The Minister of Finance and Economic Development Professor Mthuli Ncube has warned that the rising debts of State owned enterprises (SOEs) pose serious fiscal risks for Government.
Presenting the 2022 Budget on Thursday, Minister Ncube said the under-performance of the SOEs, inflationary pressures, the Covid-19 pandemic, exchange rate volatility, reduced international commodity prices and high international oil prices could threaten economic growth next year.
“State-owned enterprises represent significant fiscal risks as some are in financial distress as they continue to record losses while others are in negative equity and their infrastructure urgently needs revamp,” said Minister Ncube.
He said Zesa, the National Railways of Zimbabwe, TelOne and Zimbabwe National Road Administration (Zinara) are some of the State owned entities that are technically insolvent.
The issue of non- performing parastatals and State enterprises has been talked about for too long and it’s time Government takes a bold decision to address the issue.
Minister Ncube set aside $10 billion in the 2022 budget to fund recapitalisation of some SOEs but as long as the rot within the SOEs has not been addressed, this is money down the drain.
The underperforming SOEs are stifling economic growth through their perennial dependence on the fiscus. These enterprises are grappling with high overheads and under capitalisation worsened by corruption and lack of good corporate governance.
Cabinet in 2017 resolved to dissolve non-performing SOEs unless they were very important. State enterprises and parastatals have the potential to contribute 40 percent to the country’s Gross Domestic Product (GDP) hence the need to ensure they operate efficiently in order for them to realise profits.
It has been noted in the past that despite the SOEs’ underperformance, management at these enterprises continue to enjoy huge salaries and other benefits thereby bleeding the fiscus.
There is therefore an urgent need to clean up the State enterprises so that only those that contribute to the GDP and a few key ones that we cannot do without, remain. Cabinet resolved last year to centralise the shareholder function of SOEs as opposed to spreading it across line ministries but not much ground has been covered.
Under the centralised ownership, a single Government institution will be the shareholder of all state controlled companies and it is our fervent hope that this will be the major focus as Government cleans the SOEs next year.