The announcement this week that Government is establishing a special committee to focus on revamping State-owned Enterprises (SOEs), especially the loss making ones, is a demonstration that authorities are prosecuting the reform agenda seriously.
A total of 43 out of 107 parastatals and SOEs have been identified for privatisation, restructuring or dissolution under the new dispensation’s reform agenda.
An inter-ministerial committee will be seized with this matter until the objective is achieved.
After years of under-performance, characterised by perennial financial bailouts which bled the fiscus, along with a multitude of other sins like over-staffing, it is imperative to either transform or disband the moribund SOEs.
The envisaged transformation should be anchored on sound corporate governance, transparency and financial discipline.
Implementation of reforms should have clear timelines with people accounting for missed targets.
Zimbabwe’s 107 SOEs and parastatals at their peak, used to contribute 40 percent of the Gross Domestic Product, but poor management, corruption and weak governance systems have seen them being run down with contribution to the economy plummeting to an estimated two percent.
In 2016 alone, about 38 of these units ran cumulative losses of US$270 million, indicating poor management, weak corporate governance and possible deep-seated corruption.
The Auditor-General noted in a report in 2017 that about 70 percent of State enterprises were technically insolvent after incurring huge losses over the years.
As part of interventions under Government’s reform agenda articulated in the Transitional Stabilisation Programme, Government is now seeking to overhaul the performance of State entities that have been a drag on the economy.
This will be partly achieved by mobilising private sector capital, technology and expertise to enhance efficiency and performance of critical SOEs in the delivery of goods and services, or simply getting rid of those that no longer serve any useful purpose, or selling off those that have non-critical functions, but are potentially viable.
Some SOEs that were carved out of the civil service in “commercialisation” attempts will return to Government departments under far stricter control of parent ministries.
Finance Minister Mthuli Ncube first unveiled the restructuring in 2018 saying it would improve efficiencies and reduce the SOEs’ reliance on Treasury. He clearly disliked budgeting to cover other people’s inefficiency or wrongdoing when there were many other calls on his limited funds, including better pay for civil servants.
Government now intends to partially privatise some of the companies through the engagement of strategic partners or listing them on the Zimbabwe Stock Exchange, with all its tight enforceable rules on financial transparency and audits, while others will be merged, fully privatised, or even liquidated.
The older generation will remember the years when the National Railways of Zimbabwe was a reliable transporter of people and commodities. It was the largest employer outside the Government.
It sold enough passenger tickets each year to give one to every person in Zimbabwe, moved the bulk of the freight, and made enough profit to fund its own new locomotives and rolling stock.
One could board a train in Mutare or Bulawayo at night at make it to a job interview in Harare at 8am the following day.
But with no meaningful capital investment for decades, NRZ has almost collapsed and needs new locomotives, wagons and an improved and expanded railway network.
Railway transport is cheaper compared to other modes and ensures the movement of bulk consignments. No country can quickly implement development projects without an efficient railway system.
The Zimbabwe Iron and Steel Company (Zisco) used to be the lifeblood of Redcliff and Kwekwe, employing thousands of people, supplying an essential input to a large swathe of Zimbabwean industry, and exporting iron and steel.
Several previous attempts to resuscitate Zisco under the old political dispensation stalled and it is time for the giant to reawaken. It will need huge investment, since the technology it was using when it died is obsolete.
It does not appear to us important whether we use private or State companies to produce steel. What is very important is to convert our iron ore, coking coal, chrome, nickel and other useful additives into a range of high quality steels that can underpin a revival of our engineering industries.
The then Cold Storage Commission (now Cold Storage Company) managed the beef industry efficiently, provided secure markets or cattle farmers, and supplied not just Zimbabwean butchers but made a useful addition to exports, even making profits in air delivery. Government has made the revival of CSC a top priority given its centrality in the beef and leather sectors. CSC used to generate US$45 million per annum, but is now burdened by a legacy debt of over $25 million.
Urban populations have increased significantly since independence because of massive rural-urban migration as people seek job opportunities in the major commercial and industrial centres.
An efficient public transport system is important to move the country’s workforce and this is what makes it necessary to continue the work that has at last started under the Second Republic to get Zupco back on the road, charging viable but rational fares, fair fares in effect, and give us all a decent public transport service. Covid-19 accelerated progress and this is one SOE that is actually getting better, although it has a long way to go.
Government plans to privatise diversified telecommunications firms TelOne and NetOne to provide serious competition to private players in one of the fastest growing sectors in the world. Regulation, rather than ownership, appears to offer a better route in a competitive world.
Cheaper and even better alternatives will ensure people have access to key telecommunications services. To this end, Government has established a technical committees for TelOne and NetOne to ensure the privatisation of the two entities is undertaken “as a single package as approved”.
Air Zimbabwe, which is also saddled by a huge legacy debt, also needs urgent attention, especially in the context of the growth of the key tourism industry. Ethiopian Airlines, an African and yet world renowned company, shows what is possible.
Minister Ncube, however, acknowledges the tough path ahead.
He says the agenda of the reforms is not merely privatisation, which is possible in some, but not all cases, but State enterprise reform, a marathon programme which Government will implement prudently.