HomeAnalysisParastatal reform crucial to recovery

Parastatal reform crucial to recovery

Respected economist Ashok Chakravarti, who is part of a team of advisors to President Emmerson Mnangagwa, has told the Zimbabwe Independent that the new government will, in the short-term, privatise all underperforming parastatals.

Zimind Comment

This signals an intensification of the economic reform agenda. Loss-making state-owned enterprises are a drain on the fiscus.

These companies used to contribute 40% to gross domestic product, a quantum which has dwindled alarmingly over the years.

We are now, however, sceptical after President Emmerson Mnangagwa yesterday appointed a deadwood cabinet which does not inspire confidence or raise hopes for reform and change.

Chakravarti, who advises the government on reforms meant to enhance the ease of doing business, said that only a few parastatals will be spared privatisation.

“Zimbabwe has 114 parastatals whose capital stock is at US$14 billion but 99% have been loss-making and relied on Treasury to keep afloat. What needs to be done is to privatise them and only leave a few, around five, which government has to have direct control,” he said.

“Government should have direct control of parastatals which deal with roads, mines and energy because these are key economic drivers.” This comes on the backdrop of reports by Auditor-General Mildred Chiri that parastatals have been incurring huge losses due to irregular practices and failure to follow standard operating procedures.

The case for privatisation has always been compelling. It makes good economic sense and might spur reform.

Every year, loss-making parastatals continue depleting the fiscus.

This must now stop because throwing taxpayers’ money down the drain is unconscionable. What valuable services are being rendered to the struggling economy by moribund state-owned entities such as the National Railways of Zimbabwe, Zupco and Air Zimbabwe?

The privatisation of wasteful enterprises is long overdue. Every year the government announces lofty plans to discard of state-owned enterprises, but no practical action is ever taken in that regard.

However, the government should guard against rushing headlong without thinking the matter through. For instance, the most strategic parastatals must not be sold off. We cannot end up with a situation where the average citizen fails to access crucial public utilities after important parastatals have been sold to profit-chasing investors.

The new President is well advised to decisively tackle corruption if his efforts at reforming the state enterprises is to bear fruit. Parastatals are a major component of the Zanu PF gravy train and its feeding trough.

However, we will not hold our breath—if his pick of ministers is anything to go by. It was underwhelming, to say the least. How do you recycle the same cast of oldguard ministers and still hope for great performance? Doing the same thing over and over again, yet expecting difference results is described as madness by some.

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