HomeLocal NewsGovt presides over parastatal rot

Govt presides over parastatal rot

GOVERNMENT has maintained a slipshod management style over loss-making state-owned enterprises — most of which are technically insolvent — that are dogged by maladministration, brazen corruption and poor corporate governance despite growing calls for reforms and the prosecution of those misappropriating public funds.

By Taurai Mangudhla

Numerous previous probes have exposed corruption and other criminal activities on the part of board members and top management at parastatals, but no criminal charges have been laid against the perpetrators of such offences. In clear violation of the tenets of corporate governance and the Constitution of Zimbabwe, audit findings have been swept under the carpet.

Citizens and activists have raised concern, with the Institute of Chartered Secretaries and Administrators in Zimbabwe (Icsaz) being the latest.

Icsaz says the lack of commitment to good corporate governance, which entails timely reporting and full disclosure as well as clear managerial and board procedures that foster transparency and accountability, is seen persisting among state-owned enterprises unless the government takes stern measures to whip them in line.

“This problem is expected to persist unless the other party on the accountability equation, that is the shareholder, in this case the government of Zimbabwe, seriously demands that accountability,” Icsaz said in the adjudication report for its 2016 edition of the Annual Excellence in Corporate Governance Awards.

Icsaz said although there was a marked improvement in the reporting by state-owned enterprises that were evaluated last year, the majority of the entities fail to hold annual general meetings and regular board meetings in line with tenets of corporate governance. This comes as recent media reports have exposed the abuse of state institutions like Zesa Holdings and the Zimbabwe Manpower Development Fund (Zimdef) for personal enrichment while government does nothing to tackle the rot.

Zesa is currently reeling from a corruption storm after major energy projects were given to dodgy businessmen with criminal records ranging from fraud to drug trafficking.

The deals were inflated by more than US$500 million, raising suspicions Zesa executives and senior government officials, including ministers, are benefitting from the shady contracts, which the authorities are reluctant to investigate.

The parastatal has paid millions upfront for projects that are yet to commence but is failing to pay for power imports.

Higher and Tertiary Education Minister Jonathan Moyo and his deputy Godfrey Gandawa have been accused of abusing about US$450 000 of Zimdef funds.

Information gathered by the Zimbabwe Independent indicates that Zanu PF has admitted to receiving part of the money to bankroll party activities amid reports Zimdef paid huge sums of to fund President Robert Mugabe’s 92nd birthday bash earlier this year.

In 2014, state-owned transport enterprise CMED (Private) Limited’s protracted battle to recover US$3,8 million in a botched fuel deal in which private supplier First Oil failed to deliver for paid supplies sucked in the Office of the President and Cabinet (OTP) as it emerged the parastatal, together with government’s fuel distributor PetroTrade, approached senior bureaucrats at OTP to escape prosecution.

A 2013 CMED internal tribunal found a potential loss of US$2,7 million paid to First Oil on March 1 2013 for the delivery of three million litres of diesel which remain undelivered.

As a result, Zimbabwe has been ranked the most corrupt country in southern Africa and among the most corrupt in the world by global watchdog Transparency International, increasing the cost of doing business and investment risk.

The Auditor-General’s reports and media coverage suggest 22 ministries were found to have abused funds, flouted procurement procedures and governance rules in 2015 but no corrective action was taken, adding to a long list of institutions that are flagged by the comptroller and auditor general’s office each year, but no action is taken.

Transparency International ranked Zimbabwe 150 out of 168 countries included in the 2015 Corruption Perception Index (CPI) that was unveiled in January 2016.

Icsaz said only 11% of the enterprises submitted up-to-date financial reports for consideration.

Apart from 89% of the state-owned enterprises snubbing the process despite prior communication from Icsaz with assistance from the Finance ministry, the boards of most government entities were fairly poorly diversified in terms of age and skills while the majority of boards failed to meet regularly in line with best practice.

“About 60% of the boards of state-owned parastatals reviewed failed to meet regularly in line with corporate governance best practice, an improvement though from 40% reported in last year’s adjudication report,” said Icsaz in its report.

“Generally, 89% of state-owned enterprises failed to submit their 2015 annual reports for evaluation by the Institute. The panel of adjudicators observed that most state-owned enterprises have failed to produce full annual reports in 2015 and a majority of them have again failed to hold annual general meetings.”

The Icsaz Excellence in Corporate Governance Awards ranked companies on the Zimbabwe Stock Exchange and banking institutions. Adjudicators awarded top companies based on the extent of disclosures on corporate governance.

Analysts say, at best, government makes lukewarm remarks against graft in state enterprises and parastatals. At worst, damning voluminous reports of corruption within the public sector have gathered dust in the cabinets of officials.

Although the government has in recent times instituted a number of forensic audits that have opened cans of worms, no corrective measures have been taken.

Analysts say operations of state entities continue to lack transparency and accountability, prejudicing taxpayers in the process.

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