African Development Bank boost parastatal reform with $4,1 million
The African Development Bank, through the African Development Fund, has extended a $4,1 million grant to Zimbabwe, part of which will be used to reform three State-owned enterprises. Government is now scouting for a consultant that is expected to assist in reviewing and providing turnaround plans for the three SOEs which fall under the Ministry of Finance and Economic Planning.
Parastatal reform is among key result areas being pursued by Government as it is envisaged to lessen the burden on Government finances and facilitate economic growth. In an announcement at the weekend, the African Bank said the grant was specially meant to finance the Institutional Support for State Enterprise Reform and Delivery Project (ISERDP).
“The Government of Zimbabwe has received a grant from the African Development Fund to finance the Institutional Support for State Enterprise Reform and Delivery Project (ISERDP) and intends to apply part of the agreed amount for these grants to payments under the contract for consultancy services to provide technical assistance to undertake performance reviews and develop turnaround strategies for State enterprises and Parastatals (SEPs) in the banking sector, namely Agribank, the Infrastructure Development Bank of Zimbabwe (IDBZ) and the Small to Medium Enterprises Development Corporation (SMEDCO),” said AfDB in a statement released on Saturday.
It is believed that the consultancy work will help inform Government on how it can intervene to make the entities more efficient and deliver on their mandate.
“The main objective of this assignment is to undertake a detailed assessment of the SEPs governance and technical operating systems, processes and procedures in order to determine the possible quantified and time framed interventions by Government (in terms of governance, systems, capitalisation , et cetera) to improve on the SEPs’ performance in order for them to deliver on their respective mandates, vision and objectives in the most economic, efficient and effective way for the realisation of national socio-economic objectives,” said the Pan-African and Ivory Coast-based development bank.
Government opines that enabling the three SOEs to perform will help to stimulate key sectors of the economy. Agribank is supposed to provide financial support for the agriculture sector, while the IDBZ’s mandate is to provide funding to critical infrastructural projects that are expected to underpin local economic growth.
Apart from raising funds for various local housing projects, IDBZ also provided some resources for the Kariba South expansion project, which is already feeding 150 megawatts (MW) to the local grid. But reforms will cover all the country’s 93 parastatals. Government, through various line ministries, has begun evaluating SOEs, as part of an exercise to identify firms that can either be retained or disposed of.
Failing parastatals, including companies under their portfolio that are beyond redemption, will be shut down. The initiative is part of the 100-day target set by President Mnangagwa. Finance and Economic Planning Deputy Minister Terrence Mukupe this month said line ministries had been directed to come up with comprehensive and exhaustive information on how the SOEs had been faring, including recommendations on the way forward.
The 2016 financial audits show that 38 out of 93 parastatals incurred a combined $270 million loss due to weak corporate governance practices and ineffective control mechanisms.