Call for le­gal frame­work of State-owned en­ter­prises

Chronicle (Zimbabwe) - - Business - Busi­ness Reporter

ZIM­BABWE should de­velop a le­gal frame­work, which clar­i­fies broader prin­ci­ples of good gov­er­nance of State-owned en­ter­prises, a World Bank se­nior of­fi­cial said yes­ter­day.

Shar­ing ex­pe­ri­ences on State En­ter­prises and Paras­tatals re­forms in South Africa at a work­shop on In­ter­na­tional Ex­pe­ri­ence on State-Owned En­ter­prises and Paras­tatals Own­er­ship Struc­tures and Gov­er­nance Re­forms, WB lead pub­lic spe­cial­ist Mr Gent van der Linde said Govern­ment should de­velop a le­gal frame­work, which clar­i­fies broader prin­ci­ples of good gov­er­nance.

SEPs re­forms in South Africa be­gan in 1994 and Mr van der Linde was then work­ing in the pub­lic ser­vice.

“We re­vis­ited ba­sic prin­ci­ples of cor­po­rate gov­er­nance of these en­ti­ties.

“We took a lead from good cor­po­rate gov­er­nance prin­ci­ples func­tion­ing in the pri­vate sec­tor.

“We looked at all en­ablers that we needed for good gov­er­nance and we looked at how these en­ablers were func­tion­ing. This in­cluded con­trol and ap­point­ment of the boards.

“We iden­ti­fied ar­eas, which were weak and strength­ened them. For ex­am­ple, on the is­sue of ac­count­abil­ity, we said if the line min­istry is re­spon­si­ble for the ap­point­ment of the board, the min­is­ter should be ac­count­able.

“So if it (the board) does not per­form, it is the re­spon­si­bil­ity of the min­is­ter to act. If he can’t, he should be held ac­count­able.

“Zim­babwe needs to iden­tify pol­icy mat­ters, which needs to be looked into as it goes through re­forms of SEPs. Con­trols and ac­count­abil­ity on min­is­ters, boards and an agency which looks at the re­struc­tur­ing of the SEPs should be clar­i­fied in the le­gal frame­work.”

Mr van der Linde said the frame­work should also out­line bor­row­ing pow­ers of the boards and guide­lines on re­port­ing fi­nan­cial re­sults.

The Govern­ment is in­ten­si­fy­ing its fo­cus on ad­dress­ing cor­po­rate gov­er­nance de­fi­cien­cies within the SEPs, and a num­ber of ini­tia­tives have al­ready been taken.

These in­clude Govern­ment’s 2010 Cor­po­rate Gov­er­nance Frame­work, Prin­ci­ples of Cor­po­rate Gov­er­nance of 2014, and the Zim­babwe Na­tional Code of Cor­po­rate Gov­er­nance of 2015.

To give le­gal ef­fect, Govern­ment is fi­nal­is­ing the Pub­lic Sec­tor Cor­po­rate Gov­er­nance Bill.

As part of the ac­cel­er­ated im­ple­men­ta­tion of Zim-As­set, Govern­ment is ad­vanc­ing State en­ter­prises re­form to elim­i­nate their high depen­dency on the fis­cus, which among oth­ers is crowd­ing out cap­i­tal re­quire­ments for pri­vate sec­tor and com­mu­nity de­vel­op­ment.

Out of 97 SEPs, Govern­ment ini­tially pri­ori­tised 10 State en­ter­prises, which if suc­cess­fully turned around will bring re­lief on the fis­cus and sup­port eco­nomic growth and de­vel­op­ment.

How­ever, given the ur­gency of coun­ter­ing risks from State en­ter­prises, Govern­ment has iden­ti­fied ad­di­tional 10 SEPs for turn­around. Dif­fer­ent fund­ing ar­range­ments are un­der con­sid­er­a­tion and a roadmap for their trans­for­ma­tion is be­ing de­vel­oped.

State en­ter­prises are crit­i­cal en­ablers of the econ­omy, crit­i­cal in value chain and they pro­mote com­pet­i­tive­ness.

Fur­ther they fill in the void of es­sen­tial ser­vice and or prod­ucts by ven­tur­ing in ter­ri­to­ries too risky or unat­trac­tive to in­vestors yet es­sen­tial. How­ever, the ma­jor­ity of them are un­der­per­form­ing, largely due to mis­man­age­ment, cor­rup­tion, un-com­pet­i­tive­ness and huge debts.

For years now, the re­forms of State en­ter­prise has al­ways been on the agenda of Govern­ment with an ul­ti­mate goal of turn­ing them around to prof­itabil­ity.

Eco­nomic an­a­lysts have said the Govern­ment should deal with the debt is­sue to re­store vi­a­bil­ity of pub­lic cor­po­ra­tion.

Lat­est fig­ures show that the to­tal ex­ter­nal debt of pub­lic en­ter­prises that has been guar­an­teed by Govern­ment reached $2 bil­lion at the end of June and all the guar­an­tees have been called up.

This has con­trib­uted to an in­crease of the Govern­ment ar­rears by $1,8 bil­lion or 25 per­cent of to­tal ex­ter­nal debt, fur­ther wors­en­ing the coun­try’s low credit wor­thi­ness.

Dr John Man­gudya

Newspapers in English

Newspapers from Zimbabwe

© PressReader. All rights reserved.