New State En­ter­prises, Paras­tatals law hailed

The Manica Post - - Business News - Kudzanai Gerede Busi­ness Cor­re­spon­dent

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.

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