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Zimbabwe's parastatal rot — when looting becomes second nature

by David Mutori and Benjamin Paradza
13 April 2017NetOne

Ever wondered why the Zimbabwe Government and its ministers find parastatals attractive despite them costing the taxpayer billions of dollars?Our previous article asked questions on the wisdom of thegovernment taking over Telecel mobile network. This article explores the reasons andwhy the Telecel conundrum and indeed government ownership of parastatals are attractive to politicians but costly to the taxpayer.

Zimbabwe is known to have generated Rolls Royce parastatal related millionaires overnight without any explanation on how they made their money. In most cases Zimbabwe's miraculous millionaires do not have any business; they simply become millionaires through their relationship with government officials or parastatals.

We will explore why ministers are very keen to be appointed into ministries that are responsible for parastatals by scrutinising the money trail and hypothesise on why the government would want to own Telecel despite the fact that they already own NetOne.

Parastatals are companies that are owned by the public/tax paying citizens. Traditionally, they are organisations that are considered of significant strategic importance to the country or critical to the public but too unprofitable for a private company to invest in. In recent times, questions have been asked about why the Zimbabwean government wants to hold on to parastatals when they are neither of strategic importance nor profitable. Some examples that come to mind are mobile phone networks as questioned in our last article, National Railways of Zimbabwe (NRZ), Grain Marketing Board (GMB), Zimbabwe United Passenger Company (ZUPCO) and the Cold Storage Commission (CSC).

Our quest starts with a look at the governance of parastatals. The parastatal board (senior management team) is appointed by the responsible minister. Decisions on how to spend money (including on tenders) is made by the parastatal board. The boards are not necessarily performance managed in terms of how much they improve shareholder value, they are considered 'good' if they are loyal and play ball. Directors who come up with innovative ideas and strategies that represent the best interests of the taxpayer are sidelined because their ideas put the looter's opportunities in jeopardy. That explains why ministers are very keen to 'reshuffle' the boards of parastatals soon after their appointments; they want to put 'their people' into the board - people who will do the minister's bidding - people who do what the minister wants instead of what the public deserves.

TelOneZimbabwe's parastatals are costing the taxpayer a fortune and have contributed immensely to the national debt. They are unprofitable and do not represent value for money. In fact, taxpayer's money keeps pouring in as debt, and comes out on the other side in individual pockets. That is the reason why parastatals are the most heavily geared companies in the country - their debt outweighs equity.

The question then is: How are parastatals looted? If one follows the money, one can have a feel of where the money leaks out of these institutions. Two main looting opportunities are salaries and perks of the 'boards' and procurement/tenders. Salaries and perks are where executives are paid exorbitant salaries that are not commensurate with their responsibilities and performance. Salary scandals were explored extensively when the 'Ca$hbert' Dube PSMAS scandal was unearthed. Only a feeble mind would believe that everything Cuthbert Dube earned ended up in his personal pocket.

Procurement and tendering are other vehicles of looting. A minister running a ministry that oversees a parastatal and appoints the board of the parastatal has a lot of say in how that parastatal award tenders. Looting from tenders is generally done in three main ways; awarding tenders to cronies, inflating tender value in order to cream off the extra value or kickbacks or a combination of cronyism and inflated values. In all cases, the objectives are the same; steal from the citizens and benefit personally. Read more...

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