Farirai Machivenyika Senior Reporter—
THIRTY-EIGHT out of 93 State-owned enterprises (SOEs) audited last year incurred a combined $270 million loss as weak corporate governance practices and ineffective control mechanisms took their toll. There were indications that some line ministries had not yet responded to President Mugabe’s directive to provide updated status reports of State enterprises that fall under their portfolios.This came out yesterday during a stakeholders’ workshop held in Harare on guidelines/manuals focusing on enhancing board effectiveness and performance management derived from the Public Entities Corporate Governance Bill . In his remarks, Chief Secretary to the President and Cabinet Dr Misheck Sibanda said most of the audited entities were technically insolvent.
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“Audited financial statistics for 2016, for 93 SEPs (State enterprises), revealed an overall loss of $270 million by the 38 surveyed commercial entities. The worrying fact is that for those 93 entities, 70 percent of them were ‘technically insolvent,’ or ‘illiquid’, presenting an actual or potential drain upon an already overburdened fiscus,” Dr Sibanda said. Both the recent survey and Auditor-General’s reports, he said, showed that the enterprises’ dire situation was caused by weak corporate governance structures and ineffective internal control mechanisms.
“Without doubt, the most serious common weakness identified during the survey revolved around the structure, composition and competence of boards, and the manner in which the boards themselves operate.” According to Dr Sibanda , while some SOEs operated without full boards, some boards were reconfigured as line ministers changed. In some cases, some boards were run by one person, he said. Speaking at the same occasion, Finance and Economic Development Minister Dr Ignatius Chombo said Government could no longer continue bailing out under-performing entities.
“His Excellency the President could not have been any clearer — in terms of his frustration or his determination to act — than in his pointed remarks about State entities when he met the private sector early last month. In response to those remarks, all Ministries were directed to provide updated status reports on all State entities within their respective portfolios,” he said.
“Response to that directive has been slow. Relevant heads of Ministries – together with the respective management structures of the entities which fall under them – are advised to devote more time and attention to fulfilling the terms of that directive.” Dr Chombo said the contribution of State enterprises to economic growth had dropped dramatically due to underperformance.
“The sector’s contribution to national GDP growth has slumped to around 2 percent and, often, operational and other inefficiencies serve to inflate an already high cost of doing business, rendering our manufactured and export products uncompetitive,” he said. Dr Chombo added that despite the underperformance, management at most State enterprises continued to enjoy huge salaries and other benefits, which continue to breach Cabinet’s directive for the packages not to exceed 30 percent of total revenues. Government, according to the Treasury chief, has since developed the Public Entities Corporate Governance Bill which, together with its associated implementation regulations, is expected to become law before the end of this year. This, he said, would lead to the improvement of corporate governance in State enterprises.