Privatisation no magic wand for parastatals

Paul Nyakazeya/Paidamoyo Muzulu

PRIVATISING state-owned enterprises without addressing management and administration deficiencies will not provide the all-curing solution to problems facing parastatals in the country, analysts believe.

Finance minister Tendai Biti wants 10 parastatals to be privatised to ease the burden on the fiscus and to provide better back-up service to industry. A well functioning public sector would also provide a solid base for economic recovery, with some parastatals anchoring the most critical sectors in the country.
“The poor performance of most parastatals is largely due to management inefficiencies, poor governance systems, and in some instances lack of resources. Furthermore government, despite pledges to reform parastatals, has also failed to implement a clear recovery plan for these parastatals,” economist David Mupamhadzi told businessdigest this week.
Government last year launched the first phase of the reform programme targeting 10 major state-owned enterprises (SOEs) for privatisation namely Agribank, Air Zimbabwe, Grain Marketing Board, Cold Storage Company, NetOne, TelOne, Zimbabwe Iron and Steel Company, National Railways of Zimbabwe, National Oil Company of Zimbabwe and Zesa Holdings.
Government has already sold a controlling stake in Ziscosteel to Indian company Essar Africa Holdings and is in the hunt for similar deals for other parastatals.
Mupamhadzi, however, said there was need for government to evaluate all parastatals in order to come up with an option for each individual company.
“There is need for government to evaluate all parastatals in order to come up with an optimal option for each parastatal, which will determine the route that the government should take,” Mupamhadzi said.
“The evaluation exercise will help to identify the reforms that are required for these perennial loss-making entities. At a broad strategic level the options that are available includes privatisation, commercialisation and restructuring. However, it is important to ensure that a proper evaluation is done, to avoid costly mistakes.”
Analysts say government should, as part of measures to reform parastatals include performance-related contracts and these should be scrutinised by institutions of accountability such as parliament. 
The creation of a ministry to manage state enterprises in 1995 has to this day failed to address policy inconsistencies, address the lack of political will on government’s part or give direction to the poorly performing parastatals.
Kumbirayi Katsande, former CZI president and business executive said: “The major problem has been to do with administration and supervision of the companies. Some of the ministers are not sure of the alternatives to privatisation like commercialisation.”
However, there are other enterprises whose failure to operate effectively can be directly located on the doorstep of the government. The inability of the state to fund these enterprises combined with the leadership failure in these parastatals has meant that Zimbabweans have to grapple with the twin problems of service delivery failure and non-employment generation.
Economic consultant Eric Bloch said the current state of virtually all parastatals was “grossly appalling”. 
“They (parastatals) are all grossly under-capitalised, have immense accumulations of debt and have lost the services of many of their essential skilled personnel, have vastly ill-maintained and obsolete infrastructures, and with rare exception are unable to provide effective service delivery,” Bloch said. 
Parastatals, he said, required capital injection sufficient to ensure settlement of debts, rehabilitation and upgrading of infrastructure, technology, management expertise and technically skilled personnel.
“The revival of the parastatals has been primarily prevented by government’s inability to fund their capital needs. It has also been compounded by ongoing unwarranted political controls and constraints and by endless governmental reluctance to pursue privatisation vigorously,” he said.
Recently the ministry of state enterprises and parastatals has attempted to inject some bite in its administration of SOEs.
The ministry, in its official documents, says it will look at many strategies of turning around failed parastatals in addition to privatisation, commercialisation and strategic partnerships.
It recently unveiled a Corporate Governance Policy aimed at achieving what successive governments since Independence have failed — making parastatals self-sustaining.     
State Enteprises minister Gorden Moyo last month said the policy aims at improving accountability among government bureaucrats and senior managers of state-owned enterprises will now sign performance-related contracts.
However, analysts say with political umbrage attached to the top posts of the parastatals, it is debatable that such a provision will be enforced.

Top