eBusiness Weekly
Business Writer
Government say is at various stages of implementing the reforms of State-owned firms in a bid to transform them into vibrant enterprises, according to Finance and Economic Development Minister Mthuli Ncube.
In an update on progress made so far on reforms that entail various options including liquidation, full or partial privatisation, transformation of some entities to assume regulatory roles, merging and de-merging, and departmentalisation into line ministries, Mthuli said the objective remained to improve public service delivery.
The reforms also entail the centralisation of the ownership model for SOEs to eliminate inconsistencies in governance and ministerial interferences. Zimbabwe has a decentralised SOEs ownership model, where the Government shareholder function is spread across different line ministries. The ownership model has been associated with several challenges, including inconsistencies in governance practices, ministerial interferences, delays and or reversals of Government approved state enterprises reforms due to vested interests within some line ministries, and generally weak and passive oversight function, among others.
On the National Railways of Zimbabwe (NRZ), Minister Ncube said given the huge capital requirements to fully capitalise the entity, the turnaround of the NRZ would be undertaken in two phases, namely, the short-term and medium to long term.
In the short term, resource mobilisation strategies will target acquisition of 9 new locomotives, 315 wagons and five diesel multiple units at a cost of US$ 115 million.
These interventions would enable the NRZ to immediately uplift an additional cargo of two million tonnes per annum and an extra 5,4 million passengers per year.
Discussions were at an advanced stage with the International Finance Corporation (IFC), under the World Bank Group, with a view of engaging them as the transactional adviser for NetOne and TelOne. To date, the IFC has concluded the market assessment study for the privatization of the two telecomms firms which will identify and describe in detail some of the critical success factors which would lead to the realisation of a partial-privatisation transaction.
In April 2021, a transactional advisor of Petrotrade and Genesis Energy were engaged and has since completed thedue diligence that will inform the merger of the firms. The implementation of the merger now awaits approvals of the respective boards.
After successful de-merger from the Grain Marketing Board, Silo Foods Industries is now seeking financial injection for procurement of new plant and equipment for milling and processing, rehabilitation of existing equipment, refurbishment of factory buildings, purchase of distribution fleet. The recapitalisation of Silo Foods Industries will proceed by way of equity participation by the private sector through the disposal of 26 percent stake. While 74 percent is earmarked for acquisition by a local Government owned strategic investor.
The Government is in the process of coming up with optimal capital raising strategies for Allied Timbers and has engaged IOS Partners, an international transactional advisory firm to advise on the proposed capital raising strategies.
The review by IOS has been completed and Government is considering the capital raising options.
POSB appointed KPMG Advisory Services as the transactional advisor whose findings will inform the privatisation strategy for the bank. The Government is reviewing the submitted proposed privatisation strategy by the advisor,” said Minister Ncube.
In almost every sector where they operate, SOEs are facing several challenges including lack of capital, low productivity, and unsustainable debt. Services have deteriorated substantially and even the welfare of their employees is often in jeopardy.
The majority of these entities are technically insolvent, according to several reports by the Auditor General, presenting an actual or potential drain on the fiscus, owing to weak corporate governance practices and ineffective governance control mechanisms.
Fiscal risks had also arisen from debts assumption by the Government, re-capitalization requests, and called-up guarantees of public enterprises and local authorities.
Economics professor Gift Mugano recently said despite the SOEs being a burden to the fiscus, their underperformance was badly choking the entire economy. “They are economic burdens, not only because they are sucking public resources; taxpayers’ money, but also undermining sectors that rely on their services,” Prof Mugano said.
“For example, the underperformance of the National Railway of Zimbabwe is undermining the viability of the manufacturing and mining sectors. “Companies in these sectors are incurring huge transportation costs and this negatively impacts the viability of these firms. And you can also imagine how many jobs these entities would be creating assuming SOEs are contributing 40 percent to the GDP (like before).”
Chief director (communications) in the Ministry of Finance and Economic Development Mphambela said there had been little movement in the reforms of the SOEs as the process of contracting financial advisors was slowed largely due to changes in the currency regime and delays related to COVID-19.
