State Enterprises have accumulated debt, both local and external, of nearly $3 billion, prompting authorities to revoke provisions of the law that no State company borrows money without its sole approval. Financial indiscipline and poor corporate governance matters have been blamed for State companies’ poor show, in the process denting the performance of the entire economy given the crucial nature of the services they offer.
Zimbabwe has a total 107 parastatals spread across all sectors of the economy. While expectations are that they should contribute the bulk of the country’s gross domestic product, they are constantly making losses due to weak internal controls. In fact, Zimbabwe has not realised the true value of its parastatals since independence in 1980.
Documents in possession of Business Weekly which carries the split in external and local debt owed by State Enterprises as at September 30, 2017, show that the institutions owe $1.4 billion to both multilateral and bilateral creditors and $1,5 billion to domestic creditors. The figure are however set to rise as some of the companies are still to submit their true debt positions to the Ministry of Finance and Economic Development.
Under bilateral debt, the state firms owe the Paris Club $48 m and Non Paris Club $20 m as Debt Outstanding and Disbursed (DOD) and $733m and $20 m in arrears for the two clubs respectively.
Paris Club includes European countries such as Germany, Italy and France among others, while USA and Japan are also among the countries that have been traditional creditors for the state companies.
The document indicates that the non-Paris Club countries include Zimbabwe’s new friends from the BRICS countries that include China, India and Brazil that were also having challenges in recouping their money owed to parastatals.
The multilateral creditors in the documents include World Bank – $280m, Africa Development Bank – $80m, European Investment Bank – $150m all owed in arrears, while $67m was owed to undisclosed external funders.
“This is not an all-inclusive figure. As we speak, the public debt management officials are still in the process of collecting data on parastatals domestic debt not yet collected in the Government data base,” disclosed a source that cannot be named for professional reasons.
Sources say it is part of this debt that some parastatals have been lobbying the Government to assume so that they start on a fresh page as they battle to court some investors.
Finance and Economic Development Permanent Secretary Willard Manungo could not be reached on his phone for a comment yesterday as it went unanswered.
However, Cabinet has already approved the assumption of over $1 billion worth of debt that have been accumulated by some critical State Enterprises including Air Zimbabwe, Zisco Steel, National Railways of Zimbabwe, Civil Aviation Authority of Zimbabwe (Caaz) among others as part of accelerated efforts to make them attractive to potential suitors.
Government has been concerned over the performance of some parastatals, with some players calling for non-performers to be privatized as they a serious drain to the fiscus.
There are over 100 parastatals in Zimbabwe, some of which have been borrowing money “recklessly” knowing that Government would eventually intervene by taking over the debt.
Said the source: “There is a big challenge…you have a situation where some parastatals borrow money recklessly knowing that Government will eventually take over the debt. Surely, without mentioning names, there are other parastatals that are not supposed to be there at all. There is Government parastatals debt and parastatal to parastatal debt that also affect performance. These are some of the things that we need to be addressed as soon as possible.”
The way how the parastatals should manage their debt is well captured in the Public Debt Management Act, whose provisions, however, have been ignored by some parastatals’ heads.
The source says one of the provisions that is now being vigorously being enforced is Chapter 11 of the Debt Management Act part (4) that reads; “Subject to section 300 of the Constitution, the Minister shall have sole authority to borrow money on behalf of Government by concluding loan agreements, issuing Government securities, or entering into suppliers’ credit agreements and to issue Government guarantees, in Zimbabwe in both local and foreign currencies: provided that the minister may, if he or she is satisfied it is in the public interest to do so and in order to maintain the public debt at the sustainable levels, review or revoke any un-utilized authorizations.”