Accountability in state enterprises

State involvement in business has long been debated, with two polarised views emerging.

Collins Rudzuna

On the one hand the Western-influenced view looks down on direct participation in business by government, favouring instead private enterprise.

According to this view, business is better run by private owners with boards of directors and accountability to shareholders, competing openly in a free market.

The other extreme favours state-owned enterprises run by government appointed bureaucrats for the benefit of the nation. In reality, many enterprises exist which fall somewhere between these two extremes.

Success has generally followed the former model and countries that strongly favour free-market enterprise have succeeded better than others.

As such, even where state influence still exists, the make-up of the business sector is such that it still leans towards the private-enterprise model.

Zimbabwe has many parastatals and a few private businesses in which government has significant shareholding.

Some of these are actually former parastatals which privatised during the time when government was implementing the Economic Structural Adjustment Programme (ESAP).

The privatised enterprises have had more success than those that remained pure parastatals.

Every year, we hear of how parastatals lose money and have to get more money from government coffers. It is also a widely held view that service delivery at parastatals is poor. For these reasons citizens usually speak ill of these entities and decry how they waste taxpayers’ money.

Public anger at poorly run parastatals seems well placed. But there are other companies that citizens should also be worried about. There are often listed entities in which government and by extension taxpayers, have an interest.

When these companies become perennial loss makers then it may be well within the public’s rights to scrutinise their conduct. In reality, not many ordinary people even understand the workings of these companies and how they are costing them their tax dollars.

That responsibility is therefore taken up by government appointees on the boards of these companies.

Yet for a long time these overseers seem to be happy to not ruffle any feathers, letting poor performance go unpunished.

It was with surprise therefore that people witnessed events at Zimpapers Ltd last week that seemed to be a divergence from that norm.

Reports are that the Chief Executive Officer and the Financial Director voluntarily went into early retirement, as did the general manager and a senior disc jockey (DJ) at the Zimpapers owned radio station, Star FM.

Although Zimpapers seemed to want to portray that the exodus was a simple case of early retirement, it did arouse curiosity in the market.

Firstly because it is an unlikely coincidence that four senior executives would simultaneously decide to voluntarily take early retirement from the same organisation at the same time.

And secondly because the en-masse early retirement coincided with the release of yet another dismal set of results by Zimpapers.
Speculation has it that the four were asked to leave because of poor performance.

If that is true, then it is a positive development in the way government controlled companies are run.

Zimpapers is majority owned by an entity in which government has an interest.

The company suffered a 6% decline in revenues for the half year to June 2014. Finance costs emanating from expensive short-term debt shot up by 63% to US$851 721. Ultimately, the company made a loss of US$1,4 million where they had made a small profit in the comparable period in 2013.

If the exit of the four is a sign that the authorities are willing to let heads roll for poor performance at government controlled companies, then it is a good development.

Of course, capitalism purists will question the need for government to be involved directly in business in the first place. Some accept that certain essential services which cannot be offered at commercially viable rates should be owned by government. Examples are railway companies like NRZ and telephone companies like TelOne.

But does government really need to own a newspaper publishing company, something that the private sector seems quite capable of doing? Does government have to have a driving school like CMED Driving School? When these businesses start losing taxpayers’ money through operating losses, it is the public that bears the loss.

If government is to be involved in business then it has to be more aggressive in demanding the best performance from those entrusted with running these entities.

Where performance is below par, then necessary steps should be taken to correct the situation.

The ultimate beneficial stakeholders of government investments, the public, would demand no less than a good return on their hard-earned money.

There is even a perception that hiring at senior levels for these companies happens clandestinely on a partisan basis in favour of political appointees.

Whether this perception is accurate or not, it gives an encouraging picture when performance is demanded from the executives of government companies.

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