HomeAnalysisCeteris Paribus: SOE privatisation: #Howfar?

Ceteris Paribus: SOE privatisation: #Howfar?

THE Zimbabwe Coalition on Debt and Development (Zimcodd), a socio-economic justice coalition, last year launched a campaign codenamed #Howfar, a move meant to put the government to task over its political and socio-economic promises — made under the “Second Republic”. An aspect of relevance is that of the privatisation of parastatals — much touted by Finance minister Professor Mthuli Ncube upon assuming captaincy of Treasury.

Finance minister Mthuli Ncube

With the “new dispensation”, Treasury had emphatically vowed to dispose of all or part of 35 state-owned enterprises (SOEs) by December 2020. Over four years have passed since the “second republic”, and the plans have not amounted to much.

Stats show at one point, Zimbabwe’s SOEs contributed approximately 40% to Zimbabwe’s Gross Domestic Product, a figure which has since plummeted to less than 10% over the past decade. Rather, state enterprises have heavily bled the fiscus, as they are marred by operational inefficiencies, corruption, incompetence, government interference and nepotism with most of them swimming in perennial losses.

In fact, over the past two decades, SOEs have cost the taxpayer billions of dollars, necessitating a pressing need to privatise them. A 2017 Auditor General’s report exposed that 70% of SOEs were technically insolvent after collectively incurring an aggregate U$$270 million in losses in one year. At that rate, the SOEs have probably cost Zimbabwe over US$3 billion since 2009 — enough to clear the central bank’s blocked funds.

An example is national flag carrier Air Zimbabwe (AirZim) which has operated perennial losses over the past half a decade. Official records show that its four-year cumulative losses came in at over US$137 million between 2014-18.

In late 2018, Finance minister Professor Mthuli Ncube announced that 11 SOEs, six IDC subsidiaries and 17 ZMDC subsidiaries would be privatised under the government’s public enterprises reform framework for 2018-20 while some would be liquidated, merged, or departmentalised.

However, many of the transactions have not materialised as SOEs could not afford advisory fees; compounded by an apparent lack of investor support. As attestation, the proposed sale of stakes in TelOne and NetOne, Zupco, and Petrotrade failed to take off as the firms could not afford transaction fees.

Furthermore, in the government’s five-year economic blueprint, the National Development Strategy paper (2021-25), Treasury, indicated plans to privatise SOEs:

“In the interim, government will expedite SOEs reforms targeting improved governance, provision of services at viable prices, full or partial privatisation, demergers, outright disposals and amalgamations of some SOEs into existing government departments.”

There had been an indication of POSB’s possible listing whose processes were expected to have been completed by the end of 2021. We are now mid-2022, nothing has materialised yet.

“The partial privatisation process, which started in 2018 has significantly progressed with the consultants who were appointed to provide transaction advisory services having submitted the initial due diligence and valuation reports to the technical committee for consideration by the shareholders. It is anticipated that the private placement process and/or the listing of the bank on the Zimbabwe Stock Exchange will be finalised before the end of the year,” said Ndlovu the POSB chairman last year.

Zimbabwe Stock Exchange

The privatisation rhetoric has been in the corridors of Zimbabwean economics for the past two decades with no results, due to a lack of political commitment compounded by strong opposition from entrenched vested interests.

Agribank’s rebranding to AFC Holdings in 2021 remains incomplete without any private investors taking up a stake in the financial institution.  The remedy is not new to Zimbabwe, CBZ Holdings, Rainbow Tourism Group, Zimpapers, Dairibord etcetera are successful stories of parastatals that were privatised (fully and partially), whose contribution to the economy is noteworthy.

  • Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.net

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