Parastatals Should Charge Commercial Rates, Say Economists

GOVERNMENT plans to raise funds to revive the economy through a commercialisation and privatisation plan which will take different forms as part of a rationalisation, reconstruction and transformation agenda.


Economic analysts however said the way the plan would be crafted was important in attracting foreign investors as the issue has been on the cards for more than a decade.

ZB Financial Holdings economist Andrew Chirewo said if it was a revenue generating plan for the parastatal, the first stage could be the rehabilitation by government through rationalisation of operations.

“If government has funds or can secure strategic or technical partners, recapitalisation then the idea is noble,” Chirewo said on Tuesday. “The entities can then be allowed to commercialise, that is, charge economically viable rates, but on a phased basis to avoid social dislocations.”

Chirewo said commercialisation would enhance the entities’ self sustenance, less reliance on government resources as well as ability to operate as going concerns.

“When viability is achieved through commercialisation and with relative policy certainty, it would be easier for government to subsequently identify private sector players, to either partner with in a private-public ownership arrangement, or to completely cede control to, for the efficient operation of the entity,” he said.

He however said whatever the ultimate ownership arrangement, there was a need to come up with proper pricing mechanisms to avoid disposal of the state assets at discounted prices.

“A viable alternative or complement to privatisation is listing on the capital markets, for example the Zimbabwe Stock Exchange, as was the case with AICO, CBZ and DZL,” Chirewo said.

Economist Brains Muchemwa said most parastatas such as Zesa did not need privatization.

“They need a supportive rational policy framework from the government, restructuring and a strong economy where it can raise debt, whilst the consumers pay the right tariffs. Thinking of privatising them is taking capitalism experiments too far, and the results will always be disastrous,” Muchemwa said.

The country needs close to US$10 billion to rivitalise its battered economy and so far has received close to US$1 billion.

Minister of Finance Tendai Biti last week told businessdigest that government would assess different state assets and decide on whether to commercialise or privatise them.

“Cabinet has approved the process of commercialisation and privatisation. This includes how it will be done, timing and objectives,” Biti said.

Biti said the process had been divided into different categories and classified state enterprises under each of the groups to ensure maximum benefit for the country.

He said there were high-value state companies which had huge potential but needed capitalisation and good management.

These categories include companies such as TelOne, POSB, power stations, Zisco and National Railways of Zimbabwe. He also said there are some strategic high-value enterprises which however are seriously draining the fiscus such as Air Zimbabwe.

Coronation Financial Services economist and investment analyst Lance Mambondiani on Wednesday said privatisation maybe one of the solutions to solving the problem of an inefficient state-owned enterprises.

“This would be based on the assumption that the best way of turning around a state-owned enterprise is to subject it to market forces and open up competition and not propped up or subsidised by the government,” Mambodiani told businessdigest.

“This policy change would increase the country’s international competitive strength, increase efficiency, lower the costs of goods and services and help to balance the budget. Also, a key political value dictates that if citizens want a good or service they should pay for it,” he said.

Mambodiani said privatising a state-owned enterprises was not easy as no investor would come without guarantees.

“In accounting terms, most parastatals are probably technically insolvent, the value will be in its re-organisation and not whether it’s functional or not,” said Mambodiani.

KM Financial Solutions chairman and investment expert Kenias Mafukidze told businessdigest that privatisation required a lot of investment. “Given the sums required to take full advantage of our unique position, there is need to open up this space for private sector participation in a manner that will push the country and indeed the region forward,” he said

Economist Philip Chichoni said the current global financial crisis makes it impossible for any buyer to raise the funds required to bring the parastatal to modern standards.

“Years of no capital injection and low tariffs mean equipment at parastatals had been run down and in need of replacement,” said Chichoni.

Paul Nyakazeya

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