Ministers and their permanent secretaries will have their wings clipped when the Public Entities Corporate Governance Bill becomes law, amid indications they will no longer hire and fire parastatal boards without involving the Office of the President and Cabinet.
This will put to rest the current norm where newly appointed ministers shuffle the leadership of State companies based on unconfirmed claims, replacing them with friends and relatives, a move that negatively impact on continuity and performance of the firms. With the impending arrangement, the President would have to approve any board and/or executive appointments that a line ministry would have proposed.
Also, State Enterprises and Parastatal (SEP) boards and their executives would no longer be sacked willy-nilly unless in clear cases of gross incompetence and misconduct, said Secretary for the Corporate Governance Unit in the Office of the President and Cabinet (OPC), Ambassador Stuart Comberbach last week.
“In appointing or terminating the appointment of any member of the board of a public entity, the line ministry concerned must notify the Office of the President of such intention, and shall not act on such intention without the prior endorsement of His Excellency the President.
“The Bill prohibits the dismissal of board members for anything other than misconduct, failure to comply with their conditions of service or with their governance or performance contracts,” said Ambassador Comberbach. On September 7, President Mugabe called for the “burying” of some SEPs that are increasingly becoming a drain on the fiscus.
In 1980, Zimbabwe had 20 SEPs but the number has spiralled to 107 in recent years, with over 90 of them operating at a loss largely attributed to unmitigated mismanagement. SEPs’ contribution to GDP has plunged from 16,4 percent in 2009 to 12 percent in 2014.
Similarly, employment levels in SEPs have slid from a peak of 18 percent in 2011 (44 000 people) to 36 171 in 2015, according to statistics prepared by the World Bank. Despite a decline in performance and consequently, the sacking of junior staffers, total expenditure in SEPs spiked by 5,9 percent per year during the period 2011 to 2014 while revenues grew by a measly 2,9 percent.
Personnel costs, which account for one-fifth of SEP spending, rose by 5,5 percent “even as employment declined”, according to the Zimbabwe Economic Update – a report prepared by the World Bank that was released in June. The mismatch between performance and remuneration, particularly for senior management, has sprung Government into action to arrest the rot.
In terms of remuneration, the Public Entities Corporate Governance Bill empowers the minister (responsible for the administration of the Act) together with the Minister of Finance and the line minister, to fix maximum amounts payable to board members of public entities. Currently, some SEPs fix their own board fees and are meeting excessively so that they cream off the firms they superintend.
To increase performance of SEPs, CEOs would be appointed for maximum terms of five years, renewable only once, and would sign performance contracts. Said Ambassador Comberbach: “They (CEOs) will be appointed after a selection process involving public advertisements, interviews and approval by the line ministry, with the consent of His Excellency the President.”
The tenure of CEOs would also be reviewed annually by their boards to ensure satisfactory performance. Line ministries’ responsibility would be to more effectively monitor, supervise and oversee the management operations of public entities to ensure strict compliance by them with the provisions of the looming Act, but without infringing on the autonomy of public entities.