Zimbabwe has 92 State Owned Enterprises (SOEs) or parastatals as they are otherwise known. That’s a huge number of entities under the government’s control and the state has decided to go the privatization route.
The Zimbabwean government has realised it might not be best placed or equipped to run these entities and is therefore inviting bids to buy stakes in some SOEs. The government wants to dilute its shareholding in some of the SEOs and also to totally disinvest from some.
The Deputy Minister of Finance and Economic Planning, Terence Mukupe said,
There is a lot more that is going on, we are diluting our shareholding in those entities and our shareholding might go to zero percent in some entities.
We all are aware that most of the SOEs have been making losses for years. The struggles of the National Railways of Zimbabwe (NRZ) and Air Zimbabwe (Air Zim) have been covered extensively. Audits showed that 38 SOEs surveyed made losses totaling $270 million in 2016.
There were 93 SOEs in 2016 and the audits carried out showed that 70% of them were technically insolvent or illiquid.
The government is now selling off its shareholding in Air Zim, ZESA, NRZ, ZB Holdings, Agribank and Zimre Holdings. Government says more entities will be added to the list.
This move where a government sells of its shareholding in SOEs is called privatization, the opposite scenario where a government acquires control of an entity is called nationalisation. This privatization was first mentioned in the budget by Finance Minister Chinamasa and is being administrated by the State Enterprises Restructuring Agency.
Is privatization the solution?
Privatisation is often lauded as the answer to failing SEOs but it is not the only way to revive struggling parastatals. In Zimbabwe’s case I think it cannot be argued against privatizing some of the parastatals, some would want all of them to be privatized but that would not be wise.
In emerging countries like Zimbabwe, the government has to ensure a balance in social equity and enterprise efficiency is achieved. The role of the government is to promote development and also to step in to provide some services which the private sector may be reluctant to cover for whatever reasons, e.g high capital requirements. Where the private sector is capable and willing to cover, the government is better off privatizing.
Much like now, Zimbabwe vigorously privatized in the 1990s and that did not go well. The privatization led to mass retrenchments. Local authorities that outsourced or commercialized some services saw reduction in service quality as well as increases in prices.
In Russia, the privatization program led to increased economic inequality, as assets were stolen and agglomerated among a select few. In Mexico the privatized entities abused their market power and the country was worse off after the privatization.
That does not mean privatization won’t work this time. It is generally thought that in Zimbabwe in the 1990s, privatization failed because the socio-economic, institutional and legal framework then was not appropriate to support it.
Success of privatization programs is dependent on the proper regulatory structure and strong institutions. Success will not come simply because the government disinvests in certain entities.
It has been done in many countries successfully leading to productive efficiency, profitability, sales, operating efficiency and increases in capital investment. The success stories outnumber the failures and Zimbabwe should have learned from the 1990s failures to get it right this time.
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26 comments
So Lacoste will now sell the assets for nothing to themselves, using shelf companies from abroad! Inga!. Kutonga Kwaro Garwe!
ZESA, Zinwa I would not advise them to be privatised cz they form a neccessary service that keeps the country running and cant be left to private profit making entities. ( ubless if they privatise specific functions) Maybe get ZESA some financial health and trust themn it can be ru by issuing up bonds etc like eskom does.
Plus lets be honest this seems like a situation where someone can buy a company for like 10 million that is worth 1billion and immediately get an investo to pump in 100 million with no effort.
So we really need to quantify the worth of each of them’s assets and make sure that the liabilities have government security then they should discount them. in other owrds a real transparent and through audit has to be done before anything has even been started
I totally agree with you. You can not put ZESA and ZINWA in private hands.
Governments should only setup regulatory bodies which monitor and set rules..this will not only reduce corruption, abuse of state funds etc but it can improve reliability..well thats what I have learnt here in Australia.. The government can also own some shares as another revenue gateway….imagine if air Zim was privatised kkk it might still be running kwete kungonzi you wake in the morning and that bogus government body ( forgot its name) swallows up their debts iyo iri team one
Good move to sell of seo’s
but they must not sell zesa and hwange. they should just allow private producers and open up the industry
nrz should be partly privatized
the rest should go
I hope They sell Netone to MTN…..econet needs competition & bring that Nigerian company glo as well
Zita renyu kuseri kwekumberi
Will government also rid these institutions of corruption . Will the share holders names be published and held accountable to the ordinary person in the street . The norm in Zimbabwe is reduce staff , increase prices and give themselves fancy cars and upmarket houses . There has to be stops and balances ,one to be competitive and efficient
I agree with you GC.
It’s only fair to note that the source of the “original article(s)” was misguided. Our erstwhile deputy minister saw a shared image of an old (15+ years) privatisation advert on social media and decided to “spin” it. He later on (yesterday, 03-Jan-2018) recanted and stated on his Facebook profile that the privatisation plans at present are as announced in the 2018 Budget statement.
Makarwe evanhu
Zita renyu kumberi mkoma
Gud move, privatise…
privatetisation wow a lot of heads will role rightfully so but now the everyday government employee would have no job security an people will be sacked for wrong and right reasons
DO NOT SELL ZESA, HWANGE AND NRZ Other Seos can be sold like csc to farmers. Sell them or allow other individuals to come in to bring in competition. Issue those licences. Without selling CSC, NRZ, ZESA and Hwange. It will be huge mistake on the government’s part.
P.S. nothing to do with this article but no going back to the Common Wealth and no borrowing from the IMF and World Bank.
What is the Shona name for a Female Crocodile?
Zimbabwe needs to debate the merits of privatisation, commercialization, public listings, and hybrid approaches tried elsewhere around the world. Privatisation in the 1980a left a bad legacy of corruption, unequal development, poor service delivery, and oligarchy detrimental to sustainable development. Zimbabwe has an opportunity to test a new path using lessons from the failure of others.
Well the value of each entity has to be noted before privatisation and not all of them should be privatized, lets leave out Zesa n Zinwa… However this is a good move because the government is in no position to run these entities. Lastly the government has to monitor and fight corruption
When will Zimbabweans ever learn from their own experience? The downturn of the Zimbabwe economy started with ESAP in 1991. Before that we had a very big state-owned sector, for the most part with efficient management. We must ask, who is going to benefit from the sell-off? What we need is efficient management, and, in light of the current crisis, where necessary 50/50 deals with foreign companies. But privatization of ZESA? This is pure plunder.
Exactly and what’s the rush for
I think this govt should just focus on finishing RGM’s term and leave the very big issues until an elected government takes over
Who is in a position to buy these parastatals certainly not the ordinary man so these deals will be for the same people who have plundered the country
I agree with you, Ian Beddowes. We need to get efficient management in to clean up corruption and get these entities running properly. It is a very bad idea to allow our parastatals to be sold off to foreigners. It happened with the railways in Britain. Now British people are paying exorbitant train fares that subsidise railways and fares in Europe.
Our parastatals used to be extremely well run and they were profitable. As I see it there are several factors that could make a difference.
1 Efficient, honest and commercially minded management and staff who will work hard for the success of the parastatal.
2 Clean up corruption – and that includes stopping employees from running their personal businesses on company time/using company resources. It used to be that civil servants and parastatal employees were not allowed to have their own businesses or even to have other jobs, e.g. waitressing, without special permission.
3 Cut waste and inefficiency.
4 Maintain, reuse / repurpose existing assets.
5 Ban exorbitant salaries/ contracts. Allow moderate basic salaries with bonuses based on productivity. For example Triodos Bank pays its top executives a maximum of 9 times what its lowest paid employee earns.
6 Enable / encourage the local production of inputs.
7 Reinstate the commercial farmers so that Zimbabwe can grow its own food instead of importing. They are among the most efficient in the world. Displaced Chinhoyi/ Karoi farmers turned Zambia from a food importing nation to a food exporting nation in 18 months.
8 Subsidise basic necessities e.g. mealie meal, brown bread, milk, school uniforms. This will help to keep the cost of living down, so wages will not need to be so high. This will make us more competitive in export markets. The important thing is not how much you earn but how much you can buy with it.
9 Make the prisons productive again. They used to provide fruit, vegetables and meat to feed themselves and hospitals and other establishments. This provides inmates with skills they can use after their release as well as dramatically reducing food costs in government establishments. Audit regularly.
10 Bring in stringent financial oversight and control. Audit. Audit. Audit
11 Transparency is essential.
Everything we import means exporting jobs and money to other countries. The more we can produce in Zimbabwe and the more we can supply our own needs and produce enough to export, the better off we will be because this will provide jobs for increasing numbers of our people. If we sell our parastatals to foreigners all those profits will be exported. If we privatise our parastatals we will not be able to control the prices they charge and the profits will make rich people even richer. Encourage our people to come home from the diaspora to help getting the country back on its feet or import skilled workers/management on short term contracts with the provision that they can become residents/citizens after a certain period of time. Where necessary, these contracts need to be renewed well before they expire so that the technicians/managers can plan their lives. We lost superb people in the late 1990s/2000s because their contracts were not renewed soon enough.
We need to strive towards a Zimbabwe where no one starves and no one is obscenely rich at the expense of others. We need a well run country with justice for all. We need transparency in all public office. Nobody should be paid huge salaries, e.g. mayors, while the entities for which they are responsible are in poor condition. No senior politicians/ local government/ civil servants should receive their pay if the people they control have not been paid. The people at the bottom are much closer to starvation/ homelessness and need their pay.
Parastatals were originally designed to provide more efficient methods of providing services/ finding markets than individual businesses could do. Parastatals were to benefit the whole nation – but they have to work on trust e.g. if farmers borrow money from a parastatal to plant crops, they must repay that loan by delivering their crops to that parastatal. Soon after Independence some farmers were borrowing money from the parastatal and then selling their crops privately (not repaying their loan). This meant there was no money to advance to farmers for the following crop and the whole system broke down. Greed doesn’t work in the long term.
When will Zimbabweans ever learn from their own experience? The downturn of the Zimbabwe economy started with ESAP in 1991. Before that we had a very big state-owned sector, for the most part with efficient management. We must ask, who is going to benefit from the sell-off? What we need is efficient management, and, in light of the current crisis, where necessary 50/50 deals with foreign companies. But privatization of ZESA? This is pure plunder.
Exactly hatidi kungwarisirwa what’s the rush for we don’t want to wake and the Chinese own everything
Government will sell everything till there is nothing left. In whatever case, the proceeds will disappear, be it by legit or illegit consumption. City councils have been doing the same thing, selling every inch of land they can lay their hands on.
Where is the opposition when needed
Why are they silent
If privatisation is to occur let the locals be the given preference to snap up the shares. Otherwise all this is talk to gain the people’s confidence. it will take months before these things can be done practically. In the meantime this hot air is aimed at gaining a foothold on electoral victory, nothing more