Taurai Mangudhla —
African Export–Import Bank (Afreximbank) executive vice-president Denys Denya has called for part-privatisation of all State-owned entities as one of the means to improve corporate governance, accountability and profitability in all Government-owned entities.
This comes as Zimbabwe’s State-owned enterprises have become a feeding trough for corrupt officials costing the economy billions of dollars through gross mismanagement particularly in the form of tender scams. Just last year alone, 38 out of 93 State-owned enterprises (SOEs) audited last year incurred a combined $270 million loss as weak corporate governance practices and ineffective control mechanisms took their toll.
Giving advice on how Zimbabwe can improve its public owned enterprises at an Institute of Chartered Secretaries and Administrators In Zimbabwe (Icsaz) Excellence in Corporate Governance Awards 2017 dinner in the capital on Wednesday, Denya said state entities needed to be remodeled to become more profit oriented and more accountable.
“Hence perhaps the first step in reforming sovereign entities and promoting the culture of good governance more generally is to make sure that accountability goes hand-in-hand with sanctions as a deterrent (and) the second is to make sure that sovereign entities are run and managed as profit-making and not as acceptable loss-making institutions subject to lower corporate governance standards, with management evaluated yearly against agreed growth targets,” Denya said.
“Private investors could also be invited to the shareholding structure to forge a public-private partnership with the view to strengthening the culture of good corporate governance, with emphasis on Transparency, Independence and Accountability,” he added.
The Afreximbank executive vice-president said corporate governance is not exclusively a private sector matter, especially in region where governments continue to account for a sizable share of the economy.
“In line with most African countries, the private sector accounts for more than 40 percent of the Zimbabwean economy, suggesting promoting good corporate governance exclusively in the private sector is unlikely to result in sustainable economic development if only 60 percent of corporations are targeted in the best case scenario,” Denya said.
The Afreximbank executive vice-president said debate between public and private sector should no longer be approached from an ideological standpoint as done in 1980s during the implementation of Structural Adjustment Programmes. He also argued well-run public corporations are performing globally and gave examples of Ethiopian Airlines, Airbus and Lufthansa as corporates that are largely owned by governments but remain some of the best performing.
“In this regard, the challenges of weak governance, poor management and corruption which are plaguing African sovereign entities are not necessarily due to the fact that these entities are State-owned but perhaps largely attributed to weak corporate governance standards and accountability of management and governments in the absence of checks and balances which has given rise to excessive centralized power,” he said.
Denya said the Zimbabwean financial sector has seen its share of poor governance and over time the economic and social costs of those institutional failures have been significant to the whole economy.
“It can be argued that ultimately the cascade of bank failure and collapse of financial institutions set the Zimbabwean economy on a path to a long-term crisis and recession given the long lasting nature of the financial crisis.
In effect, the costs of what has been a rather long crisis, have been significant, not just for the government acting as the lender of last resort on behalf of all Zimbabwean taxpayers, but also for individuals and small depositors.”