Govt pumps $200m into ailing parastatals

Source: Govt pumps $200m into ailing parastatals – DailyNews Live

BUSINESS EDITOR      18 April 2017

HARARE – Zimbabwe’s cash-strapped government has pumped nearly $200
million into the country’s struggling parastatals.

This comes as calls have been getting louder for the cash-strapped country
to restructure its loss-making parastatals to make them attractive for
foreign investment and recapitalisation.

Market experts said the opportunity cost of missing revenue from
government enterprises was being felt across the country following the
neglect of essential capital projects.

Finance minister Patrick Chinamasa, however, believes public institutions
are essential vehicles through which government influences economic
activities.

“However, low capitalisation of such institutions has been negatively
affecting the operations of some of these critical institutions. In view
of this, government has extended a total of $196,878 million towards
recapitalisation of public institutions,” he said.

Zimbabwe has 78 parastatals, which at full capacity can contribute 40
percent towards the country’s Gross Domestic Product (GDP), but the
majority of them are bleeding the Treasury by drawing salaries and
recapitalisation funds.

But despite sustained pressure from various stakeholders to privatise or
dispose of the loss-making parastatals government has over the years
continued to protect water and electricity provision arguing that they are
strategic sectors.

Critics say most of Zimbabwe’s parastatals have been ruined by poorly
qualified managers, many aligned to Zanu PF, who were put in charge of the
government-controlled firms because of their political connections rather
than technical expertise.

Since the early 1990’s, parastatals have continued to be dogged by
challenges that include undercapitalisation, obsolete infrastructure, low
capacity utilisation, lack of working capital caused by low debt
collection, outstanding long-term loans, non-compliance, lack of good
corporate governance and the existence of substantial inter-parastatal
debts.

Recent reports by Auditor-General Mildred Chiri indicate that State-owned
enterprises and government departments operate in the red, continuously
bleeding the fiscus and in most instances failing to adequately provide
the service for which they were set up for.

Government once came up with strategies to restructure and dispose
shareholding in some State-owned enterprises, but has failed to implement
these measures over the years.

Once, several entities were earmarked for restructuring or privatisation
and these included the National Railways of Zimbabwe, Zesa Holdings, Air
Zimbabwe, Agriculture Development Bank of Zimbabwe, the Grain Marketing
Board, Zimbabwe Grain Bag, NetOne and TelOne.

African Development Bank (AfDB) director general, Tonia Kandiero, said
there was need for parastatals reform before foreign investors can inject
their hard-earned cash.

Kandiero added that no profound change can take place in the absence of
effective institutions with good corporate structure, accountability,
culture and mechanisms to track performance.

“State-owned enterprises are key to delivering services and enabling
citizens and private capital to realise their potentials,” she said.