VICTOR BHOROMA
The downfall of Hwange Colliery Company (HCC) which went into administration on October 31, 2018 should be a wakeup call to the government and the Zimbabwean parliament. This is not the first state enterprise to go down in the same manner. Zimbabwe’s economic history is littered with how yesteryear colossal enterprises such as CSC, NRZ, ZBC, GMB, ZIMGLASS, ZISCO steel, Zimasco, ZUPCO, Air Zimbabwe, Chemplex Corporation, Allied Timbers and Willowvale Mazda Motor Industries (WMMI) collapsed over time due to poor corporate governance and mismanagement. Privatisation for State Entities and Parastatals (SEPs) has been a podium policy for a long time while the government religiously funds loss making entities. In 2017, government pumped over $500 million in bailing out struggling enterprises. From January to August 2018 alone, more than $212 million was channelled to SEPs for recapitalisation. Since July 2017, cabinet approved the takeover of over $1 billion worth of debts for struggling enterprises such as Air Zimbabwe, ZISCO Steel, NRZ and Civil Aviation Authority of Zimbabwe (CAAZ) among others as a strategy to clear off their balance sheets and lure investors.
An evaluation of government funding into commercial enterprises clearly shows that lack of funding is not the core problem bedevilling most of these enterprises, regardless of how much millions are pumped in them. Corporate governance ethos have long been forgotten while politicking has taken over to the detriment of the tax payer and economic development. Board members are hired and fired without any due diligence on performance track record. It is actually common for failed or corruption implicated Board members to be dismissed at one entity and be recycled at the other without any investigation.
Senior managers award themselves obscene salaries, allowances and loans while lower level employees go for months without basic salaries. Board members also pocket Board siting allowances without siting or making any contribution to the enterprise’s strategy. Contracts are parceled to cronies or companies owned by ministers, board members and senior management. Auditors are hired for compliance reasons but their audit reports are suppressed as long as they implicate those at the top or threaten future business for the auditors. There are no budgets or performance targets at some enterprises to hold management accountable to. As such insolvent commercial enterprises survive on government handouts and consistently burden the tax payer with millions of debts under the facade that they are serving their mandates.
The treasury department has given a few identified SEPs up to nine months to privatise and revamp their operations but the government and parliament need to step in to stop the rot occurring in entirely all SEPs. Zimbabwe’s Public Entities Corporate Governance Act passed in May 2018 needs to be amended to make it mandatory for state entities to publish their half year and full year audited results. These results should be used to tie board fees and management salaries to organisational performance (performance based remuneration) as opposed to benchmarking management perks to private companies that perform well. The results should also provide for asset declaration by the board of directors and senior management when they are released after every 6 months.
Additionally, parliament should have the authority to play its oversight role effectively without political influence. Board appointments for regulatory authorities such as ZERA, ZTA, CAAZ, RBZ, SAZ, POTRAZ, ZIMRA, TIMB, MMCZ, BAZ, Procurement Authority and NSSA (not exhaustive) should be vetted by one independent body approved by parliament such as the Institute of Directors Zimbabwe (IoDZ) . These authorities are important to the economy in moderating the investment climate through licensing new players, setting standards, fighting corruption and monitoring players in that industry. Their operations cannot be left to political appointees at the expense of service delivery to citizens and overall economic development. State enterprises continue to be run down through mismanagement and looted in broad day light. If binding reforms that bring accountability and prosecution of those found on the wrong side of the law are not instituted, the rot will continue. More state entities will go down the Hwange route while government and parliament drag their feet.
Victor Bhoroma is business analyst with expertise in strategic marketing and business management aspects. He is a marketer by profession and holds an MBA from the University of Zimbabwe (UZ). For feedback, e-mail him onvbhoroma@gmail.com or Skype: victor.bhoroma1.
