Parastatals: Monuments to failure

Source: Parastatals: Monuments to failure – The Zimbabwe Independent May 13, 2016

GOVERNMNT’S ambitious plan to turnaround technically insolvent state-owned enterprises, starting with 10 critical ones should be commended, but it is evident this is based on lofty aspirations which are very difficult to achieve.

Editor’s Memo,Dumisani Muleya
dmuleya@zimind.co.zw

It must also be pointed out these parastatals were in the first place reduced to Zanu PF feeding troughs through systematic patronage, mismanagement and plunder, while eventually looted into empty shells by the same government which now claims to have a reform plan.

While forensic and performance audits are being conducted on most of the 10 largest parastatals targeted for priority action to determine appropriate restructuring policies and employmentcosts are being reduced in some of them, the truth is this government has no political will and capacity to resuscitate the dying public enterprises.

It would be great for authorities to prove their critics wrong, at least for once.

For some of the 10 enterprises targeted for priority action, authorities plan to seek strategic and technical partners, pursue joint ventures, or unbundle the companies.

Audits on Grain Marketing Board (GMB) and Cold Storage Company, and four turnaround strategies under consideration by cabinet relating to the Industrial Development Corporation, Zimbabwe National Water Authority, Agriculture and Rural Development Authority and TelOne will provide the baseline for the appropriate restructuring framework.

Government is still struggling with due diligence and designing as well as implementation reform strategies for each of these companies. It is also battling with how to reduce the bloated workforce at GMB, TelOne and National Railways of Zimbabwe (NRZ).

Zimbabwe has about 78 state enterprises with a capacity to contribute 40% to gross domestic product. The state-owned enterprises — which cover a vast swathe of the economy — used to be the locomotive of economic growth and sources of employment, but mismanagement, corruption and crippling debts have bled them to wrecks.

The decline and failure of parastatals have had a negative impact on the whole economy and the contagion is far-reaching and damaging. NRZ’s decay, for instance, has not only affected the parastatal itself and the transport sector in general, but the economy as a whole.

To underline the point, Bulawayo industries, for example, depended on NRZ’s competitive transportation costs for coal and steel products used in the city’s heavy duty industries from Hwange and Ziscosteel in Redcliff. Zisco itself was part of the country’s economic backbone, but now it has been broken by government’s failures, leaving the whole economy paralysed.

Good management, strong corporate governance and efficiency are not just absent at parastatals, but are also frowned upon by the agents of kleptocracy running these companies.

Qualified, skilled and competent managers are often removed and replaced with corrupt and incompetent cronies. Corrupt managers are protected by senior government officials, including ministers, while honest people are fired by dishonest crooks.

This is why state enterprises are crumbling all over the place under the burden of ineptitude, graft and debts, at the same time haemorrhaging the fiscus.

As things stand, the inter-parastatal debt is way above US$600 million, but the cumulative figure could easily exceed US$1 billion if other obligations are included. The inter-parastatal debt has become a major destabiliser to the economy because it is sabotaging service delivery and efficiency. Because of these debts, potential strategic partners and investors are also shunning state entities as they fear losing their money.

Strong calls have thus been made for government to dispose of state enterprises, but few takers have been forthcoming given the crippling debts. Inevitably, Zimbabwe has failed to come up with viable commercialisation or privatisation models.

That is why one of the major objectives to reform public enterprises is to eliminate the large budgetary burdens caused by subsidies to make them commercially viable and operationally efficient. Government needs to be serious about the parastatal reform process as part of fixing the broken economy and go beyond its stale rhetoric.