At the launch of the Public Entities Corporate Governance Act Finance Minister Professor Mthuli announced that as from 2020 State Entities and Parastatals (SEPs) shall be assessed for their adherence to corporate governance principals and ranked accordingly. According to the Finance Minister, one of the consequences will be penalties for a lack of adherence. Corporate governance has been a topical since the 2017 Auditor-Generals report by Mildred Chiri exposed the extent of the rot in some of our SEPs that was attributed to a lack of strong corporate governance practices and cultures.
State-owned Entities have fallen from grace having contributed as much as 40% of Gross Domestic Product in the 1990s to contribute less than 10% of current GDP. 21 SOEs were described as having poor corporate governance in the auditor generals report. While the law which the launch was based on was signed into being on June 8 last year, with little else to celebrate currently they have seen fit to officially launch it now. Entities will be ranked based on their adherence to corporate governance rules and not necessarily on their performance or other outcome-based measures such as value for money. While it is true that a lack of corporate governance has contributed to the failure of our SEPs there is no guarantee that good corporate governance structures will guarantee success.
“It is our expectation that when the rating of the entities in terms of their compliance with good corporate governance takes place as from 2020, no entity shall be found wanting as this may reflect badly on the board and senior management. So better watch out, the rankings are coming and you don’t want to be found wanting as a board or senior management charged with leading SEPs. It also requires SEPs to produce and publish strategic plans to assist in coming up with performance contracts and this dovetails well into the Integrated Results Based Management tool that Government has adopted. It also requires entities to publish annual reports on progress made in the implementation of their set priorities and mandates.The Act also regulates the tenure of office for board members to two four-year terms and that of chief executive officer to two five-year terms.”
While taking time to praise the governments own reforms government officials said this was another step in reforming the nation. Unfortunately, no attention seems to have been paid to how much damage has been done to the viability of businesses from monetary and business policies that Zimbabweans have experienced over the last few years. Inflation and the runaway exchange rate coupled with electricity and energy challenges have left many businesses in Zimbabwe in a true quandary. Small businesses have closed and even big businesses such as South Africa’s Pepkor have been sent packing by the economic situation.
All this comes hot on the heels of the controversial reappointment of former ZESA board chairman Gata at the helm of perhaps the most problematic SEP in Zimbabwe. ZESA is dogged with corporate governance issues in addition to its performance issues. The government has become associated with paying lip service to certain ideas but not coming through on actions and there is a palpable concern in the air that this will be another one of those cases. Measures such as the anti-corruption commission, the Presidential Advisory Council and the Monetary Policy Committee have brought no discernible difference from the policy inconsistency that prevailed before their introduction.