Comment: Corruption must not derail privatisation

AFTER years of toying with the idea of privatising state enterprises, government now seems keen to dispose of shareholding in non-performing parastatals. First to go will likely be Agribank. Government hopes to sell 60% of its shareholding in the troubled bank.

While the exercise would definitely turn around the fortunes of the companies, benefits to the economy cannot be underplayed. This should also ease the burden on treasury which has been channelling millions of dollars annually to shore up the quangos. But a lot needs to be done to ensure the exercise is a success and free from corruption. This is however requires transparency, a rare attribute in government.

Without transparency and public accountability, the privatisation effort will be a failure and could leave the economy worse off.

Though government finally found a good suitor for the Zimbabwe Iron and Steel Company (Zisco), underhand developments surrounding the bidding process exposed the ugly face of influence peddling with certain politicians backing company A while others backed company B.

Undoubtedly, such politicians had received bribes to ensure their handlers won the bid. Corruption should not stand in the way of privatisation of these enterprises. Even after Essar Group won the bid to acquire a controlling stake, the dust has not settled yet, with politicians mudslinging the winning bidder for very obvious reasons.

Those who did not get a piece of the cake through infamous “facilitation fees” are possibly hoping to cash in on the sale of at least 10 other state enterprises — Air Zimbabwe, National railways of Zimbabwe, Noczim, Agribank, Cold Storage Company, Grain Marketing Board, NetOne, and TelOne.

Apart from corruption and lack of transparency, government should choose partners on the strength of their balance sheets and conduct thorough due diligence exercises into would-be suitors to avoid embarrassment of yesteryear that saw government handing out a management contract to a dubious Indian outfit that failed to revive the steelmaker, actually leaving it in a worse-off state.

All the companies slated for privatisation have one thing in common; they are struggling and have been in this position for a long time largely because of poor management and failure by the state to recapitalise the firms.

Finance minister Tendai Biti aptly captured the dire need for privatisation at Agribank while presenting his 2011 fiscal policy statement earlier this month.
He said Agribank was in such financial trouble that before the company trades, the bank is already in a loss position.

Judging by the government’s current financial position, the state cannot afford to reinvest in all its companies, especially now when government generates revenue just in excess of US$2 billion annually.

Real and sound reforms need to be instituted in parastatals so they can play a pivotal role in the economy’s growth and turnaround. At the moment institutions such as Zesa and the National Railways of Zimbabwe are but an albatross around the economy’s neck. It is generally accepted that energy and a sound infrastructure underpin any economy’s growth.

Government last year approved a new programme to restructure, commercialise and privatise at least 10 companies and had received interest from foreign investors.

The government solely controls or is the major shareholder in 78 corporations in sectors such as energy, transport, finance, mining and telecommunications.

The CZI recently said: “There can be no economic growth with the parastatals in the condition in which they find themselves.  There is need for government to give specific timelines on privatisation. In addition, given the seriousness of the matter and the huge economic benefits to the nation, CZI suggests that the issue be handled in the Office of the Vice-President.

The first major step to achieve requires government to let go. It must take a cue from the success of other privatisations and commercialisations of parastatals such as Dairy Market Board, now DZL, Cotton Marketing Board now AICO, and see the benefits.

These two companies — DMB and CMB — are perhaps the most shining examples of how successfully privatised state enterprises can contribute to the economy’s growth and the fiscus at the same time.

 

 

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