act on the poor performance of State entities, President Mugabe recently demanded, when he met representatives of the private sector, that line ministries must prepare status reports on relevance, strategic importance of state entities, areas of duplication or role overlaps, sustainability of operations and possibility of turnaround and how (public private partnerships or joint ventures) or whether certain entities should be closed or absorbed into ministries as departments. Minister Chombo said most line ministries had also been directed to draft turnaround strategies for public entities falling under them and to suggest potential sources of funding, but the response of line ministries and the heads of the related State entities to the directive had been slow.
This also comes as the Public Entities Corporate Governance Bill, to regulate the activities of State enterprises and parastatals, is expected to be completed before end of this year to introduce strict reporting requirements and management of all Government owned entities for better performance. Minister Chombo said State enterprises and parastatals had continued to reward directors and executives outside of the framework recommended by Government, despite the fact that most of the institutions continued to bleed and perform dismally both financially and in service delivery.
Government fixed maximum salaries and allowances for senior executives of public entities at $6 000 monthly in 2014 and directed that expenditure on employment must not exceed 30 percent of revenue. A data baseline survey conducted in 2016 revealed that 70 percent of Zimbabwe’s 107 parastatals and State enterprises were technically insolvent, illiquid and continued to drain the fiscus. The minister said most public entities continued to bleed due to the wasteful habits of their executives.
“The days of no boards, incomplete boards, one man boards, non-existent board committees, indefinite acting CEOs, finance directors and heads of internal audits are well and truly gone; Remuneration has to be based on performance and assessed on the individual and the entity,” he said.
“Bonuses, if they are to be paid at all, must only be awarded on the basis of annual performance assessments against agreed performance targets and only after annual audited financial assessments confirm a satisfactory overall entity performance,” the Finance Minister said. A recent forensic audit of one strategic State enterprise showed that management paid itself two bonuses in 2012 and three bonuses in 2013.
“Nothing can justify this squandering of (public) funds; my ministry will be acting to ensure recovery of such unjustified payments and all those who benefited there from. These are public funds and use thereof must be fully justified and must at all times be accurately and transparently accounted for,” Minister Chombo said. He said directing scarce resources into recapitalising salvageable State enterprises and parastatals would not bear desired results if wilful and wasteful bad habits of executives are not stopped. As such, he said the bill will address the underlying governance deficiencies in State entities.