Call for legal framework for State enterprises

Business Reporter

ZIMBABWE should develop a legal framework, which clarifies broader principles of good governance of State-owned enterprises, a World Bank senior official said yesterday.Sharing experiences on State Enterprises and Parastatals reforms in South Africa at a workshop on International Experience on State-Owned Enterprises and Parastatals Ownership Structures and Governance Reforms, WB lead public specialist Mr Gent van der Linde said Government should develop a legal framework, which clarifies broader principles of good governance.

SEPs reforms in South Africa began in 1994 and Mr van der Linde was then working in the public service.

“We revisited basic principles of corporate governance of these entities. We took a lead from good corporate governance principles functioning in the private sector.

“We looked at all enablers that we needed for good governance and we looked at how these enablers were functioning. This included control and appointment of the boards.

“We identified areas, which were weak and strengthened them. For example, on the issue of accountability, we said if the line ministry is responsible for the appointment of the board, the minister should be accountable. So if it (the board) does not perform, it is the responsibility of the minister to act. If he can’t, he should be held accountable.

“Zimbabwe needs to identify policy matters, which needs to be looked into as it goes through reforms of SEPs. Controls and accountability on ministers, boards and an agency which looks at the restructuring of the SEPs should be clarified in the legal framework.”

Mr van der Linde said the framework should also outline borrowing powers of the boards and guidelines on reporting financial results.

The Government is intensifying its focus on addressing corporate governance deficiencies within the SEPs, and a number of initiatives have already been taken. These include Government’s 2010 Corporate Governance Framework, Principles of Corporate Governance of 2014, and the Zimbabwe National Code of Corporate Governance of 2015.

To give legal effect, Government is finalising the Public Sector Corporate Governance Bill.

As part of the accelerated implementation of Zim-Asset, Government is advancing State enterprises reform to eliminate their high dependency on the fiscus, which among others is crowding out capital requirements for private sector and community development.

Out of 97 SEPs, Government initially prioritised 10 State enterprises, which if successfully turned around will bring relief on the fiscus and support economic growth and development.

However, given the urgency of countering risks from State enterprises, Government has identified additional 10 SEPs for turnaround. Different funding arrangements are under consideration and a roadmap for their transformation is being developed.

State enterprises are critical enablers of the economy, critical in value chain and they promote competitiveness. Further they fill in the void of essential service and or products by venturing in territories too risky or unattractive to investors yet essential.

However, the majority of them are under-performing, largely due to mismanagement, corruption, un-competitiveness and huge debts.


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