HomeOpinion & AnalysisColumnistsComment: Foreign partners must be approved on basis of due diligence

Comment: Foreign partners must be approved on basis of due diligence

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Zimbabwe has been determined to change the fortunes of government firms, many of them notorious for shoddy service, perennial financial loss, gross mismanagement and corruption.

The government recently approved a new programme to restructure, commercialise and privatise at least 10 companies and had received interest from foreign investors.

These public entities have the potential to contribute over 40% to our GDP, and they can contribute to market capitalisation as well as employment.

Zimbabwe’s unemployment rate is above 80%.

It is a fact that over the years, our parastatals have been a drain on the fiscus. Hence the announcement by government that it is offloading 53% of its stake in Ziscosteel is news coming at the right time.

Zisco is one struggling firm government has been battling to revive through its privatisation drive.

The others include the Grain Marketing Board, National Railways of Zimbabwe, fixed phone company TelOne, mobile phone operator NetOne, AgriBank, the National Oil Company of Zimbabwe, power utility Zesa, Air Zimbabwe and beef processor Cold Storage Company.

Identifying a strategic partner for state firms has been a mammoth task for government.

But Wednesday, government announced it had given India’s Essar Group the right to buy 53% of Ziscosteel in the second round of bidding that ended in September, but is still in talks to finalise the terms and conditions of the transaction.

We become livid when a whole government, led by three principals, zeroes in on a partner without carrying out a proper due diligence like what happened when they selected the diamond mining firms in Chiadzwa.

We are still smarting from reports of theft, fraud and money-laundering surrounding Canadile Miners, one of the three firms with rights to mine diamonds in Chiadzwa.

How on earth can dubious characters with no proven track record in mining diamonds end up partnering with the government?

Was there a due diligence on the said firms whose directors are now condemned as thieves? Who conducted the due diligence on these people?

Whether it is true or false, the point is it is essential and imperative to have a due diligence on any company seeking to partner government.

Curiously, government opened a fresh expression of interest for Zisco after rejecting bids by India’s Jindal Steel and Power and ArcelorMittal South Africa, arguing it was not comfortable with a multinational partner for the ailing steel maker – the largest in the country.

The rationale – Industry and Commerce minister Welshman Ncube says “such big companies might be too powerful to control and could kill competition”.

We are dismayed at the dereliction of duty by government – failing to carry out a proper due diligence on a supposed partner.

The world knows that Zanu PF is desperate to raise money for its conference, otherwise why would government merrily announce a partner before finalising the terms and conditions of the transaction?

We wonder why government (like in the diamond case) always chooses to partner with companies without a sound balance sheet. We do not know much about Essar Group yet. But the way government has handled its affairs in the past puts us in an uneasy position.

Efforts to revive Ziscosteel have been on the cards for almost 20 years. In 2004 another Indian firm Global Steel Holdings pulled the plug on a $400 million deal under unclear circumstances.

After that Zisco survived on selling scrap metal. Another attempt was aborted after government refused bids by ArcellorMittal and Jindal.

Why a government, by three political parties, would be led up the garden path by a few people masquerading as genuine investors is anybody’s guess.

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