eBusiness Weekly
Business Weekly Last Word
Zimbabwe’s State Enterprises and parastatals have generally had a bad time in recent decades with most being a near bottomless pit for taxpayer’s money, or folding because they failed, or simply being run in a sloppy and inefficient way, or having boards and management that can only be described as corrupt.
Part of the problem, and a major part, was that no one seemed to care. A first-class manager and a tenth-rate manager were rewarded the same way. Cronyism was endemic and neither supervisory boards or the management were set high standards and compelled to adhere to these.
This was not always the case, and even today it is unfair to make universal generalisations. The National Railways of Zimbabwe, the inheritor of a number of creatively financed private companies that were amalgamated and then nationalised in colonial times is a good case. It was, for a long time, the second largest employer after the Government itself, generated its own capital and had a reputation as an efficient, tightly managed entity that could move the bulk of Zimbabwe’s imports and exports and much of the intercity trade and passenger traffic.
Things started going wrong in the 1990s and in the 21st century it has largely been an irrelevant factor on the transport stage. Yet it is still needed. Bad decisions, zero effective oversight and a management that simply existed, rather than being held to account, were all symptoms and causes of the near collapse.
Various solutions were imposed. One, converting many parastatals into private companies totally owned by the Government, looked promising on paper yet do not pan out in practice, largely because the “commercialised” parastatals continued operating as before. The change from an entity governed by an Act of Parliament to a company governed as a private company under the Company’s Act might even have cut oversight, since Parliament was no longer primarily responsible for ensuring that the entity performed.
So, to start with the basics, we now have the Public Entities Corporate Governance Act being implemented to govern how State Enterprises and Parastatals are run. This is an essential first step, to make sure the system is in place. What is also necessary is to make sure that the Act is fully implemented.
When we look at the need for a system to be in place as a first step we need look no further than ourselves, Zimbabwe Newspapers (1980) Limited. The State, through the Mass Media Trust acquired 55 percent of the company, but 45 percent remained in private hands and, critically for governance, the company remained listed on the Zimbabwe Stock Exchange.
Now when it comes to governance and accounting rules the ZSE is top drawer and listed companies have a lot of rules to follow and reporting timelines to keep and failure is rewarded with suspension and then delisting. Rules include separation of board and management, following the latest international accounting standards and ensuring a detailed external audit by a reputable firm.
No one says Zimpapers has been run perfectly in the last 38 years. There have been lapses, sometimes serious lapses. But Zimpapers was able to overcome these relatively quickly simply because the governance and accounting standards were in place and mistakes were discovered quickly. Corrupt managers were arrested or replaced; questionable decisions were publically debated at shareholder meetings. Basically the system worked and any attempt to change the system was shot down. Exceptions were banned.
This is how the practical application of the new Act must be done. If, with experience, there is a perceived need for change of system, then Parliament has to be approached to debate and make these changes. Unilateral exceptions cannot be allowed through
This is particularly important with the unfortunate near juxtaposition of events. We have the announcement of the rigid enforcement of the new Act, and a few days before we had the announcement that Dr Sydney Gata would be executive chairman of Zesa, a clear breach of the governance principle that the board and management must be separated. Combining the roles of chairman and chief executive is generally a serious error and, in this particular case, sends the wrong message.
Dr Gata is qualified for both posts. He should have been appointed to just one, probably the chairmanship since, in most organisations, especially those where there are questions about managerial decisions, it is essential that the rot must be stopped from the top.
There is nothing wrong in having a chairman who knows a great deal about a particular entity. In fact a high-knowledgeable and experienced chairman would seem to be ideal, knowing what the questions that management have to answer are, knowing when inadequate or silly answers are being given, and being able to assess the competence of the top managers, perhaps the most critical point. Who, for example, is going to asses Dr Gata when he has both jobs? His underlings on the board and in management cannot assess their boss . And yet someone must hold him to account.
Energy and Power Development Minister Fortune Chasi made it clear that he was extremely unhappy over how Zesa was being run. So is everyone else in Zimbabwe. Vigorous action was and is required. The Minister is entitled to recall Dr Gata and make a radical change to the Zesa board. That is the Minister’s job and he can be held accountable for doing nothing or for letting the rot remain or spread. But he erred in giving Dr Gata the double job. For a start it sends the wrong message and secondly it outs all the management eggs into one basket.
Correcting this is not a problem. An effective and hard-driven board can quickly come up with a person suitable for running Zesa under the board. With a strong board, made up of people who know and care about what Zesa does and should do, and a highly qualified and effective CEO the next step, fixing Zesa, can proceed.
