CLOUDINE MATOLA
Government’s decision to expand the number of perennial loss-making State entities placed under the direct management of Mutapa Investment Fund as part of the administration’s efforts to turn them into profitable businesses, has been met with mixed reactions.
The majority of State-entities continue to hurt economic recovery through their enduring reliance on fiscus.
There are growing concerns that Mutapa Investment Fund, which changed its name from Sovereign Wealth Fund of Zimbabwe, could be used as a vehicle for plundering the nation’s assets have led to criticism of the fund.
It follows the law promulgated by President Emmerson Mnangagwa last year in September, which significantly altered the governance of the nation’s sovereign wealth fund.
The fund was freed from the Public Procurement and Disposal of Public Assets Act of the nation by the new law, which was passed under extraordinary Presidential Powers measures.
This means that the fund is no longer subject to drawn-out procurement processes when purchasing or disposing of assets.
It also eliminates the requirement for transparency when conducting procurement transactions.
The outgoing governor of the Reserve Bank of Zimbabwe, Dr John Mangudya (pictured) has since been appointed the new CEO of Mutapa Investment Fund effective May 1, 2024.
On the one hand, a number of economists voiced their unease and criticized President Mnangagwa for enacting the measures through decree.
In an interview this week, economists Prof Tony Hawkins expressed disquiet.
“It is well-known that the larger business units become the more difficult they are to manage. This is particularly the case when very diverse operations are lumped together in a single entity,” Professor Hawkins told Business Times.
He added: “The skills and especially the experience crucial for the efficient management of utilities like transport or energy businesses, let alone a central bank, are very different from managing a mining group covering very different products and scale operations.
“A sovereign wealth fund is designed to mobilise domestic savings and recycle them into national infrastructure and social projects. The choice of the leader who has presided over the collapse of the currency and the destruction of domestic savings and pensions, to mobilise savings boggles the mind.
“The authorities believe that tinkering with structures is the solution rather than appropriate economic policies at national and firm level. It’s an accident waiting to happen and where accidents are waiting to happen, they always do.
The Mutapa organisation originally designed to attract foreign and local investment and earn profits for reinvestment in the capital-starved national infrastructure and utilities is being converted into an opaque cross-subsidisation operation with minimal oversight by parliament or the auditor-general, among many.”
Economic analyst, Victor Boroma concurred saying: “Zimbabwe’ state entities and parastatals need governance reforms and good leadership. The Auditor General reports since 2015 have clear recommendations of what needs to be done, but there is no political will to address the rot.
“Mutapa is another state entity governed by the same statutes that govern the loss making and mismanaged state entities we already have. Actually, some public procurement procedures that ensure transparency and accountability have been removed on Mutapa. As such it is difficult to expect Mutapa to improve governance of SEPs.”
On the other hand, economist Eddie Cross believes that the Mutapa fund will produce the intended outcomes.
He claimed that the Mutapa Fund will enable such State- entities to engage in profitable trading.
“I think that’s one of the main purposes of the formation of the Mutapa Fund. Ethiopia has done this, Singapore did this very successfully. And what we’re doing is we’re moving state-owned enterprises with very substantial assets that are not performing into the fund.
“And as such, we hope that the fund will turn these organizations around and make them trading profitably. And this will then increase the value of their money,” Cross told Business Times.
Another economist, Dr Prosper Chitambara, concurred with Cross.
“Well, I think the coming in of the Mutapa Investment Fund could actually be an opportunity for us to reform and restructure our parastatals. I think for a long time, the issue of parasitical reform has been a major challenge,” Dr Chitambara said.
He added: “ We haven’t made as much progress as we would have expected. “So I think the Mutapa Investment Fund really is an opportunity for us to reform these entities so that at least they can begin to play a greater developmental role in the economy.”
Dr Chitambara also said, authorities should follow international best practices in terms of transparency and accountability.
“Yes, so it could actually enhance governance, but it’s important that we ensure there’s more transparency and accountability in terms of how the Mutapa Investment Fund itself is going to be managed and governed.
“I think we need to follow international good practice in terms of issues of transparency and accountability around the Sovereign Wealth Fund,” Dr Chitambara said.
Major State companies like the National Railways of Zimbabwe, Air Zimbabwe, ZESA Holding, Zimbabwe Power Company, Powertel, ZESA Enterprises, POSB, and NetOne are now owned by Mutapa Investment Fund.
The list of businesses now held by Mutapa Investment Fund also included a few more Reserve Bank of Zimbabwe subsidiaries: such as Homelink Finance, Fidelity Gold Refinery, Export Credit Guarantee Corporation of Zimbabwe, and Homelink Private Limited.
