Govt to Centralise Control of State Firms

THE Government will adopt a centralised ownership model for State-owned enterprises (SOEs) to eliminate inconsistencies in governance and ministerial interferences, Finance and Economic Development Minister Professor Mthuli Ncube said yesterday.

Zimbabwe has a decentralised SEPs ownership model, where the Government shareholder function is spread across different line ministries.

The ownership model has been associated with a number of challenges, including inconsistencies in governance practices, ministerial interferences, delays and or reversals of Government approved SEPs reforms due to vested interests within some line ministries, and generally weak and passive oversight function, among others.

Under the centralised ownership model, a single government institution carries out the role as shareholder in all companies controlled by the State.

Prof Ncube said the new model had already been approved by the Cabinet and would be implemented next year.

“In line with international best practices, Government took a deliberate decision to review the SEPs ownership model,” said Prof Ncube in the 2021 National Budget statement presented yesterday.

“Following approval by Cabinet, implementation of the new ownership model will also be one of the central SOEs reforms to be implemented in the 2021 fiscal year.”

Prof Ncube said the current model had been related to the poor performance of the SOEs sector not only in Zimbabwe, but the world over, wherever this model had been followed.

As such, many countries in the region, such as South Africa, Mozambique, and more recently, Namibia and Zambia; as well as those on the continent and beyond, such as China, Malaysia, France, have migrated from the decentralised ownership model in favour of centralised or dual ownership models.

“Quite often we read in the media about ministers interfering (in the affairs of SOEs),” said a renowned corporate governance expert who declined to be named for professional reasons.

“It had become a norm that whenever a new minister comes in or when there is a Cabinet reshuffle, one should also expect changes in the board or management.

“This was very disruptive and affected smooth operations of SOEs and this move by the Government is very welcome and should be immediately put into action.”

The minister said the State Enterprises and Parastatal Reform Agenda remained one of the key policy thrusts for Government.

The other supportive 2021 SOEs policy priorities that would be implemented simultaneously with the transformation of the SEPs ownership model, would entail the privatisation of 11 SEPs, six subsidiaries of the Industrial Development Corporation of Zimbabwe and 17 Zimbabwe Mining Development Corporation (ZMDC) subsidiaries.

All boards for ZESA Holdings subsidiaries will be dissolved to allow Zimbabwe Power Company to engage strategic partners for power generation projects.

Silo Foods would be recapitalised through strategic partnership.

The Government will implement recommendations by the performance reviews for 10 SEPs to come up with effective turnaround strategy options.

The 10 SOEs identified for this review process include ZMDC, Zimbabwe National Road Authority, the Scientific and Industrial Research and Development Centre, Allied Timbers, the Infrastructure Development Bank of Zimbabwe, Agribank, Small and Medium Enterprises Development, the Zimbabwe Electricity Distribution Company, ZimParks, Environmental Management Agency, Forestry Commission and Zimbabwe Revenue Authority.

There would be the development and implementation of reform strategies for Printflow, Traffic Safety Council of Zimbabwe, Kingstones, CMED, National Oil Infrastructure Company, the National Pharmaceutical Company and the Agricultural and Rural Development Authority.

With regards to TelOne and NetOne, Government is working with the World Bank Group on an appropriate privatisation roadmap.

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