New State Enterprises, Parastatals law hailed

THE State Enterprises and Parastatals (SEPs) sector is posed for better fortunes following the gazetting of the Public Entities Corporate Governance Act that will address a host of maladministration and viability issues that had restricted profitability for over two decades.

The legislation signed into law by President Emmerson Mnangagwa last Friday will prioritize competence, accountability and transparency in the manner state enterprises are run as the new administration is expediting the economic reform agenda.

A plethora of interventions have been put in place to mitigate rampant corruption that has seen the sector that once ceded 15 percent of total revenue to fiscus at its peak in the early 90s now reduced to a perennial fiscal liability.

The Auditor General’s findings released on a yearly basis have continued to expose gross incompetence by some board members and chief executives in SEPs who continue to bleed state resources at the expense of enhanced performance.

To avert rampant corruption and incompetence, board members will now serve for a maximum of eight years, while no member will sit on more than two boards.

This will also entail declaration of assets and business interests exceeding $ 100 000 to the office of President and Cabinet and failure to comply will result in disqualification from working as a senior officer or to any board of a public entity.

A corporate Governance unit, a department in the Office of President and Cabinet is being established to monitor and evaluate the performance of public entities and their leadership with its head holding the same rank as the permanent secretary.

The latest development will place limits on the terms of office of chief executives and board members of state enterprises and parastatals while also binding them to performance contracts.

In order to bring back business viability, appointments will be entirely based on merit and failure to draw up a strategic plan or non-compliance will lead to dismissal for board members.

In line with Government policy to rationalize expenditure, permanent secretaries are no longer required to sit on boards of public entities and remuneration capped for appointees.

“The development is well placed to stir the SEPs sector forward as it now has a legal base to whip management of these entities in line.

“What is more important is to look at the business model for most of these enterprises which makes the idea for performance based contracts noble,” economic analyst Kipson Gundani told Post Business.

“State entities should now stop acting like social entities but adopt a commercial, viable approach,” he added.

He emphasised the significance of a well structured and viable SEPs sector as crucial in sustaining its operations which was not only a major relief to the fiscus but also a critical contributor to the tax basket at a time corporate and income tax was thinning.

Government has continuously taken up debt burdens and issued debt guarantees for most SEPs with the latest case study being the taking over of a US$ 144 million NRZ legacy debt, which had stalled progress on the US$ 400 million recapitalization deal with the Diaspora Infrastructure Development Group and Transnet.

Industrialists have welcomed the reformation of the SEPs sector as crucial in industrial linkages to spur the economy forward.