Parastatals bleed Zimbabwe’s coffers dry
Published: 26-OCT-04
The abysmal performance of Zimbabwe’s parastatals, many run by relatives of President Robert Mugabe, is pulling the country even deeper into the financial mire.
By Thabo Masemola
Zimbabwe’s government is spending money it does
not have on under-performing parastatals, thereby
adding to the country’s already unmanageable budget
deficit. Industry players and economists argue
that moves to save under-performing entities are unsustainable
and likely to further bloat the national debt. It is also likely to
put paid to any lingering prospects for foreign investment.
Of Zimbabwe’s Z$1,2 trillion domestic debt, 60% is owed by
parastatals. If they were listed companies, analysts would label
them “dogs”. But instead of euthenasing these perennial losers,
the Reserve Bank of Zimbabwe (RBZ) has set up a concessionary
loan facility to lend them money: US$25bn to the Agricultural
and Rural Development Authority, $20bn to the
National
Railways of Zimbabwe (NRZ), $10bn for Zupco, and $7,5bn
each to Air Zimbabwe and Zimbabwe Broadcasting Holdings. It
also regularly supplies the National Oil Company of Zimbabwe
with foreign currency to finance fuel exports.
None of the companies is likely to pay back the money. Some
are untouchable because they are being run by the president’s
relatives. Of the eight or so parastatals, only one, Wankie Colliery,
operates profitably.
The performance of Wankie, a coal mining company listed
on the Zimbabwe, Johannesburg and London Stock exchanges
in which the government holds 40% shareholding, is the only
bright spot among the mediocrity of state owned companies. In
the half year to June, the company made an operating profit of
$25bn compared to $921m the previous year.
Others, such as the Zimbabwe Iron and Steel Company
(Ziscosteel), Zimbabwe Electricity Supply Authority (Zesa) and
meat processor the Cold Storage Company, are in
desperate
need of recapitalisation. The RBZ has given $20bn to Zesa and
will increase it to $50bn by the end of the year after finding that
the company was technically bankrupt.
The company underwent a restructuring exercise that created
five companies, creating huge overheads for new management.
While the subsidiary companies have put in place boards of
directors, the holding company has been running without one,
with an executive chairman, Dr Sydney Gata, in charge. Dr
Gata is President Mugabe’s brother-in-law.
In an effort to improve accountability, the RBZ asked all
parastatals in need of support to produce audited accounts and
credible turnaround plans. Only four of them met the deadline
for the end of August. Zesa, Zimbabwe Broadcasting Holdings,
Tel One, Zimpost, Industrial Development Corporation,
Civil Aviation Authority of Zimbabwe, Road Motor Services,
Air Zimbabwe and National Railways of Zimbabwe have since
submitted their accounts. Two of
them, Air Zimbabwe and the
NRZ, were found to have inflated their balance sheets.
In NRZ’s case, Ministry of Transport permanent secretary
Karikoga Kaseke said its $10bn monthly wage bill was higher
than its turnover and the parastatal has failed to pay its workers
on time for much of the year. Some of the companies, such as
the National Social Security Authority, a government pension
agency to which all employees have to contribute, have been
operating on an unapproved budget for five years.
Plans to dispose of the Cold Storage Company, NRZ and the
Posts and Telecommunications Corporation have failed due to
huge debts that have been accrued over the years by the three
companies.
Some of the companies that have been successfully privatised
include Dairibord Zimbabwe Limited, the Jewel Bank, Zimbabwe
Reinsurance Company, Rainbow Tourism Group, the Cotton
Company of Zimbabwe, CAPS Holdings Limited, Zimchem
Refineries and Munyati Mining
Limited.
To allow the parastatals to move forward, government would
have to take over the debts of some of them. It has already
retired debts of $12bn for TelOne and Net One to pave the way
for an ultimately unsuccessful attempt to privatise them. It also
took over a debt of $3bn for CSC in an attempt to commercialise
the company earlier this year.
However, after the domestic debt doubled from $600bn in
December last year, government suspended debt underwriting
for parastatals to meet its budgetary targets.
The acting Minister of Finance and Economic Development,
Dr Herbert Murerwa, said government will no longer guarantee
loans for unpaid debts incurred by the utilities to encourage selfsufficiency
and that it will avoid large quasi-fiscal obligations
such as debt takeover, price subsidies and loan guarantees.
He said access to commercial bank credit for parastatals
would now be based on acceptable business
practices and production of externally
audited
accounts and a viable pricing system.
But the move appears to have caught some
of them off guard and some, like Zimbabwe
Broadcasting Holdings and Ziscosteel, have applied
to the State to take over their debts before
commercialisation.
Reserve Bank governor Dr Gideon Gono
says there is need to bring sanity to the government-
owned companies because of the continued
dependence on the fiscus.
He said: “Specifically, the parastatal sector
should evolve into contract systems for engagement
of top management, where each contract
is renewable upon satisfactory performance
with remuneration being performance related.”
The central bank has made all its senior
management team sign five-year contracts,
which are renewable upon good performance.
Dr Gono added: “For meaningful investment
to flow into the country, particularly in the strategic
parastatal community it is imperative that
as Zimbabweans we rid ourselves of the gross
mentality of
entitlement where office bearers
resist implementation of prudent turnaround
strategies clinging to the past with no sound
financial management norms.”
The RBZ has insisted on quarterly reports of
progress towards implementation of turnaround
plans and that the parastatals should
publish their accounts every half year. Whether
this will have any effect remains to be seen.
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