Privatisation moves from the backburner

The coalition partners include President Robert Mugabe’s ZANU-PF, Movement for Democratic Change (MDC-T) party led by Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutambara’s break-away MDC-M formation.
Sources in government said work was currently underway for a massive divesture exercise by the government, which would involve the disposal of the country’s silverware to raise money.
Finance Minister Tendai Biti indicated during his budget review statement that lack of budgetary support as well as reduced income levels and the death of the Zimbabwe dollar would compel the government to embark on “creative ways of raising additional financial resources, including disposal of family silverware”.
Government has put in place a team to spearhead the parastatals’ privatisation drive. The team is made up of Biti and Minister of State Enterprises and Parastatals Joel Gab-buza Gabuza, as well as State Enterprises Restructuring Agency executives.
The Ministry of State Enterprises is also expected to undertake and evaluate all public enterprises, with a view of rationalising their functions as well as other time-framed reforms.
Through this process, and guided by what government describes as cost effectiveness, options for public enterprises reform will include recapitalisation, commercialisation, privatisation and part or outright disposals, according to a Short Term Emergency Recovery Programme (STERP) unveiled in March.
Last week, Net*One, the state-owned mobile phone network operator, said it had already been overwhelmed with enquiries for equity investment by foreign shareholders, even be-fore the government rolled out the privatisation process.
The announcement by Reward Kangai, the Net*One managing director, was widely viewed as a barometer of the government’s commitment to privatisation.
“Since September 15, when the power sharing agreement was signed, there has been an increase in enquiries from the UK, Canada, Italy, looking for opportunities,” Kangai said in an interview with news agency, AFP.
Biti and his team are expected to come up with a schedule for the divestiture programme.
This is likely to be followed by an evaluation of parastatals targeted for privatisation to come up with a price, as well as the threshold of divestiture in each of the targeted parastatals.
“We will be taking a scientific approach in order to come up with a detailed report that we will present to Cabinet,” Biti said about the team’s work to come up with a comprehensive report on the planned government divestiture programme.
There are simmering fears the inclusive government could sell some parastatals for a song as they battle to increase revenue inflows, given the desperation for cash.
The fact that most of the parastatals are also undercapitalised means that their valuations would be significantly discounted.
In a discussion document titled Compreh-ensive Economic Reco-very in Zimbabwe, the United Nations Dev-elopment Programme (UNDP) highlighted: “Given that the driving force of the economy in the post-crisis dispensation will be the private sector, it will be necessary to open up sectors where markets work, such as telecommunications, media, especially the electronic segment, electricity and transport sectors.
“There is therefore a lot of scope for private sector involvement in all sectors of the economy, which should be facilitated through the deregulation of existing monopolies.”
To mitigate the risk of selling its assets at a discount, government admits it could also consider listing targeted assets as an alternative to privatisation.
While government has full ownership and control of public enterprises, the financial and economic benefits arising from this shareholding have often been low, owing to under performance of these entities.
Currently, one of the major challenges compromising efficient service delivery emanates from their under-capitalisation.
“Given current budgetary resource constraints, there is scope for tapping the large potential resource base through selective listing on the stock exchange as well as targeted direct foreign investor participation on a joint venture basis,” reads the STERP document.
The framework for the re-capitalisation of such entities as the Cold Storage Company, Zimbabwe Electricity Supply Authority, Air Zimbabwe, the Zimbabwe National Water Authority, National Railways of Zimbabwe, as well as telecommunication companies TelOne and Net*One, was being developed, said STERP.
“This will also apply to companies in which the inclusive government has significant shareholding, such as Hwange Colliery, SMM Holdings and the Zimbabwe Iron and Steel Company.
“The inclusive government will also pursue joint ventures with competent consortia of foreign and local partners to raise financial and technical resources for investment in expansion, improved efficiency and reliability, as well as liquidating outstanding and current obligations.”
Interestingly, the current privatisation drive appears to be spearheaded by the MDC-led by Tsvangirai, a former secretary general with the Zimbabwe Congress of Trade Unions (ZCTU).
Apparently, the MDC was formed mainly with the backing of the ZCTU in 1999, but has gradually lost its influence in the party, now dominated by intellectuals and capitalist-leaning activists and businesspeople.
As a trade unionist, Tsvangirai had opposed privatisation, saying it resulted in job losses and that the process of government divestiture programmes excluded key stakeholders like workers.
Since the process was publicly announced in March, the ZCTU has issued no public statements on the move, giving government a free ride on the process.
The discussion document by the UNDP said it was imperative for government to engage in broad consultation during the privatisation process
“The participatory approach to restructuring has been promoted by the International Labour Organisation (ILO) through its Inter-departmental Pro-gramme on Privatis-ation, Restructuring and Economic Democracy.
It emphasises the importance of a tripartite approach in ensuring a smooth transition from a bureaucratic to an entrepreneurial culture.
“According to the ILO, ‘Public sector reforms are most likely to achieve their objectives of delivering efficient, effective and high-quality services when planned and implemented with the full participation of public sector workers and their unions and consumers of public services at all stages of the decision-making process.”