Hwange Colliery collapse reflects deep-seated governance crisis 

Source: Hwange Colliery collapse reflects deep-seated governance crisis – The Zimbabwe Independent November 9, 2018


Africa is endowed with some of the world’s richest natural resources such as coal mined at Hwange Colliery.

THE recent arbitrary placement of Hwange Colliery Company Limited (HCCL) under reconstruction by government is yet another example of how state-run enterprises touted as engines of economic growth have collapsed due to mismanagement, corruption and political interference, contributing to Zimbabwe’s comatose economy.

By Tinashe Kairiza

Hwange Colliery (pictured), now consigned to the graveyard of other moribund firms and parastatals once billed as key economic growth pillars, has collapsed after decades of systematic corruption and maladministration.

Unrestrained interference in the day-to-day running of the coal miner by political elites, who view the company as a feeding trough, also contributed to the company’s demise.

Last week, the coal miner was placed under administration after accumulating a massive debt of US$352 million, opening a fresh chapter in the sad tale of how vital cogs of economic growth have collapsed, largely as a result of political meddling, corruption and incompetence. President Emmerson Mnangagwa, who has waxed lyrical about fighting corruption, has also been implicated in the web of intricate scandals leading to the demise of the company.

Virtually all economic activity in Hwange—the biggest and most populous town in Matabeleland North province, was built on the back of a once-thriving coal extraction and processing enterprise, with surplus output exported within the region during the peak of the colliery operations.

However, the mining company has now been admitted to the intensive care unit, negatively affecting thousands of workers and their family as well as downstream industries which relied on the firm.

Hwange Colliery has since been suspended from trading on the Zimbabwe and Johannesburg stock exchanges. The imminent suspension of the coal miner by the London Stock Exchange will hardly be surprising given that the decision to place the company under administration was taken without consultation and approval from the other shareholders.

The systematic decline of Hwange Colliery is also reminiscent of the collapse of yet another key locomotive of economic growth, namely Ziscosteel—once the largest integrated steel maker in Africa, which has been reduced into a shell after years of mismanagement and asset stripping by politicians. The steel maker’s furnaces were kept running from coal and coke supplies from Hwange Colliery which was transported via railway operated by the National Railways of Zimbabwe (NRZ)—another vital cog of the economy which is in the process of being rescued from the quicksand of collapse through a US$400 million recapitalisation deal with the Diaspora Infrastructure Development Group (DIDG).

At peak operation, the three intertwined companies were of strategic importance to the national economy, supporting a myriad of other downstream industries and providing a source of livelihood to thousands of families.

In a clear admission of its incompetence, government last year invited bids from the private sector to buy controlling stakes in 24 perennially loss-making parastatals which have become a drain on the fiscus after decades of mismanagement and plunder, largely by top government officials and their cronies. However, investors have shown little appetite to take over the struggling state enterprises.

Most of the struggling state enterprises are facing collapse, mostly due to decades of gross mismanagement, weak corporate governance and corruption. The majority are saddled with enormous debt overhangs.

These include flag carrier Air Zimbabwe (AirZim) which was also placed under reconstruction this year. The once-thriving company is saddled with a massive debt overhang of US$341 million.

At Independence in 1980, AirZim had 18 planes and was a profitable and well-run enterprise. The company now has only three planes. Similarly, the collapse of the Cold Storage Commission (CSC) has been attributed to mismanagement and corruption which saw the firm’s once-thriving cattle herd being decimated.

At Independence, CSC had a herd of 3 million cattle, which declined to 1 million by the mid-1990s before plunging to 6 000 in 2014.

Last year, a dossier compiled by former CSC workers revealed that the meat-processing firm could have been prejudiced an estimated US$12 million.

For years, the government has ignored reports from the Auditor-General’s Office detailing massive corruption in government, parastatals and local authorities.

Bindura University of Science and Education, commerce lecturer Felix Chari said the demise of Hwange Colliery would derail ongoing efforts to set Zimbabwe’s weak economy on a firm recovery and growth trajectory.

Economist Tinashe Kaduwo said the collapse of Hwange Colliery—among other key economic enablers—would usher in a new wave of headwinds buffeting the economy.

Observers contend that government’s ongoing efforts to set Zimbabwe’s fragile economy on a firm growth trajectory would require government to prioritise the resuscitation of firms which once acted as engines of economic growth.