Eric Bloch: Privatisation Urgently Needed

ZIMBABWE has long paid lip-service to the intent to privatise its parastatals, wholly or partially, but in reality has only minimally done so.


In its first economic programme, the National Transitional Economic Development Programme, of 1980/81, government declared intent to pursue parastatal privatisation, as it did also in the next economic programme. Similarly, this was a stated intention in the 1991 Economic Structural Adjustment Programme, and in innumerable subsequent programmes.

But, save for at one stage, a brief period of time, establishing a National Privatisation Agency, and during the very curtailed life of that entity, privatising  a very few  parastatals, all has been empty words,  devoid of  substance or action.

The few privatisations that were pursued included the enterprises that became Zimbabwe Reinsurance Company Ltd, Dairibord Zimbabwe Ltd, Cotton Company of Zimbabwe Ltd, Commercial Bank of Zimbabwe, and Rainbow Tourism Group Ltd.

Despite the impressive successes of these privatisations, government was not motivated to continue and intensify a programme of disinvestment from its innumerable parastatals, and from its numerous private sector investments such as its very substantial shareholdings in Hwange Colliery Company Ltd, Financial Holdings Ltd, which owns Zimbabwe Banking Corporation Ltd, and Zimbabwe Newspapers Ltd.

Although, in the absence of any authoritative statements from government, only speculation and surmise can be resorted to in order to determine the reasons for the governmental reticence to implement privatisation with conviction, in all probability those reasons include that many of the political hierarchy welcome the opportunities of effecting nepotistic senior management appointments, and of availing themselves gratuitously to parastatal resources.

Concurrently, they welcome the enhancements of their spheres of authority and control, as presumably do many senior civil servants in governmental ministries.

However, there are now many pressing reasons why parastatal privatisation should be extensively pursued.

Foremost amongst them is the need to bring to the parastatals high levels of efficiency and service. 

It is therefore very significant that in Minister of Finance, Tendai Biti’s 2009 Budget Review Statement of March 18, he said: “The Short Term Economic Recovery Programme (Sterp)…prioritises the enhancement of efficiency  in delivery of public services…by our public enterprises and local authorities. Reforms for the public enterprises will focus on re-capitalisation, commercialisation, privatisation and part or outright disposal…”

Government as a whole, Minister Biti, the Minister of Economic Planning and Development, Elton Mangoma, and the other directly effected ministers in particular, must ensure that this  declared intent of Sterp will not, yet again, be naught but hollow declaration without fulfillment, and will  this time be constructively  and expeditiously implemented. There has always been a need for privatisation, but now it is very especially needed that Zimbabwe extensively and urgently do so.

This is so for diverse reasons, almost all of which stem from the basic fact that governments are not equipped to function in private sector, commercial and like operations. Governments come and go, and the changes result in very limited continuity of management policies and of operational strategies.

Moreover, whilst key policy determinations lie in the hands of the politicians that constitute a government, first-line responsibility for their implementation falls to the public service. Few have the experience and expertise necessary for commercial operations, for their skills generally lie in the fields of governmental administration. Furthermore, as they are not equity participants in the parastatals that fall under their ultimate control, the incentive and motivation for operational success is minimal.

This is in no manner a unique circumstance to Zimbabwe, but has been a characteristic for many generations in almost all countries that had parastatals engaged in commercial and quasi-commercial activities. For decades, commencing in the 19th century, the USA had major parastatals such as national railways and telecommunications, and they only became really viable and of substantive service to consumers after privatisation.

The same applied to telecommunication, air, water and gas service enterprises in the United Kingdom, most of that country’s parastatals delivering little other than consumer dissatisfaction until after privatisation (although, admittedly, the privatisation of British Rail has not yet yielded expected results). Parastatals in France, Italy, much of the former Soviet Union, and many Far East countries only became meaningful and effective operations after privatisation. Zimbabwe needs to recognise, albeit belatedly, the inadequacy of parastatal engagement in commerce and in service delivery, and must learn from the experiences of so many  other countries, inclusive  of many in Africa.

The need to do so in Zimbabwe is particularly urgent as, virtually without exception, the parastatals are grossly undercapitalised (and in numerous instances, to all intents and purposes,  are prima facie insolvent, surviving  only upon governmentally guaranteed loan funding, the servicing  of which is compounding  their non-viability  and insolvency). 

As a result of that under-capitalisation, their infrastructures are increasingly aged and ineffective and inadequate.  Especial highlights of this circumstance include Zimbabwe Electricity Supply Authority (Zesa), TelOne, National Railways of Zimbabwe with its ageing and insufficient rolling stock and deteriorating  lines of rail and  supporting  signal  services, and Air Zimbabwe.

These are far from the only ones in desperate need of considerable capital and expertise injections to refurbish, rehabilitate, replace, and enhance plant, machinery, equipment, and other infrastructure.

Government, with an already monumental debt burden, does not have the resources to fund these parastatal necessities, and cannot access them. Only by constructive privatisation, partially to appropriate national, regional and international strategic partners, can the required capitalisation be forthcoming.

Concurrently, most of the parastatals have been as grievously affected by the very pronounced “brain drain” as has the private sector. However, rational privatisation of the parastatals with appropriate  partners  from beyond  Zimbabwe’s borders can  enable access to very necessary, state-of-the-art technology transfer, availability of critically needed skills, and training  development  of new Zimbabwean  pools of requisite skills.

Properly pursued, privatisation can also relieve Zimbabwe’s highly-impoverished government of a meaningful portion of its gargantuan debts, and of continuing contingent liability  under the guarantees provided  to lenders to the parastatals. It can also facilitate a progressive streamlining of Zimbabwe’s greatly bloated public service.

Privatisation of parastatals can also be an effective element of Zimbabwean indigenisation and economic and empowerment, by availing parastatals’ employees the opportunity of acquiring a portion of equity in the parastatals (concurrently with substantive  other domestic  and foreign direct  investment), either directly, via employee share trusts,  or through equity-acquisition  options. A big proviso, however, in pursuing this objective, is that it be managed and implemented with absolute transparency, good governance controls, and preventing exploitation by the politically-connected for self-enrichment.

All these, and other incontrovertibly evident grounds for privatisation of parastatals, and government disinvestment from commercial operations that should be wholly private sector, including banking finance, media, and mining, dictate that there is an urgent need that government now does unhesitatingly and intensively implement privatisation and disinvestment.

BY ERIC BLOCH

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