HomeHeadlinesBigwigs ‘blocking’ parastatal reforms

Bigwigs ‘blocking’ parastatal reforms

TINASHE MAKICHI/SYDNEY KAWADZA
CONCERTED efforts by Treasury to push for key parastatal reform and privatisation of the loss-making entities have been frustrated by some hawkish cabinet ministers and senior bureaucrats, who have for many years enjoyed the feeding trough, the Zimbabwe Independent can report.

In 2018, Finance and Economic Development minister Mthuli Ncube announced far-reaching changes on the ownership of parastatals as he proposed to wean-off the State-Owned Enterprises (SOEs) from government control.

Most parastatals have been making losses amid disturbing reports of endemic corruption with the government lethargic in combating financial leakages. Ultimately, the SOEs have been bleeding the fiscus.

Ncube initially set a December 2020 deadline to implement parastatal reforms but to date nothing has happened.

Most parastatals were established by the Rhodesian government to avert the adverse effects of sanctions imposed after the rebel government declared independence from Britain unilaterally in 1965. But the Zanu PF government has since run-down the parastatals.

Zimbabwe has over 107 parastatals and SOEs with a potential to contribute over 40% of the country’s gross domestic product.

In private briefings, high-level government officials told the Independent this week that a group of hardliners was intentionally blocking proposed reforms to maintain the status quo.

Line ministers have imperial powers over parastatals as they appoint or dissolve board members. There have been reports that some ministers exploit the parastatals to milk resources for self-aggrandisement and for political expediency through projects in some constituencies.

Government officials said several inter-ministerial meetings were organised to craft ways of implementing the reforms but some ministers, top officials and managers snubbed them.

The Office of the President and Cabinet (OPC), which is expected to oversee the implementation of parastatal reforms, is moving at a snail’s pace.

“Various meetings were planned to map a way forward but there has been resistance by the government and some political bigwigs who have been benefiting from the parastatals,” a government official said this week.

The push to wean-off SOEs from line ministries came amid concerns by investors over what they term “too much power” given to ministers on the running of parastatals.

The unbridled power of ministers has caused the cancellation of various investment deals whenever there is a change of a minister, which often results in the firing of both the boards and management.

Officials said ministers — supported by senior civil servants who include permanent secretaries, chief directors, and other managers — who block the parastatal reforms are those who run parastatals that are doing well under their purview.

The Zimbabwe Mining Development Corporation (ZMDC), Zimbabwe Consolidated Diamond Company (ZCDC), Cold Storage Company (CSC), Chemplex Corporation and the National Railways of Zimbabwe (NRZ) are some of the state-owned enterprises at the centre of the controversy.

“Efforts by Mthuli (Ncube) to remove parastatals from line ministries are being fought from all angles. Remember parastatals are good capital sources for these government officials considering that perks for ministers are not enough to fund their Hollywood lifestyles,” a government official said.

“There have been efforts to put this move into motion but the amount of resistance is massive. Douglas Munatsi (the late Zimbabwe Investment and Development Agency CEO) tried to advance this but to no avail.”

The source further indicated that a number of ministers and senior government officials were baying for Ncube’s blood over the initiative that would whittle down their influence in the running of parastatals.

“There are also serious divisions on how this initiative must be carried out with a certain section of ministers and government bureaucrats employing dirty tactics to block this move,” the source added.

The Independent is reliably informed that there has been a misunderstanding around the control of parastatals, such as, Chemplex Corporation, which also has mining interests under it.

Another ongoing battle is between the Industry and Commerce ministry and the Ministry of Agriculture over the control of CSC.

The state enterprise is currently under the Agriculture ministry.

Most SOEs have, over the years, become cash cows for senior government officials, which have funded their foreign trips.

Head of State Enterprise Reform and Corporate Governance Unit Willard Manungo said he was in a meeting and did not respond to questions sent to him.

Ncube was also not available for comment.

Corporate governance expert Gift Mugano called for the expeditious implementation of SOEs and parastatals reform arguing the entities were being used as conduits for corruption and political expediency.

“Ncube made proposals that we should have centralisation of SOEs and parastatals and the Office of the President and Cabinet was supposed to be providing an institutional framework,” he said.

“When you look at the rampant corruption and abuse of funds at the SOEs and parastatals, you need to question why it is happening. Why are the boards not being fired by the line ministers?

“Normally, if there is corruption noted in a parastatal or SOE, you expect the board to fire the chief executive or top management. If the board doesn’t fire the chief executive you expect the minister to fire the whole board. But how many boards have been fired by the ministers?” Mugano queried.

However, another corporate governance expert, Tsitsi Mutasa said the issue had nothing to do with politics but was purely an architectural issue where the current ownership model of parastatals was not working.

“The reality is that the current ownership model does not work as it is characterised by too much interference from line ministers who treat the parastatals as their personal companies.

“The undue interference in the day-to-day running of SOEs reduces the board’s role to window dressing as boards lack both authority and power over the affairs of the entity,” Mutasa said.

“The current model allows ministers unfettered power to override board decisions sometimes to the detriment of the entities.

“The introduction of the OPC-Corporate Governance Unit (CGU), rather than improving parastatals’ performance, has only added a further layer of confusion,” she added.

Mutasa said the issue of the ownership model has been discussed and to politicise the issue will be a shame as the focus should be on how to reform SOEs.

“It is a good thing that the Ministry of Finance and Economic Development is looking at the best way to run them and the model that is being proposed is the one being used in other jurisdictions,” she said.

“If properly implemented a new ownership model should help in terms of accountability, sustainability, and ultimately service delivery.”

Mutasa also queried the existing situation where regulatory bodies also fall under the same ministry with parastatals they regulate, a situation with great potential for conflict of interest as well as an unfair competitive market environment.

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