Govt swoops on spectator parastatals

SEPs such as Zupco, the National Railways of Zimbabwe (NRZ) and Zesa, are some of the struggling firms that have been relying Government support.

SEPs such as Zupco, the National Railways of Zimbabwe (NRZ) and Zesa, are some of the struggling firms that have been relying Government support.

Africa Moyo Business Reporter
STUNG by the unabated decline in the performance of State Enterprises and Parastatals (SEPs), Government has withdrawn wholesale support for the firms — 70 percent of which are technically insolvent owing to gross mismanagement — unless they provide bankable turnaround strategies.

Last year’s financial audits show that 38 out of 93 SEPs incurred a combined $270 million loss, attributed to weak corporate governance practices and ineffective control mechanisms. SEPs, which have been run down by management whose focus is drawing salaries — increasing them in some cases despite their underperformance, are now seen as “an actual or potential drain on the fiscus”.

Finance and Economic Development Minister Patrick Chinamasa yesterday said fiscal risks also arise from debts assumption, recapitalisation requirements and called-up guarantees.

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Presenting the 2018 Budget, Minister Chinamasa said Treasury had been inundated with requests for direct budgetary support for recapitalisation by SEPs.

However, in most cases the requests “lack adequate justification and hence, only pose further fiscal risks”.

“Fiscal balance under the ‘New Economic Order,’ however, necessitates that public enterprises, including local authorities, cease to exist just to pay salaries and wages, and incur financial deficits.

“Hence, Government is, beginning 2018, putting a stop to unabated flow of Budget resources to public enterprises and local authorities without any returns, either through dividends or meaningful public service delivery.

“I, therefore, emphasise that Government support to public entities will strictly be conditional on credible and bankable turnaround strategies, complemented by stringent cost containment measures,” said Minister Chinamasa.

Government had already initiated moves to “bury” all underperforming SEPs and remain with only those that are operating profitably and/ or have declared a dividend.

Currently, just a few SEPs including Agribank, TelOne, NetOne, the National Oil Company of Zimbabwe (NOIC) and the National Social Security Authority (NSSA), are doing fairly well and have published their audited results religiously.

NSSA, NOIC and Agribank are among the fewer firms that have declared dividends.

NSSA board chairman Mr Robin Vela told The Herald Business last week that the parastatal was doing well, and has a balance sheet of $1,5 billion and a profit of $165 million.

It is also going to pay a bonus to both employees and pensioners this year.

Agribank has also declared a dividend of $914 000 to its shareholder for the year to December 2016. Government decided to reinvest the dividend into the business to finance its operations.

SEPs such as Zupco, the National Railways of Zimbabwe (NRZ) and Zesa, are some of the struggling firms that have been relying Government support.

Minister Chinamasa said SEPs that exhibit potential “will be reformed, while those which cannot be rehabilitated will be privatised or face outright closure”.

“Our public enterprises remain a drawback through their inefficiencies, with their contribution to the economy down from around 60 percent to current levels of about 2 percent,” said Minister Chinamasa.

“Their inefficient operations are a drain on the Budget, over and above serving to worsen the high cost of doing business in the economy,” he said. Despite the under-performance of these entities, management at most parastatals continues to enjoy huge salaries and benefits, which breach Cabinet’s directive of packages not to exceed 30 percent of total revenues,” said Minister Chinamasa.

In a bid to improve corporate governance in SEPs, Government has since developed the Public Entities Corporate Governance (PECG) Bill, which, together with the respective regulations, is being finalised.

Among other provisions of the PECG Bill are that heads of SEPs who receive salaries and benefits beyond the threshold are punished, while board members should declare their financial standing.

Furthermore, Government says through the PECG Bill, days of no boards, incomplete boards, one man boards, non-existent board committees, indefinite acting CEOs, finance directors and heads of internal audits are over.

Remuneration is also expected to be based on performance and assessed on the individual and the entity.

Similarly, bonuses, if they are to be paid, would only be done on the basis of annual performance assessments against agreed performance targets and only after annual audited financial assessments confirm a satisfactory overall entity performance.

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  • Chamunorwa

    The very idea of a parastatal in a modern economy is anachronistic. These parastatals must be privatised and be left to fend for themselves. Sell the lot including the ZBC and The Herald.

    • Ray Mbada

      The real Chamunorwa for sure…how can you privatise Z.B.C. and the Herald? It’s as good as privatising the Country.

      • Gary WekuZviyambe

        The ZBC and The Herald are operating as private companies owned by ZANU-PF

        • yowe

          Very true

      • Vhomoto

        Zvako iwe. The real issues as contained in the report is the lack of an effective governance system in the country. For starters the country has an ineffective oversight machinery that must be dealing with Auditor General’s reports and hold all Accounting Officers to account in parliament. We have had several cases of fruitless and wasteful expenditure from parastatals and at the end of the year the Accounting Officers, Board and management are given bonuses which in my view must now be performance related. The Office of the Auditor General in my view is rendered useless as most of its reports are too historical and not time conscious. This year they may be publishing a report on the 2015/2016 financial statements imagine.

    • Hombarume

      Boss, any government needs its own broadcasters and newspaper. Better you say change management.
      The problems are not ownership but operational.

    • yowe

      Hahahaha yes Herald should be privatised ndokuti manyepo aite mashoma lol YOWE!!!!

      • Online Editor

        Yoweee!!!

    • Loud Speaker

      LOL about selling the Herald!…I’m surprised your comment wasn’t ‘removed’! https://uploads.disquscdn.com/images/19d3133218f2f3577e763bfcd97df3521590f77178b60cb9af6efd075198890d.gif

  • gilbert bere

    The New government in making right noises,awaits implementation of these policies. Go President ED,go.

  • Supamustgo

    No boards at TelOne and Telecel. Indefinite acting CEO at NetOne who happens to be related to the ICT Minister. AB Communications, owned by the Minister is providing Public Relations Services to the state owned MNOs and telco at a fee. Executive Management recruitment for officer level positions at Telecel being handled directly by the Minister himself. Supa is corrupt and must go!!!

    • yowe

      I agree with you

    • musayigwa

      At least replacing the “masanctions” excuse with the mismanagement excuse may be a step in the right direction towards pinning the real rot – CORRUPTION!

  • eliah

    What a fitting heading and picture of one of the most useless parastatal zupco which was relevant in the 70s and 80s.

  • Exchange

    Non performing SEPs must shape up or ship out.Competent boards are key in the performance of these organisations.

    • Vhomoto

      They can not ship out because they are in existence to deliver a service to the public and as long as that service is still paramount they can not ship out. What must ship out however are the office bearers who are mandated to steer this ship in the right direction.

  • shumbasamaita

    I must acknowledge that the incoming president had limited room to bring in talent into government which would help turn-around some of these parastatals by way way of appointing competent ministers, however we are banking on his leadership to want to change by whipping ministers into line. Most of the allegations pointing fingers at his ministers & other officers must be investigated on time because that’s feedback & in most cases pointers on areas that would be crying for help. The issue of SOEs has been topical for donkey years now & everyone seems agreed on what must be done but there is no implementation to achieve the change. Why is it allegations continue to fly around on minister supa, is it people hate him. Surely cde president look at these issues, the culture of where public funds are looted should stop.I hpoe cde president will have a larger enough pool to choose from after electios otherwise the majority of his ministers are same old deadwood that lead us to where we are today.

  • Edzai Kufaa

    We seem to be spending to much time on discussion and crafting what seem to be effective policies, and spending less time on action. The Govt should enact a Bribery and Corruption framework. Mr President we plead with you to walk the talk on corruption and arrest all those that were sabotaging our beautiful country. Otherwise this administration will be seen as the same to the previous administration the never took any action on the culprits.

  • yowe

    Hearing from the grapevine that letters have been sent to some parastatal bosses and heads of banks instructing them to return money they externalised…February achanakidza YOWE!!!

    • Vhomoto

      zvomene here?

  • zvakwana

    and they forgot AIR MUGABE ZIMBABWE, that should be buried as well.I dont see any reason why tax payers’ moneys should be misused by air zimbabwe that served the former president and his family only.Air Zimbabwe should sue the Mugabes for the outstanding fare dues because they were mostly the ones it used to fly about.

  • SNgwenya

    Please can someone fire the whole Hwange Colliery Management team right from the Board Members to the Executives. They have dismally failed those gentlemen. We believe most of the treasury bills they received from Government were paid to Grace Mugabe through her relative Chidhakwa and Thomas Makore. The country needs to export as to generate the desperately required Forex but with Makore on the helm of Hwange Colliery we can all forget. The man is a big thief.

  • Progressive Zimbabwean

    This budget is quite encouraging and hopefully we will see more cost cutting measures. The chiefs vehicles have been shelved and that will give credibility to the minister. He also removed vehicle requests for ministers etc. Foreign travel is already reduced because the current president has not gone out of the country since assuming office. I do not think the ministers have travelled either. In fact the budget has guidelines on all foreign travel. I think all so called parastatals must eventually be fully commercialised. They must make money and contribute to national development.

  • Loud Speaker

    Why does a government need its own newspaper or broadcaster?

    ………………………………………………………………………….

    That is a rhetorical question..Right!

  • jephy

    Zimpapers in not a parastatal its also listed on the stock exchange,

  • Vhomoto

    Aiwa Chamunorwa proper governance structures must be in place irrespective of whether an entity is state owned or privately owned that’s our point of departure with you. Some SOEs by their very nature are strategic assets that can never be privatised but still must function in the context of the 3 “e” effectiveness, efficiency and economical.

    • Chamunorwa

      The problem with parastatals is that the investor (the Government) can never monitor managers effectively. Ministers and civil servants have other duties to perform. In addition, any profits from the parastatals belong to the Government. Conversely, private sector investors monitor the companies they invest in closely because they will lose the amount they invest if the business fails. Equally, they will get the profits if the business succeeds.

  • Vhomoto

    If only we had an institution that is constitutionally mandated to receive such whistle blowing cases and investigate them and perpetrators brought to book then it would go a long way in mitigating against cases of corruption. Not really sure why we have the Office of the Ombudsman in Zimbabwe. No one knows the incumbent head of that institution, my god

  • L. Makombe

    How could the government as the owners of the parastatals hire incompetent people? The ministers responsible and boards should answer. Is it not the issue of Air Zimbabwe whereby we said Simba was the best candidate and yet we had other motives to boot out Muzenda so that we could have our blue eyed boy. Is it not the same that we booted Chinamasa and put in Chombo because we had other ideas. The government is squarely is responsible for the demise of the State Enterprises. ZUPCO taibhadhara here when we hired it. Where are the buses that Chombo promised? When we want to engage people at these State Enterprises, let us give them autonomy and not go to them making demands that are not business related. I remember the late Nhalala Masuku saying that Zimbabwe is the only country in the world that rewards people for failure because when we hire we openly tell the candidate that when you fail, you will take with you the luxury vehicle, you have unlimited fuel and holiday allowance. It is ridiculous to say the least. For a start, let us be serious and let private employment agencies do the recruitment, and not these biased boards.

    • Tanaka C

      Well said.