Source: EDITORIAL COMMENT: Do not cling to CAPS | The Financial Gazette August 18, 2016
IT is difficult to understand why government cannot learn from its past mistakes. Its desire to muscle into private companies and adding those that it would have acquired to a growing list of loss-making parastatals defies logic.
The majority of State-owned enterprises are in a sorry state. Many of them have been used as conduits for siphoning public funds out of State coffers to fund the lifestyles of a privileged few through corruption and general profligacy.
In June, we reported that executives in 28 State firms blew US$850 million between 2014 and 2015 through corporate crimes. Many had expected government to act, but nothing happened.
To rub salt to the wound, CAPS Holdings has been acquired by government. In effect, the pharmaceutical giant is now a State-owned enterprise.
Looking at what is happening within the parastatals community, there is really no reason to pop the champagne bottles. Most of the parastatals are barely surviving due to gross mismanagement, political interference and under-capitalisation.
Now that CAPS is part of the parastatals family, it might get worse.
To start with, government played a role in aggravating the crisis at CAPS.
In 2008, it directed the company to supply US$4 million worth of drugs to public hospitals in order to keep the health delivery system running. While this was a noble idea meant to cater for the health needs of the ordinary people, the payment took long to come. And when it came, CAPS, which had spent a fortune in importing raw materials in foreign currency, received worthless Zimbabwe dollars, which had lost value at the time due to hyperinflation.
Today, government wants to come across as a knight in shining armour.
We are not fooled.
Soon, the company will sing the blues.
Government does not possess the qualities required to run a sophisticated company like CAPS. Its history is littered with failure. It has failed to run monopolies such as the National Railways of Zimbabwe, the Agricultural and Rural Development Authority, the Zimbabwe Iron and Steel Company and Hwange Colliery Company Limited (HCCL), to name but a few.
NetOne is an immediate case in point that makes depressing reading. Here government has failed to make headway at the mobile telecommunications operator in boom times when rivals such as Econet Wireless have done exceptionally well.
Coal producer, HCCL is yet another sad example. Coal is in high demand on the domestic and foreign markets, but due to mismanagement, Hwange is in total mess, crippled by unsustainable debts and State interference.
This gives us the conviction that government will inflict more pain than good at CAPS, should it decide to cling to the asset.
CAPS must revert back to competent private players with technical abilities and financial muscle to run an essential drugs business profitably.
We however, take solace in Industry and Commerce Minister Mike Bimha’s promise to involve private partners and we urge those who would be tasked to work out the CAPS plan to do so expeditiously, making a strong case for government to exit the company.