Source: Zim’s parastatal rot: When looting becomes second nature – NewsDay Zimbabwe April 18, 2017
Ever wondered why the Zimbabwean government and its ministers find parastatals attractive despite them costing the taxpayer billions of dollars? Our previous article asked questions on the wisdom of the government taking over Telecel mobile network. This article explores the reasons and why the Telecel conundrum and indeed government ownership of parastatals is attractive to politicians, but costly to the taxpayer.
BY David Mutori/Benjamin Paradza
Zimbabwe is known to have generated Rolls-Royce parastatal-related millionaires overnight without any explanation on how they made their money. In most cases Zimbabwe’s miraculous millionaires do not have any businesses; they simply become millionaires through their relationship with government officials or parastatals.
We will explore why ministers are very keen to be appointed into ministries that are responsible for parastatals by scrutinising the money trail and hypothesise on why the government would want to own Telecel despite the fact that they already own NetOne.
Parastatals are companies that are owned by the public/tax paying citizens. Traditionally, they are organisations that are considered of significant strategic importance to the country or critical to the public, but too unprofitable for a private company to invest in. In recent times, questions have been asked about why the Zimbabwean government wants to hold on to parastatals when they are neither of strategic importance nor profitable. Some examples that come to mind are mobile phone networks as questioned in our last article, National Railways of Zimbabwe (NRZ), Grain Marketing Board (GMB), Zimbabwe United Passenger Company (Zupco) and the Cold Storage Commission (CSC).
Our quest starts with a look at the governance of parastatals. The parastatal board (senior management team) is appointed by the responsible minister. Decisions on how to spend money (including on tenders) are made by the parastatal board. The boards are not necessarily performance-managed in terms of how much they improve shareholder value, they are considered “good” if they are loyal and play ball. Directors, who come up with innovative ideas and strategies that represent the best interests of the taxpayer, are sidelined because their ideas put the looter’s opportunities in jeopardy. That explains why ministers are very keen to “reshuffle” the boards of parastatals soon after their appointments; they want to put “their people” into the board — people who will do the minister’s bidding — people, who do what the minister wants instead of what the public deserves.
Zimbabwe’s parastatals cost the taxpayer a fortune and have contributed immensely to the national debt. They are unprofitable and do not represent value for money. In fact, taxpayers’ money keeps pouring in as debt, and comes out on the other side in individual pockets. That is the reason why parastatals are the most heavily-geared companies in the country — their debt outweighs equity.
The question then is: How are parastatals looted? If one follows the money, one can have a feel of where the money leaks out of these institutions. Two main looting opportunities are salaries and perks of the “boards” and procurement/tenders. Salaries and perks are where executives are paid exorbitant salaries that are not commensurate with their responsibilities and performance. Salary scandals were explored extensively when the “Ca$hbert” Dube PSMAS scandal was unearthed. Only a feeble mind would believe that everything that Cuthbert Dube earned ended up in his personal pocket.
Procurement and tendering are other vehicles of looting. A minister running a ministry that oversees a parastatal and appoints the board of the parastatal has a lot of say on how that parastatal awards tenders. Looting from tenders is generally done in three main ways; awarding tenders to cronies, inflating tender value in order to cream off the extra value or kickbacks or a combination of cronyism and inflated values. In all cases, the objectives are the same; steal from the citizens and benefit personally.
The cronies have also perfected the art of looting; they make sure that they keep the minister and the ruling party happy. They donate to the cause. Higher Education minister Jonathan Moyo’s admission that he diverted Zimbabwe Manpower Development Fund money to party programmes is just a tip of the iceberg. President Robert Mugabe has been alerted to scandals many times and he chooses to look away.
Readers may recall Energy minister Samuel Undenge admitting that a high-profile tender had been awarded un-procedurally, but nothing was done to him. That emboldens the looters and the vicious cycle goes on and the taxpayer continues to pay.
The Zimbabwean government is even known to shun “foreign” strategic investors because they are considered to stand in the way of the looting spree. We are not surprised to learn that MTN (Africa’s biggest mobile network operator) was turned away from acquiring a 49% stake in NetOne. If the strategic partnership had been approved as proposed way back in 2012, the state of mobile communications in Zimbabwe would be at par with world standards.
A forensic audit of all material tenders that have been awarded by parastatals would be interesting. Who was awarded the tenders, did the tenders represent value for money for the taxpayer, whom are tender winners related to?
Not long ago, we heard one Wicknell Chivayo boasting that he made his money from tenders when he was asked what business he was involved in. As hard to swallow as his answer might seem, Chivayo actually described what happens in the real world of tendering in Zimbabwe. An audit of those awarded tenders would even be more interesting as it gives insights into how they spend the money.
The looting process is as follows:
1. Citizens’ money is poured into parastatals;
2. Parastatals award inflated tenders to cronies through a crony board appointed by the minister;
3. Cronies give kickbacks to public officials and donate to “the party”;
4. Ministers look away and parastatals run out of cash;
5. Ministers go back to the citizens to ask for more cash and the cycle goes on.
There is a fundamental corporate governance flaw in giving one person (the minister) sole power of appointing boards of directors of parastatals. For transparency and accountability, such authority should lie with the parliamentary committee, which would thoroughly scrutinise any deals.
Zimbabweans United for Democracy strongly believes that at the centre of rebuilding Zimbabwe is good governance. There is no way good governance can prevail if a minister, who knows very little about the ministry they run, is given excessive powers to do as they please for as long as they keep the master happy through looting of public assets.
Also, acquisition of a private mobile operator by the government is contrary to the global trend, where governments are moving out of mobile communications business. The money wasted in this business could be put to better use if it was spent on health, education, infrastructure and other social services.
The collapse of many parastatals that used to perform very well at independence was not accidental. It was a product of many years of systematic and state-sanctioned looting, which continues to this day. There must be an end to this madness and the only way of achieving this is through electing a proper and responsible government.
When looting becomes second nature to Zanu PF, we must not accept it as normal.
David Mutori is a UK-based economist and pro-democracy activist. He can be contacted on firstname.lastname@example.org. Benjamin Paradza is an exiled judge of the High Court of Zimbabwe and president of Zunde. He can be contacted on email@example.com; wwwzunde.org; @zundezim