Reforms that have been long in coming
IS ZIMBABWE not going back to the Esap era by privatising some State enterprises? Yes, in a way we are going back to Esap. However, it is important to note that Esap’s scope was broader than just privatisation of State enterprises. The main focus of Esap was in the area of trade liberalisation.
Through Esap, Government abolished quantitative controls, and reduced and harmonised tariffs and duties.
In addition, Government was expected to rationalise the fiscal situation through restoring revenues by widening the tax base, cutting social expenditures and strengthening the budgetary and financial management process with a view of reducing budget deficit to below five percent of GDP.
In the financial services sector, the thrust was to open up the market for competition, liberalise interest rates and foreign exchange.
Finally, Government was expected to undertake public enterprise reforms through the commercialisation and privatisation of public enterprises.
Here, we are revisiting one of the elements of Esap, which is privatisation and commercialisation of State-owned enterprises. However, for the avoidance of doubt and for reader’s interest, Zimbabwe never dumbed Esap in reality.
We continued with Esap up to present day. What we scrapped from our minds is just the phrase Esap.
Zimbabwe is largely a liberalised economy.
We have continued to open our economy under various trading platforms; that is, in Sadc, Comesa, and now under the African Continental Free Trade Area.
Our financial markets and goods markets are liberalised.
From the fiscal side, we are working with the IMF under a Staff Monitoring Programme in instituting fiscal reforms which, inter alia, seek to contain budget deficits in the region of one percent of GDP.
Moreso, we continued with doing business reforms under the rapid results initiative.
Over the years, Government had a snail’s pace in reforming State-owned enterprises, hence, their dismal performance which has seen their contribution to the GDP plummeting.
My observation is that President Emmerson Mnangagwa’s Government picked up energy to carry out the whole package of Esap as we seek to integrate ourselves with the rest of the world. This is the right thing to do. Are these reforms not going to increase cost of services? International experience has shown that if not handled very well, privatisation of State-owned enterprises can be catastrophic.
The Zambian government was heaped with praises when it began privatising state enterprises. However, the consequences of privatisation were severe and attracted worldwide attention to the extent that Harvard University economists went to Zambia to conduct a study that resulted in a book titled “How not to Privatise”.
In our case, judging by the list of enterprises to be privatised and commercialised and the strategies to be undertaken, it is clear that Government is treading carefully.
The best way to privatise and commercialise is to separate service-oriented enterprises from production ones and retain control of the service-oriented ones but still positioning them for efficient service delivery through restructuring and instituting efficient governance reforms.
For production-oriented enterprises, Government went for joint venture agreements and outright privatisation, which is perfect.
From this angle, it is clear that if this process continues in a well sequenced manner, it will not backfire. Consumers will actually receive services which are reliable and affordable.
What is clear is that State-owned enterprises are a missing link in our economic matrix.
Privatisation and commercialisation of State-owned enterprises is expected to increase the national cake, improvement in service delivery, with far-reaching multiplier effects across all sectors of the economy.
These multiplier effects can come in the form of reduction of cost of doing business as in the case of resurgence in parastatals like the National Railways of Zimbabwe and the Zimbabwe Electricity Supply Authority.
In the same vein, the resurgence of companies like the Zimbabwe Iron and Steel Company and the Cold Storage Company will contribute significantly to the country’s export basket and job creation.
From a fiscal sustainability angle, it is apparent that if we successfully privatise and commercialise our State-owned enterprises, Government will see transformation from the current state quo where State-owned enterprises draw funds from Treasury to a new order, where the Stateowned enterprises will contribute to the fiscus.
As I wrap up, the move to privatise and commercialise Stateowned enterprises is a good move for which we must applaud Government. Government must undertake this programme without delay. It must not one of those programmes which will not see light at the end of the day. ◆ Dr Mugano is an economic advisor and Registrar at Zimbabwe Ezekiel Guti University