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State Enterprises: Time to crack the whip

27 Jun, 2014 - 00:06 0 Views
State Enterprises: Time to crack the whip Government owns majority shareholding in some of the non-performing companies such as the National Railways of Zimbabwe, Zesa Holdings, Cold Storage Company and Air Zimbabwe whose plane is pictured above

The Herald

Government owns majority shareholding in some of the non-performing companies such as the  National Railways of Zimbabwe, Zesa Holdings, Cold Storage Company and Air Zimbabwe whose plane is pictured above

Government owns majority shareholding in some of the non-performing companies such as the National Railways of Zimbabwe, Zesa Holdings, Cold Storage Company and Air Zimbabwe whose plane is pictured above

Lloyd Gumbo Mr Speaker Sir
The way our State-owned entities operate makes the heart sick. How many of them can justify their existence besides being a drain on the fiscus?
They are always screaming for bailouts despite the fact that most of them are supposed to be profit-oriented.
SOEs were originally established to generate resources for the Government to develop the rest of the economy, but how many of our nearly 80 entities have fulfilled this mandate?

For how long shall Treasury be burdened with forking out millions of dollars year in, year out to prop up incompetence, mismanagement and corruption in these organisations?

Just before Parliament went to break last month, a number of parastatals appeared before their respective portfolio committees to give evidence on their operations and, oh boy, it’s always depressing to hear them testify.

They always paint this gloomy picture of how Treasury is failing to make them viable by not giving them adequate funds.
It is unfortunate that our parliamentarians sometimes buy into these excuses instead of demanding better management and innovation from management.

For instance, we have SOEs operating in sectors where they compete with the private sector yet the latter are operating viably while the former are perpetually begging for bailout from Treasury.

What would be the justification for NetOne trailing Econet and Telecel in terms of subscriber base and viability when they were the first to get an operating licence?
Why should Zupco be failing when other bus companies are breaking even?

Most of the SOEs must be profit-oriented, but rent-seeking behaviour by management at most of these enterprises has seen them run down these entities while others suffer a stillbirth.

To me, most SOEs are nothing but spoilt cry babies with lazy minds who have been allowed to continuously exist despite their obvious incompetence.
Parliamentarians have so many a time grilled management at these parastatals but not much change has been noted.

What our parastatals must understand is that they do not exist just for the sake of it or to create employment opportunities for unqualified and incompetent personnel who cannot find job offers in the private sector.

They were specifically created for particular purposes that they must fulfil or ship out if they cannot stand the heat.
Yes, some of them are not meant to be profit-making but to offer a service but they should at least be viable and sustain themselves than expect Treasury to continue bailing them out by paying salaries instead of capital projects.

Our parliamentarians must stop this attitude of treating these parastatals with kid gloves but must demand better performance.
SOEs must be vehicles for socio-economic development that guarantee both the social needs of our people and economic growth.

There are a number of questions that boggle the mind every time one mentions SOEs.
For instance, do we really need a bloated parastatal base especially in non-strategic sectors where the private sector could offer a better service?

Should we maintain majority shareholding in struggling entities that show no sign of recovery just for the sake of ownership?
Or should we create SOEs to accommodate the incompetent for political expediency or to create jobs for the boys and girls?

Or should they continue to be liabilities that taxpayers have to sustain for no benefit?
Let’s be serious for a moment, our economy does not allow us that flexibility.

We are in a precarious position that requires bold decisions without compromising socio-economic development.
Government and Parliament must bite the bullet and restructure SOEs without further delay.

They should pick and dust the commercialisation and privatisation strategy adopted by the Government in 2010 to bring sanity in various sectors.
Make them viable first and then everything else will fall in place.

Owning a goose that does not lay eggs will not increase their population so there is need for adoption of a strategy that will make these entities viable.
Economists say SOEs fail because of policy rigidity and mismanagement.

Commercialisation and privatisation of SOEs is not a new phenomenon in Zimbabwe.
It started in the early 1990s but has frustratingly been very slow.

Only a few have been privatised and commercialised resulting in them being profitable entities among them CBZ Bank, Dairibord, Cotton Company of Zimbabwe, Zimre and the Rainbow Tourism Group.

Government still owns majority shareholding in some of the non-performing companies including National Railways of Zimbabwe, Zesa Holdings, Cold Storage Company and Air Zimbabwe.

Yes, it is good to create jobs for our people but let it not be at the expense of the taxpayer.
Time for some of these entities to be privatised or commercialised is now if Zim-Asset is to achieve its goals.

A lot is rotten in our parastatals, making it difficult for the State to realise anything from these parastatals and enterprises given the fact that the blueprint requires a portion of local funding for it to succeed.

Where can the local funding come from if entities that are supposed to be givers want to be receivers?
What is odd is that these entities provide services and are paid but declare losses every year with some of them fail to even cater for their employment costs.

So in that case, why should our parliamentarians just fold their arms and watch imo munyika maita zvikwambo?
What also boggles the mind is the fact that some of these SOEs have a comparative advantage over the private sector, for instance, the former have access to cheap credits, forgiveness of customs duty and taxes but are still failing to break even which raises questions about financial management and accountability in these entities.

Are these entities not feeding troughs for the powers that be?
Government is equally culpable because there has been too much interference by ministers in the management of those entities where they have imposed their people to run them.

They have also imposed unviable operating conditions. For instance, Air Zimbabwe was forced to continue charging in local currency when the economy was already running on foreign currency, resulting in people flying for cents during the “money burning” era.

Bureaucracy is another challenge that will always bedevil SOEs because the processes that they have to go through for tenders to be approved leave a lot to be desired.
Privatisation will bring accountability as ministers will no longer have absolute power to interfere with their operations and services offered by these entities will be paid for on commercial or viable basis.

Let’s face it, there are too many SOEs that are not adding value to socio-economic development except creating employment for people without anything in return despite the fact that they must be profit-oriented, emulating business practices in the private sector.

The other challenge is the staffing levels in these parastatals where relatives, some of whom are unqualified for that matter, are employed leading to a ballooning wage bill.

This then poses serious problems for these entities to retrench given the current labour laws.
For instance, Air Zimbabwe has found it difficult to retrench excess staff when their recruitment was never justified in the first place if one is to look at the staff-aircraft ratio.

Arguments against privatising SOEs are usually influenced by populist stances that may not yield positive results both socially and economically.
But it has all been rhetoric and nothing more given the fact that no social development can be achieved without economic development.

Laura Wallace in “Deepening Structural Reform in Africa: Lessons from East Asia”, states that most African governments are fearful that privatisation would increase unemployment. But why should we create redundant organisations just for the sake of occupying our people and drain the Treasury?

What value does it add to have the majority of people being employed but fail to pay them on time besides putting pressure on Treasury to bail out non-performing entities?

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