President Emmerson Mnangagwa
PRESIDENT Emmerson Mnangagwa yesterday disclosed that government will unveil a programme of State enterprise reforms during the first quarter of next year.
In his state of the nation address, Mnangagwa said parastatals have undermined economic recovery through perennial dependence on the fiscus, with most of them failing to make meaningful contribution to the economy.
He said the firms were grappling with high overheads, inter-parastatal debts, mal-administration, under-capitalisation, corruption and lack of good corporate governance which had negatively impacted on their operations.
“Government has taken the bold decision to reform, commercialise or wind up some State enterprises and parastatals, which have been for a long time an albatross around the government’s neck owing to, inter alia, poor corporate governance, undercapitalisation, unsustainable salaries and allowances and excessive borrowing. A full programme of the reforms shall be unveiled during the first quarter of 2018,” said Mnangagwa.
“In the same vein, local authorities are expected to transform themselves into engines of economic growth and meaningfully contribute to improving the quality of life of our people.
“Government will insist on the return by local authorities to proper town planning practices and strict adherence to business and building by laws. The corrupt parcelling out of land to land barons and the construction of houses on undesignated areas and in a haphazard manner must stop.
“I exhort councils to ensure orderly settlement of people, provision of water and sanitation facilities together with other infrastructure required for decent habitation,” he said.
In 1980, Zimbabwe inherited about 20 parastatals. But the number has since increased to 107. Of this number, about 43 are commercial enterprises that operate on a cost-recovery or for profit basis.
Commercial entities include those in the energy, transport, communications and agricultural sectors, where they both provide essential public services and implement government policies.
Parastatals have over the years failed to make any meaningful contribution to the economy. They are grappling with high overheads, inter-parastatal debts, maladministration, undercapitalisation, corruption and lack of good corporate governance. These factors have negatively impacted on their operations.
Consequently, they have failed to contribute to Zimbabwe’s economic development.
Parastatals are currently contributing about 6,9 percent to gross domestic product, according to a study done by the World Bank and released this year.
The absence of effective oversight has allowed State enterprises to accumulate liabilities through extensive financial linkages and complex cross-debt, which intensify systemic fiscal risks.
Aggregate annual expenditures averaged US$3,5 billion during 2011 to 2015, according to the World Bank.
State enterprises, collectively, moved from close to the breakeven point in 2011 to reporting combined losses of just under US$340 million in 2015.
In general, the aggregate working capital position is precarious, the World Bank report said.
Twenty five of the 43 commercial State enterprises have become illiquid, with current liabilities exceeding current assets and seven are insolvent, according to the World Bank.
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