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Comment: Take cue from privatisation success stories

THE decision to sell the struggling Redcliff-based steelmaker — Ziscosteel — this month to Essar Group was government’s unusual step in the right direction. But even so, government should broaden its privatisation or commercialisation drive to include other failing parastatals such as Air Zimbabwe, Zesa Holdings, National Railways of Zimbabwe (NRZ) and Zupco.

All these companies have one thing in common; they are struggling – have been struggling for a long time and need fresh capital. Judging by government’s current financial position, the state cannot re-invest. Real reforms need to be instituted in parastatals for them to play a role in the revival of the economy.
At the moment, institutions such as Zesa and NRZ have become an albatross around the nation’s neck. Until government fully adopts privatisation or commercialisation, the economy will remain in the doldrums. Obviously this should be underpinned by the return to the rule of law and respect for property rights.
Although State Enterprises minister Gorden Moyo claims Zimbabwe is determined to change the fortunes of government firms, many of them have continued to bleed the fiscus over the years. Government last year approved a new programme to restructure, commercialise and privatise at least 10 companies and had received interest from foreign investors.
Targeted firms include GMB, NRZ, fixed-line phone company TelOne mobile phone operator NetOne, AgriBank, Ziscosteel, the National Oil Company of Zimbabwe, Zesa, Air Zimbabwe and beef producer Cold Storage Company (CSC).
Moyo last month said details would be available by year-end. But judging by the pace it took government to dispose of Ziscosteel, Moyo’s year-end target is not achievable. The government solely controls or is the major shareholder in 78 corporations in sectors such as energy, transport, finance, mining and telecommunications.
The Confederation of Zimbabwe Industries (CZI) has also urged government to seriously consider parastatal reforms. CZI says “real action” needs to be taken. If government cannot privatise parastatal monopolies, then it should allow private players in monopolised sectors, the business body says.
Government must take a cue from the success of other privatisation and commercialisation of parastatals such as Dairy Market Board, now DZL, and Cotton Marketing Board, now AICO, and see the benefits.
These two companies — DMB and CMB — are shining examples of how successfully privatised firms can contribute to the economy’s growth and the fiscus at the same time. But government has to safeguard the process from influential individuals, who might be already circling around some of the state enterprises. 
Ziscosteel’s disposal will help other downstream industries as well. Under good management, Ziscosteel could steadily rise to be a giant steel maker. It is also important to have an investor for Zesa and NRZ.
A quick glance at a listed company’s challenges show how energy is perhaps the biggest handicap to an already troubled industry. Power outages have contributed to low capacity in industry.
Over the years, NRZ has also been run down and needs to be recapitalised. Many businesses in the country have had to resort to far more expensive but reliable transport means than risk spending the entire year waiting for shipments. Even Zambia has done much better on the privatisation front. 
Ten countries account for most of the privatisation in Africa so far: Mozambique, Angola, Ghana, Zambia, Kenya, Tanzania, Guinea, Madagascar, Nigeria and Uganda. Undoubtedly, most of these countries are doing much better than Zimbabwe economically.
Vital lessons could be drawn from how privatisation was done in these countries and use the best practices as a model for Zimbabwe’s own plans to roll back the frontiers of the state from business. A blend of the continental best practices and the lessons learnt from the transformation of DMB and CMB to successful companies could be a firm foundation for an effective privatisation programme.

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