Eric Bloch Column

Disservice from parastatals

By Eric Bloch


WHEN Gideon Gono, governor of the Reserve Bank of Zimbabwe, delivered his statement of Fine-Tuning of Monetary Policy on October 9, he dropped an array of bombs upon the fina

ncial sector, the Zimbabwe Stock Exchange, Money Transfer Agencies (MTAs), exporters, other economic entities, and the populace in general. Some of the bombs were very necessary and deserved, whilst others have potentially disastrous consequences of the same magnitude as would be caused by a North Korean nuclear bomb, the most pronounced being the repercussions upon an already critically injured export segment, verging upon permanent collapse.


One of the very necessary bombs, however, descended upon many of Zimbabwe’s parastatals. Gono clearly, and justifiably, voiced his displeasure at the extent to which some of the parastatals have very evidently done nothing to right their ills, mainly self-afflicted, and place their operations upon an even keel. Instead, these parastatals demonstrably perceived RBZ as a “milk cow”, and the governor made it clear that that cow was no longer prepared to be milked. He said that in the light of RBZ’s “varied experiences over the last 18 months, some parastatals and local authorities have developed seemingly perpetual reliance on the Reserve Bank for support, unacceptably surrendering their cash-flow planning and survival needs to us (RBZ)”.


He said that in view of this syndrome of total cash-flow reliance upon RBZ of such parastatals, “it has become necessary to institute stringent measures that restrict and forbid non-performing parastatals and local authorities from accessing central bank support”. He advised them that hereinafter “their first port of call for financial assistance shall be their parent ministry”, and stated that those that immediately come to mind are Air Zimbabwe, Zinwa, Zesa, GMB, Arda and Zisco, (although he commended some others, including National Railways of Zimbabwe and Zimbabwe United Passenger Company), for “beginning to perform and self-sustain”. He also urged banking institutions “to play a complementary role in instilling sound financial management systems and corporate governance standards in the parastatals sector as a condition for lending”.


The affected parastatals must have been shaken rigid, for RBZ largesse had been very considerable, motivated by a desire to bring economic efficacy to parastatal operations, required for the economy to function properly, but much of that largesse having been abused and, instead of those parastatals better-serving the economy, their service delivery had become progressively less and less, and that which has been forthcoming not meeting the national needs. With the RBZ being a benevolent banker, those parastatals felt that they were “on a pig’s back”.


Irrefutably, some dynamic action is not only necessary, but is also long overdue, and that action must include that the RBZ cease to be the banker of permanent resort, and that the parastatals very belatedly engage in effective cash-flow management, and take those actions necessary to achieve viability, self-sufficiency, and absolute fulfilment of the purposes for which they are supposed to exist. However, it is unacceptable that they should now transfer their funding dependency upon their parent ministries, other than possibly transitorily whilst implementing positive and constructive measures to achieve self-sufficiency. On the one hand, if the ministries become the substitutory source of funding on an ongoing basis, the underlying malaise of the parastatals will not only continue unabated, but will intensify, with the economy and the populace being ever-greater victims of mismanagement, declining service and soaring costs.


On the other hand, government’s fiscal deficits are already untenably great, and would worsen very considerably if the ministries were to provide an unending flow of funding to parastatals. Such parastatal financing could only be funded by government by recourse to yet further taxation of an already very over-taxed economy and of a populace which is, even now, grossly imposed upon by considerably excessive direct and indirect taxation, or by government increasing its devastating great borrowings. Many of such borrowings are, to all intents and purposes, provided by RBZ, through the purchase of government treasury bills and loan stock not taken up by the private sector, and paid for with inflation-creating, excessive printing of money.


Thus, it will be as undesirable for ministries merely to become funding substitutes of RBZ for the cash-ravenous parastatals, as it has been for RBZ to be the financial horn of cornucopia for parastatal inefficiency, and for parastatal deficiencies. Instead, once and for all, government needs to do something about total and partial privatisations of parastatals, which it has recurrently declared as its intent since 1991, but with little performance, save and except for the very successful privatisations of the Cotton Company of Zimbabwe, Dairibord, Rainbow Tourism Group, Zimbabwe Reinsurance Company, and Commercial Bank of Zimbabwe, and some very limited other partial state disinvestments.


Government, empire-building ministers, permanent secretaries, and the politically well-connected, need to learn that it has been extremely rare, the world-over, for governments to run businesses well. Not only do governments have neither the required expertise and motivation, but those constituting the governments inevitably being transient in nature, and normally being devoid of specialised business expertise to run businesses properly, they are totally unsuited to be engaged in businesses.


This has not only been a Zimbabwean syndrome, but one throughout the world. For many decades the parastatals of the USA, Britain, France, Italy, Russia, and many other countries, were business disasters. Year in and year out they failed to meet the needs of their countries which they were supposed to satisfy, and were an endless financial burden upon the exchequers. Eventually, and with immense political reluctance, each of those countries ultimately embarked upon programmes of privatisation, and with very rare exception did so with great success. The transcontinental railways of the USA, that country’s telecommunications, and those of the United Kingdom, British Airways, British Gas, Renault and Peugeot, are but a few of the very many examples of successful privatisations.


The keys to the successes were the genuine will and determination to privatise, the choice of strategic partners possessed of required technical expertise, and other essential resources, and appropriate legislative deregulation, combined with placing enterprise viability and the needs of the population ahead of political considerations. Zimbabwe needs all of these keys to unlock its parastatals successfully, and in order to access the keys it must be willing to clean-up the parastatals by writing-off their debts, ridding them of unnecessary super-structures, and restructuring them with foundations of operational viability, accessing strategic partner expertise and adequate equity investments.


It is long overdue for Zimbabwe to sort out its parastatal chaos, and the first step towards doing so is for government to have the courage to pursue, with utmost vigour, a real policy of privatisation, instead of nothing but endless, non-performing, lip-service. Until government does so, Zimbabwe will continue to suffer inadequate and erratic power supplies, fitful telecommunications, unreliable grain supplies, air services which — despite recent valiant efforts by Air Zimbabwe personnel — are characterised by unreliability, and like disservice from most other parastatals.

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