Chinamasa pumps $200 million into ailing parastatals

Zimbabwe's cash-strapped government has pumped nearly $200 million into the country's struggling parastatals.

This comes as calls have been getting louder for the cash-strapped country to restructure its loss-making parastatals to make them attractive for foreign investment and recapitalisation.

Market experts said the opportunity cost of missing revenue from government enterprises was being felt across the country following the neglect of essential capital projects.

Finance minister Patrick Chinamasa, however, believes public institutions are essential vehicles through which government influences economic activities.

"However, low capitalisation of such institutions has been negatively affecting the operations of some of these critical institutions. In view of this, government has extended a total of $196,878 million towards recapitalisation of public institutions," he said.

Zimbabwe has 78 parastatals, which at full capacity can contribute 40 percent towards the country's Gross Domestic Product (GDP), but the majority of them are bleeding the Treasury by drawing salaries and recapitalisation funds.

But despite sustained pressure from various stakeholders to privatise or dispose of the loss-making parastatals government has over the years continued to protect water and electricity provision arguing that they are strategic sectors.

Critics say most of Zimbabwe's parastatals have been ruined by poorly qualified managers, many aligned to Zanu-PF, who were put in charge of the government-controlled firms because of their political connections rather than technical expertise.

Since the early 1990's, parastatals have continued to be dogged by challenges that include undercapitalisation, obsolete infrastructure, low capacity utilisation, lack of working capital caused by low debt collection, outstanding long-term loans, non-compliance, lack of good corporate governance and the existence of substantial inter-parastatal debts.

Recent reports by Auditor-General Mildred Chiri indicate that State-owned enterprises and government departments operate in the red, continuously bleeding the fiscus and in most instances failing to adequately provide the service for which they were set up for.

Government once came up with strategies to restructure and dispose shareholding in some State-owned enterprises, but has failed to implement these measures over the years.

Once, several entities were earmarked for restructuring or privatisation and these included the National Railways of Zimbabwe, Zesa Holdings, Air Zimbabwe, Agriculture Development Bank of Zimbabwe, the Grain Marketing Board, Zimbabwe Grain Bag, NetOne and TelOne.

African Development Bank (AfDB) director general, Tonia Kandiero, said there was need for parastatals reform before foreign investors can inject their hard-earned cash.

Kandiero added that no profound change can take place in the absence of effective institutions with good corporate structure, accountability, culture and mechanisms to track performance.

"State-owned enterprises are key to delivering services and enabling citizens and private capital to realise their potentials," she said.