Govt orders ministries to immediately craft turnaround strategies
GOVERNMENT has ordered all ministries to immediately craft turnaround strategies in line with its new thrust to retain viable State Enterprises and Parastatals (SEPs) and dissolve those that are inefficient, Chief Secretary to the Office of the President and Cabinet Dr Misheck Sibanda said yesterday.
The move follows President Mugabe’s call when he met captains of industry and commerce recently that some parastatals have become an albatross to the fiscus, continuously requesting for finance to fund their unprofitable operations.
In his keynote address during the Public and Private Dialogue on the Public Entities Corporate Governance Bill in Harare yesterday, Dr Sibanda said Cabinet directed him - as head of the public service - to ensure that SEPs were restructured and operated viably.
“I have since written a circular to all ministries asking all of you to provide to Cabinet your submissions on turnaround programmes of your parastatals as well as whether the parastatals are doing what they were supposed to do, and if not, coming up with suggestions for the way forward.
“So this circular, if you have not received it, you will find it on your desks because it was a challenge to all of us,” said Dr Sibanda.
He said the Ministry of Finance, through the Accountant General’s department, the State Enterprises Restructuring Agency (Sera) and the Corporate Governance Unit in the Office of the President, would assist ministries in crafting their turnaround plans before submitting to the specific Cabinet committee dealing with parastatal reforms.
Government is determined to transform the operations of SEPs, as part of a holistic agenda to turn around the economy in line with Zim-Asset and the Ten Point Plan enunciated by President Mugabe in 2015.
Zimbabwe has 107 SEPs, and about 85 are recording losses annually, with performance figures for 2015 showing a worse position compared to two years earlier.
Managers at SEPs are drawing huge salaries and perks while the companies they are presiding over are performing badly for a sustained period of time.
In the 1990s, SEPs were contributing 40 percent to Gross Domestic Product, but due to asset stripping and underperformance, the contribution has come down to about 11 percent from year 2000. Six SEPs are currently insolvent.
Dr Sibanda said the role of SEPs and the contribution they were expected to make towards economic growth were “considerable”.
“Without effective performance and efficient service delivery by the sector, most especially the majority utility providers and commercial enterprises, the ambitious goals and development objectives under Zim-Asset may remain beyond reach, certainly within the expected timeframes.
“For some time now, Government has been seized with the need for reforming and restructuring the SEP sector, and, in parallel, the need for considerable tightening-up with regard to compliance or, more accurately, non-compliance by much of this sector with the basic tenets of sound corporate governance.
“It is deeply regrettable that previous efforts by Government to address these issues have been largely ignored by both the SEPs themselves and, of equal concern, by line ministries whose constitutional responsibility includes effective supervision and oversight of the State entities which fall under their political and administrative mandates,” said Dr Sibanda.
He added that Cabinet decisions to restructure some key and strategic SEPs had taken “excessively” long to be implemented while progress reports had either been erratically produced or not at all.
About 22 SEPs have never produced financial results since 2009 while others were last audited in 2010, directly contravening good corporate governance principles.
Dr Sibanda said the 2010 Corporate Governance Framework for SEPs had been regarded as a “document of suggestions”, instead of a set of rules to be religiously followed by SEP managers.
SEP managers have also deliberately flouted the 2014 Cabinet directive on levels of remuneration.
The directive came after Premier Services Medical Aid Society (PSMAS) salary scandal.
PSMAS chief executive officer Dr Cuthbert Dube, was reportedly earning $230 000 with other head honchos also netting humongous salaries at a time when service providers were turning away the medical aid society’s members because of non-payment.
This saw Government cobbling a remuneration guide, which ordered parastatal managers to take salaries of $6 000 and below, depending on the viability of their entities, but are reportedly still earning up to $30 000.
Dr Sibanda said while bosses took obnoxious salaries; financial and operational performance, corporate governance compliance and general service delivery within SPEs continued at “less than satisfactory levels or have even deteriorated further”.
He said if anyone doubted Government’s seriousness to “definitively” address the SEPs underperformance levels, “such doubt should have been completely eradicated by the very targeted and specific” remarks made on the issue by President Mugabe when he met private sector players at State House last week.
Private sector players complained about the mediocre performance of many SEPs, especially those mandated with supplying enabling utilities such as electricity, water, telecommunications and transportation in a consistent, efficient and cost-effective manner.
The erratic and high cost of services continue to make locally produced goods uncompetitive on the export market, effectively reversing the gains made by Statutory Instrument 64 of 2016. Minister of Policy Coordination and Socio-Economic Ventures in the Office of the President Simon Khaya Moyo, who officially opened the workshop, said SEP bosses have “crossed the line” in terms of poor corporate governance structures. He said failure would no longer be tolerated at parastatals. “Either improve on performance and service delivery to the people of Zimbabwe, or face the consequences,” said Minister Moyo.