HomeOpinionNo end in sight as parastatal woes deepen

No end in sight as parastatal woes deepen

Paul Nyakazeya

WHEN Central Bank governor Gideon Gono raised his hackles last week accusing permanent secretaries from various ministries of undue interference in haemor

rhaging parastatals, many people wondered where he had been all along.

The more discerning took the remarks as at an attempt by Gono to give himself more leverage in controlling the state enterprises that have been feeding from the central bank’s financial trough.

The RBZ chief has doled out large sums of money to these quasi-government organisations in the hope of breathing life into them while at the same time ensuring that they become beholden to the central bank’s largesse programme.

President Mugabe has mandated his two vice-presidents to supervise and coordinate operations of the parastatals, with Gono sitting as a member of all the committees.

Presenting oral evidence before the parliamentary portfolio committee on Transport and Communications last week, Gono said gross interference by permanent secretaries was scuttling efforts by parastatals to contribute to the economic turnaround.

“There is no role clarity between parastatals and the line ministries. In some cases, permanent secretaries are acting as chief executives of parastatals and the boards are sidelined,” Gono was quoted as saying.

“When boards are appointed they should be given room to deliver and if they don’t fire them. This business of doing it half-heartedly is a recipe for disaster.”

Gono said 90% of the policy advice that was given has either not been implemented or considered and that 80% of the advice did not need any money but commitment.

“We are wondering whether this is just a culture of not wanting to implement advice,” Gono lamented.

Parastatals and local authorities have over the past decade been taken as the missing link in enhancing quick productive sector supply response to fiscal and monetary policy incentives.

Analysis of the country’s supply side response rates has shown that the fight against inflation (1 204,6% for August) and productivity reversals can be much longer if there is no radical transformation among parastatals.

Most of parastatals have a common thread that runs through them.

Other than being state-owned, the companies are known for their ever-shrinking accountability, lack of transparency, inefficiency, disastrous financial performance, choking debt and corruption.

These state bodies have been run down due to managerial shortcomings and government interference, with some perennial loss-makers enjoying state-protected monopoly positions.

Last year alone, power utility Zesa Holdings, the National Railways of Zimbabwe, the Grain Marketing Board, the few state enterprises where a shroud covering their financial statements was lifted, recorded massive losses, while Air Zimbabwe, Zimbabwe United Passenger Company (Zupco), Zimbabwe Broadcasting Holdings and Zimbabwe Iron and Steel Company (Zisco) relied on grants from treasury to remain afloat.

Presenting a synopsis of the impact of the central bank’s interventions in the economy in July, Gono said local authorities and parastatals contributed about 40% to gross domestic product and that they had forward and backward relationships with other sectors of the economy.

“The involvement of parastatals in the turnaround equation took into account their virtual existence in every sector of the economy and the critical nature of the inter-linkages with broad sectors of the economy,” Gono said.

“There is therefore need for radical surgery because the status quo is simply untenable in an economy whose survival has depended on an accidental combination of circumstances.”

No matter how much money is poured into parastatals, their performance will not improve unless there is a complete overhaul of management and how operations are done, analysts say.

Parastatals have been a breeding ground for patronage, nepotism and corruption. Government directives and persistent interference have crippled their viability.

Senior appointments that are not advertised are made on the basis of political affiliation.

Finance minister Herbert Murerwa however sees things differently. Earlier this year he said some parastatals would be listed on the stock exchange before the end of the year.

Up to last year, the last time for which figures are available, the central bank had sunk a staggering $12 billion (revalued) into these bottomless black holes to re-capitalise their operations at a time when central government was finding it difficult to balance the books.

Despite such cash injection, production at Zisco declined sharply from 14 200 tonnes in July last year to 1 000 tonnes in July this year.

The iron and steel giant continues to be hobbled by inadequate working capital to service key creditors, particularly Zesa and Hwange Colliery.

This has often caused supply disruptions over non-payment. Zisco also fell prey to government officials and managers who were, according to Industry and International Trade minister Obert Mpofu, involved in corrupt activities. Fearing a political backlash, Mpofu retracted his statements last week.

Hwange’s coal production has also declined by over 20%, with total coal sales for the interim period to June declining to 883 311 tonnes from 1 405 960 during the same period last year.

Zesa Holdings is saddled with a foreign debt of US$330 million. The power utility’s wage cost consumes in excess of 55% of its revenue.

Its operating losses as of February 2006 stood at $8 trillion (old currency). The Cold Storage Company was reportedly failing to pay its workers for three months from January to March due to financial problems.

Analysts have partly blamed the different policies by Murerwa and Gono for the problems of parastatals. The two are said to have clashed over policy in parastatals.

Murerwa has accused Gono of acting outside his mandate by venturing into quasi-fiscal activities instead of confining himself to monetary policy issues. The two have also clashed on how to handle issues relating to the International Monetary Fund (IMF) and payment of the institution’s debt.

Gono said he was battling with a problem that started under Murerwa in the late 1990s. Murerwa has stood his ground and insisted that Gono, now accused by some in government of acting like a prime minister, stop interfering in the Finance ministry’s remit through his quasi-fiscal activities.

Gono warned that the economy would not recover in “a thousand years” if government officials and the generality of Zimbabweans continue to work at cross purposes.

“Until as a country Zimbabwe uses the same ladder of development other states used to get where they are, this economy would never turn around in the foreseeable future,” Gono wrote to Murerwa on February 13 this year.

“Not with the current mentality. Never and not in the famous 1 000 years.”

In June this year parastatals, which have remained an impediment to economic growth and a drain on the fiscus, were saddled with delinquent loans totalling an incredible $76, 4 billion (old currency).

Thus the central bank has all along been chasing its own tail.

The events make it clear that hoping to revive these debt-laden, underperforming, unaccountable and non-transparent parastatals through extending loans at concessionary rates is the wrong tack.

In his fourth quarter monetary policy statement in January Gono said: “We will use the first six months to prepare a comprehensive roadmap for privatisation which allow implementation in the second half year of 2006.”

Ten months down the line no developments or statements have suggested that the central bank was working on the privatisation of parastatals.

One analyst said privatisation was now the only way to go to restore parastatal viability.

“The move should be informed by a genuine realisation on the part of government that its role is to create an environment that is conducive to doing business, rather than being a major player in business itself,” said the analyst who preferred not to be named.

He said privatisation could also be an effective tool to bring down the high rate of inflation by transferring control of the greater part of the economy from government to the private sector.

The $10 trillion (old currency) Parastatals and Local Authorities Reorientation Programme which was disbursed to parastatals last year has not improved parastatal’s operations.

Analysts said the intervention was noble because state enterprises had been enmeshed in costly mismanagement and inefficiency and drained the fiscus, but it was illogical for the central bank to throw money at this problem without addressing its root cause – government itself.

“While this was a positive and long overdue move by the central bank, it would have been logical to undertake extensive restructuring of the management structures at some of the parastatals first in order to eliminate managerial deficiencies, which have often led to the underperformance of these enterprises in the past,” an analyst said.

Analysts said both parastatals and local authorities should also be allowed to charge economic prices and tariffs for the goods they produce, otherwise they will continue to post huge operational losses and hence continue to place a huge burden on the fiscus.

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