Erich Bloch: Parastatal Privatisation

WITH an allegedly “unified” government hopefully becoming functional shortly, Zimbabweans and the world at large have an increasingly great expectation of major policy changes to bring about an economic recovery, gravely needed and very long overdue.

 

In the unity accord signed by Zanu-PF and the two MDC formations, a few weeks ago, the three parties agreed “to give priority to the restoration of economic stability and growth in Zimbabwe”, and recognised that the “unity” government would necessarily have to “lead the process of developing and implementing an economic recovery strategy and plan”.

They emphasised their recognition of the role that would have to be played by government in achieving an economic transformation by committing themselves, within the signed agreement, “to working together on a full and comprehensive economic programme to resuscitate Zimbabwe’s economy, which will urgently address the issues of production, food security, poverty and unemployment, and the challenges of high inflation, interest rates and the exchange rate.”

Amongst the innumerable issues that must necessarily be addressed, if economic recovery is to become a reality, is the urgent rehabilitation and enhancement of much of the Zimbabwean infrastructure as is required for effective economic activity. That infrastructural rehabilitation and enhancement need relates especially (but not exclusively) to energy generation and distribution, air, rail and road transportation, water management and distribution, and telecommunications. Zimbabwe’s resources in these critical areas of supply of economic (and sociological) essential needs are dismally debilitated and incapable of servicing current national needs, let alone the considerably increased requirements of a future growth economy.

The common denominators between the diverse entities responsibilities for the energy, water, transportation and telecommunications service and supply in Zimbabwe are that, save for two providers of cellular telephone services, all such entities are wholly owned by the State. All those enterprises are parastatals, none of them are meeting the present needs of Zimbabwe, their infrastructures are aged, operationally grossly inadequate, subject to horrendously frequent breakdowns, and far behind the technological advances achieved and used in most other countries.

Many of those common denominators are by-products of others, foremost of which are that all of the parastatals would, if they were private sector enterprises, verge upon the criminal, with frequent incurring of debt without reasonable expectations of servicing debt. That under-capitalisation, compounded by lack of foreign exchange, hinders infrastructural upgrades, let alone timeous and effective maintenance, repair and refurbishment. The parastatals are also afflicted by ongoing losses of skills (in common with most other economic sectors), and an almost total inability to replace the lost skills, resulting in a continuously increasing lack of requisite technological resources.

Yet another of the very major retardants of the operations of the parastatals is that their managements are not accorded the degree of decision-making autonomy and independence necessary for effective business administration, control and development. Instead, pen-pushing civil servants set upon empire building and preservation unduly intervene and impose decisions upon managements. This is exacerbated by the extent that government in general, and some ministers in particular, have over the years utilised their authority over parastatals to progress governmental political objectives or self-centred materialisation.

Admittedly, this sad state of affairs has in no manner been unique to Zimbabwe, but is in common with not only prevailing conditions in various other countries (and especially those operating as quasi-dictatorships), but also was the case in the past in numerous first-world, developed economies.

Almost without exception, those countries as have successfully resolved the ill-effects upon their economies, did so by partial or total privatisation of those parastatals.

Such privatisations were very successfully effected in France ( inclusive of its automotive industries, rail transformation and telecommunications), in the US over more than 70 years (inclusive of immensely successful privatisation of media services, telecommunications, rail transportation, energy generation, and much else) and, with a few exceptions, in the United Kingdom, where the most pronounced successes were in telecommunications, provision of utilities, and certain rail, air and road transportation services.

For almost 17 years Zimbabwe has talked of privatisation, including such intended action having been one of the planks of the Economic Structural Adjustment Programme (Esap) of 1991, and the establishment of a Privatisation Agency in the late 1990s. Regrettably, to a very major extent, the only action has been talk, rather than action of substance. There have been a few very notable exceptions, and the successes of those exceptions should be added motivants to government vigorously to pursue privatization.

The privatisation of Cotton Company of Zimbabwe, Zimbabwe Reinsurance Corporation (Zimre), and Dairibord Zimbabwe Ltd, as well as government’s partial disinvestment from some of its banking interests (ZB Bank and CBZ Bank), evidence the merits of privatisation, whilst the failure of most existing parastatals to service national needs is in sharp contrast to those privatisation successes. Amongst the many that urgently need privatisation, wholly or partially (but then at least substantially) are Zesa, Zinwa, TelOne, NRZ and Air Zimbabwe.

If such privatisation would be on the basis of partial disposal of equity to international strategic partners, partial disposal by equity listing on the Zimbabwe Stock Exchange, and partial disposal to management and employees of the enterprises, the entities would access much needed capital, state-of-the-art technological inputs, new operational equipment compatible with, and enhancing of, existing equipment resources, and skilled personnel, whilst markedly improving prospects of retaining the services of such competent management and staff as may still be in the employ of parastatals.

Concurrently, government would be relieved of very considerable direct, and indirect debt, and in some instances would even benefit from fiscal inflow in exchange for its divestment from the parastatals, thereby providing greatly needed funding to reduce, to some extent, government’s gargantuan deficits.

In addition, in some instances, Zimbabwe would also benefit from some foreign exchange inflows, which are very greatly needed.

The time is now for government to discard the prolonged dislike of parastatal privatisation (despite many pretences to the contrary), and intensively, rapidly and effectively to pursue such privatisation, which is very long overdue.

 

 

 

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