Parastatals now burden on fiscus

Source: Parastatals now burden on fiscus – The Zimbabwe Independent June 23, 2017

Although the plunder of Zimbabwe’s perennially loss-making parastatals is nothing new, the latest reports by the Auditor-General and the World Bank — whose findings we reveal in these pages today — show that the looting of state-owned enterprises has reached epic proportions and now poses a clear and present danger to national survival.
The auditor-general derives authority from the constitution and the role of the office is to provide parliament with independently verified information about the executive arm of government.

Comment: Zimbabwe Independent Editor

Sadly, it has become clear that the overly powerful executive, firmly ensconced on the gravy train, does not take the auditor-general seriously. The National Assembly and the Senate must partly shoulder the blame for this tragic state of affairs. Why on earth is the legislature not taking decisive action on parastatal rot?

According to the latest figures, the losses incurred by parastatals have practically doubled since 2011. Most of these companies require public subsidies and have become a major source of financial risk. It is a scandal that executive compensation has doubled between 2011 and 2015, according to the World Bank’s latest economic update.

Auditor-general Mildred Chiri’s report, released yesterday, exposes some extreme cases of weak corporate governance resulting in huge financial losses and misappropriation of funds. The report highlights several weaknesses in parastatals, among them governance issues, revenue collection, debt recovery, employment costs and procurement of goods and services.

The World Bank says parastatals have had a limited impact on the economy because of their poor financial and operational performance although they are supposed to play a pivotal role.

Zimbabwe has 107 state-owned enterprises, but only 43 are wholly commercial entities. The parastatals represent about 14% of gross domestic product with commercial state-owned enterprises contributing 7,5%. These are companies which used to contribute up to 40 of GDP. Years of mismanagement, corruption, cronyism and political meddling have rendered the companies dysfunctional, bankrupt and utterly shambolic.

The devil is in the detail. A close look at the numbers is revealing. Parastatal expenditure rose by 5,9% per year between 2011 and 2014 while annual revenue grew by just 2,9%. Aggregate annual expenditure averaged US$3,5 billion during the 2011-2015 period, while personal costs, which account for about a fifth of parastatal spending, increased by 5,5% on average. Debt service costs also increased by 6,1%. The rampant financial malfeasance in parastatals is evidence of government’s tragic failure to manage public funds. Hundreds of millions of dollars are looted with impunity. Virtually every state-owned enterprise is tainted.

Despite sterling efforts by the media and the auditor-general to expose parastatal rot and the looting of public funds through inflated and unauthorised salaries and perks, the executive arm of government has not shown seriousness in instituting a new corporate governance framework. Parliament must now step up to the plate.