MANY view it as not only ironic, but shocking why the country’s loss-making State owned enterprises and parastatals afford to pay hefty salaries to executives who have apparently failed to turn around the entities.
Experts contend that the poor state of the entities have largely retarded economic development.
Currently saddled with a huge inter-parastatal debt of $1 billion, many executives running such institutions blame central government for not fully supporting the institutions for the dire positions they are in.
Below is a report compiled by State Enterprises minister Gorden Moyo highlighting issues affecting state owned enterprises.
In the year under review, the Ministry pursued its main task, which was to champion reforms in State enterprises and parastatals (SEPs).
Some of the key reforms included good corporate governance, the restructuring of selected parastatals, the crafting of an inter- parastatal debt strategy and the introduction of results based management in State enterprises. These reforms or agenda for reform and restructuring come against a background of a plethora of challenges that are administrative, economic and political in nature.
In 2012, the ministry and the State Enterprises Restructuring Agency worked towards State enterprises reform and restructuring in spite of a constrained budget. The budget for the ministry for 2012 was a drop in the ocean if compared to other ministries.
Serious challenges were faced by the ministry, especially when reports from parastatals were not presented on time, or in some cases not presented at all. The ministry compiled two reports on corporate governance compliance and plans for restructuring or privatisation of some SEPs.
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The business ethics in some of these SEPs leaves a lot to be desired especially where most of the board members and even chief executive officers lack corporate governance ethics.
There are questions also on transparency in government-owned mining companies.
Corporate governance reforms in State enterprises and parastatals have been pursued with a view to creating a good moral climate. Board secretaries are key links in the proper functioning of boards and also in facilitating timely AGMs. Almost 100 board secretaries were trained in 2012 alone.
Also, the ministry prepared a Corporate Governance Compliance Report as of June 30, 2012, and hopefully the next one will be published by end of December.
Most of our stakeholders now recognise the ministry as a torchbearer for good corporate governance in Zimbabwe.
The ministry introduced written performance agreements between the line ministries who superintend over SEPs and their respective boards. This is meant to enhance a new business culture in SEPs where there are clear targets and deliverables that people work towards. Similar agreements have already been drawn up for chief executive officers of SEPs who will be placed on performance contracts that comply with the results-based management system.
This practice, which is already in all government ministries, had not yet been extended to SEPs.
It is our sincere belief that the ministry helped curb the bleeding of SEPs through bloated salaries for executives. High remuneration, often without justification, means that SEPs have to budget more for salaries, allowances and wages at the expense of operations.
It was shocking that some parastatals without ministerial approvals were paying their CEOs as much as $20 000 at a time the same companies were reeling in debt and underperformance.
Following the study of remuneration levels of the public service, local authorities, informal sector incomes and regional levels, the Ministry of State Enterprises proposed reasonable salary adjustments. Based on the August 30, 2012, Corporate Governance Returns, three AGMs have been held this year.
It shows that some SEPs are taking the guidelines of the Corporate Governance Framework (CGF) seriously and are focusing their business model towards meeting the expectations of their stakeholders.
Some like TelOne, NRZ and ZPC have had their boards properly constituted following our new guidelines and the same is awaited from Potraz, Zimpost, Traffic Safety Council of Zimbabwe and Zimbabwe Family Planning Council, just to give examples.
There has been some improvement in the submission of financial statements. Of the 30 SEPs that submitted their Corporate Governance Returns as at June 30 2012, 17 had audited financial statements for 2011;
12 SEPs had audited financial statements for 2010. There has been notable restructuring progress on Agribank, GMB, Air Zimbabwe Holdings (Pvt) Ltd, ZPC, ARDA Chisumbanje Project and Zimbabwe Grain Bag though the restructuring progress has been slower than anticipated.
The adoption and launch of the Restructuring Manual in 2012 has been a significant step in the work of the ministry in 2012.
It is a cause of concern that the speed of restructuring process has been hindered by resistance to change and the fear of losing power by those who perhaps benefited from lack of transparency. There are also clear turf wars where some parastatals and ministries choose not to co-operate fully in strategic national projects creating embarrassing situations like Ziscosteel case.
The fact that the Corporate Governance and Restructuring Manuals have not been codified has given some officials the opportunity not to comply as they cannot be legally sanctioned.
The ministry has no power or means to speed up the drafting of the SEPs Management Bill since that falls within the legal drafting division of the Attorney-General’s Office.
The first draft is yet to be produced though 24 months have gone by since Cabinet directed the good office to work on the draft. The Bill will, among other matters, codify the CGF.
Progress has been made towards the promulgation of the SERA Bill. The legal framework will ensure a standard, co-ordinated, efficient, transparent and credible restructuring process that will help to address some of the perennial challenges faced in the restructuring programme.
A number of weaknesses/gaps in the SEPs regulatory environment in Zimbabwe were identified in 2012.
These included in some cases: A fragmented approach to regulation; lack of independence of regulators; absence of regulators in some sectors; multiple regulation; mixing of ownership and regulatory functions; and regulators playing a dual role of being a regulator and a service provider at the same time.
This scenario results in the absence of a level playing field for both public and private sector players in the provision of services, thereby compromising consumers’ rights to fairly priced and quality services and products.
Some of the SEPs have clear mandates set out in the enabling Acts of Parliament. It is, therefore, not possible for them to carry out other commercial activities outside their mandates.
This hinders restructuring as the Acts must first be repealed. A case in point is POSB which cannot apply for a commercial bank licence as it is a savings bank according to the Act. This also applies to other parastatals like the Grain Marketing Board. Regulatory reform is being pursued on a case by case basis. An example is the setting up of the Zimbabwe Energy Regulatory Agency (Zera) in 2012 which has been set up as part of the reforms in the energy sector. The ministry is guided by the draft regulatory framework it has developed.
The ministry came up with an inter-parastatal debt strategy. Inter-parastatal debt is now over $1billion when government departments and local authorities are included.
Inter-parastatal debt has been a major challenge to most SEPs and this has led to cash flow problems, inability to attract investors and access to lines of credit due to unattractive balance sheets. In this regard, it is important to note that government has started to engage SEPs to implement some of the mechanisms for clearing inter-parastatal arrears through government paying an estimated $124 466 249 to SEPs who, in turn, will pay their statutory obligations to Zimra.
The Ministry of State Enterprises and Parastatals will pursue the continued restructuring of parastatals in 2013. Agribank will be privatised in the first half of the year as the financial and legal advisors for this transaction have already been appointed. Zimre and Zimbabwe Power Corporation will be the next candidates for restructuring as the paperwork has been done and is being forwarded to Cabinet for final approval.
The flagship programme of corporate governance will be stepped up higher with a training calendar having been drawn up already for 2013.
It is the responsibility of the line ministries to ensure that boards are in place at SEPs and the Ministry of State Enterprises and Parastatals will seek the support of the Office of the Prime Minister to ensure that boards are appointed at all SEPs.
The start of a new financial year presents an opportunity to have a fresh start so as to ensure that performance contracts are in place at all SEPs.
