eBusiness Weekly
Tawanda Musarurwa
Zimbabwe has been looking to privatise several of its parastatals and state enterprises for almost two decades now, but the Government does not have to look too far for a successful parastatal privatisation story.
In April last year, the Government intimated plans to implement a massive plan for the privatisation of SEPs.
The development comes as the majority of state enterprises and parastatals have been posting losses perennially. For instance, in 2016, 38 out of 93 audited SOEs incurred a combined $270 million loss.
The Government published an initial priority list of companies including Air Zimbabwe, National Railways of Zimbabwe (NRZ), Cold Storage Company (CSC), Zimbabwe Electricity Supply Authority (ZESA), NetOne, TelOne and Zimpost and POSB, Industrial Development Corporation of Zimbabwe (IDCZ) subsidiaries, Olivine Holdings, Agribank, and CAPS Holdings among others.
By September 2018, the Government had announced that it had completed valuing assets of state-owned enterprises and parastatals and was engaging transaction advisors to assist in reforming them.
But some know-how is closer to home.
From Dairy Marketing Board to Dairibord Holdings Ltd
Listed on the Zimbabwe Stock Exchange (ZSE), with a current market capitalisation of circa $62 million Dairibord Holdings Limited is a shining example of successful privatisation.
In terms of how the Dairy Marketing Board was transformed to Dairibord Holdings Limited, CEO Anthony Mandiwanza explains:
“We commenced in 1991 what we called the rationalisation of the Dairy Marketing Board, getting rid of all the activities which were of a commercial nature but being treated as a strategic development. So the value chain had to be opened up and interrogated intensely.
“State enterprises are typically involved in everything, including activities even where they do not have expertise as a result, the cost arising out of inefficiencies is a huge burden and that burden is borne by the taxpayer. We eliminated that, and that process was momentous with respect to the history of this country.
“By 1994 we had moved from a loss-making company ($20 million in losses per annum) to a situation where we were now profitable. Buoyed by that development, the Government moved to commercialise two state enterprises, namely the Dairy Marketing Board and Cottco (The Cotton Company of Zimbabwe) at the beginning of 1994. And on the 23rd of October 1996, Cabinet passed a decision communicated to us that Dairibord, which was still owned 100 percent by Government (although commercialised) must now proceed to privatisation.”
But what are the deep lessons?
Mandiwanza elaborates: “The good lessons I find (from the privatisation of the Dairy Marketing Board) first is that you do not privatise a State enterprise before it has gone through an incubation period, a measurable incubation period and you give it very specific milestones.
“It speaks about turning it around first, and when you have turned it around then you can move logically to attracting private capital. Rushing to invite private capital into an asset that is stinking will not achieve the desired results. You need to invest in that state enterprise so that it becomes attractive, thereafter private capital will be chasing after value.
“Second, an omnibus approach does not work. You can’t say this is what we did at Dairy Marketing Board, therefore the same template should work for Air Zimbabwe or the Cold Storage Commission (CSC) for instance. Each individual State enterprise must be dissected, understood what is its core business to make sure that things, which are non-core activities are removed.
“The third important issue. You cannot privatise, deregulate the market and say it is now free for all. In our experiences we embarked on a broader vision. We had a period of some 10 years of which we were building our businesses. When competition came in, the pain was not as fatal as it would if tomorrow you say CSC is privatised and you instantly deregulate the meats market.”
Following its privatisation, Dairibord Holdings went on to acquire Lyons Zimbabwe, Charhons and also established NFB Logistics. The expansion programme also included a foray into Uganda, which the company would quickly backtrack from.
Business analyst Victor Bhoroma, has written that an extensive study by the World Bank in 2012 on the impact of 18 privatisation programmes in 10 African countries showed a jump in productivity in 16 of the cases investigated.
“High capital investments took place as private investors were growth — oriented than the Government, workers were not worse off and in most cases were even better off through equity or share participation in the privatised firms and that consumers received better service and quality products.”
Other analysts see positive broader implications of privatisation.
Analysts at Akribos Research Services have said Government’s plans to privatise and restructure Zimbabwe’s state enterprises and parastatals (SEPs) will have a significant impact on the growth of the local capital markets.
The analysts said to the extent that a significant number of these entities are privatised, this could result in some or all of them listing on the Zimbabwe Stock Exchange (ZSE), which is the linchpin entity of the local capital markets.
“Zimbabwe has over 100 parastatals whose capital stock is at $14 billion, but 99 percent of these have been loss-making. We expect this development to deepen local capital markets given the possibility of new listings on the Zimbabwe Stock Exchange,” said the analysts.
Zimbabwe’s capital markets are not that well developed and are dominated by shares although one can invest in Collective Investment Schemes and/or Unit Trusts and other privately sold funds.
