Business Reporter
State Enterprises and Parastatals Minister Gorden Moyo has said that there has been a marked improvement in the holding of annual general meetings by State enterprises and parastatals following the introduction of performance based contracts. Ineffective boards are believed to have contributed to the poor state of corporate governance in the country’s SEPs, which led to the Government formulating board performance agreements and performance contracts for the chief executives of SEPs.
He said there had been improvements both in respect of board appointments and AGMs.
“Since the adoption of the Corporate Governance Code for SEPs in November 2010, there have been positive developments in the way corporate governance practices are being embraced. We have seen new boards being appointed timeously with the appropriate skills, and the number of SEPs holding AGMs has increased,” he said.
Experts believe that AGMs are critical in keeping a company’s performance under scrutiny and in defining its strategic issues.
Minister Moyo gave special mention to the Grain Marketing Board, which held its first AGM in almost a century.
“Let me appreciate the recent holding of the first AGM in 81 years by the GMB. This is a positive development and is line with the Corporate Governance Framework for SEPs.
“It is worrying for State entities to operate without boards for long periods because management is then left to operate without accountability, a situation which may compromise the efficiency and effectiveness of an entity due mainly to the absence of an effective oversight function.”
The Government, through the new constitution, is also expected to limit the terms of SEP chief executives in order to encourage renewal. It has, however, not been smooth sailing as the minister has lamented the fact that some SEPs are still ignoring legislation applicable to them as well as provisions of the Corporate Governance Framework.
The country has about 78 SEPs that have potential when operating efficiently to contribute about 40 percent to the Gross Domestic Product.
However, these entities have been struggling due to liquidity challenges and lack of good corporate practices, coupled with inept management. To this extent, the Government initiated an SEP restructuring programme, which is now in its second phase.
Minster Moyo said under the current restructuring phase, his ministry, through the State Enterprise Restructuring Agency, is working closely with line ministries to identify and effect appropriate restructuring for SEPs.