Parasitical Parastatals must adapt or die

Sun, 05 Nov 2017 11:52:40 +0000

FINANCE minister, Felix Mutati has put the brakes on excessive spending by chief executives of loss making parastatals.

This is long overdue. Thanks go to Mr. Mutati for banning first-class travel on airlines and ostentatious expensive vehicles for chief executive officers (CEOs) of State-Owned Enterprises (SOEs), while their companies continue to suffer financially. This measure has certainly raised eyebrows not only in the parastatal business community where the traditional view of a parasitic existence is becoming more difficult to sustain, but also within the Industrial Development Corporation (IDC) itself. It is impossible to understate the value of low-cost travel for Zambia’s emerging IDC. Well done.

What was even more interesting was the revelation that the national Treasury did not have enough fiscal capacity to look after all the state owned parastatals. It is surprising that some parastatals’ CEOs could go to the extent of purchasing Toyota Land Cruiser V8 like cabinet ministers when their institutions cannot afford the same.

 The Minister of Finance also warned that government would not hesitate to have underperforming state owned parastatal companies liquidated. It is a well-known fact that the government could not continue investing in institutions that could neither pay dividends nor pay taxes to it. Simply put, parasitical parastatals must adapt or die.

If the ailing SOEs could overhaul their governance structures, restructure their costs, and instill a private-sector mindset, then they should have a rosy future in Zambia’s growing economy. If not, there is no shortage of local and international entrepreneurs waiting to swoop on their carcasses. After all, there is nothing wrong for the SOEs to have strategic partners.

Suffice to say that government would only recapitalize parastatals that have business and strategic plans in place in accordance with the law. Meanwhile, government has already begun evaluating parastatals like ZSIC, ZAMTEL, ZESCO and ZAFFICO for it to start the process of disinvesting at the end of the year so that it could get some liquidity.

As expected, ZAMTEL took a head start and announced that it had so far paid a total of K 93.3 million in 2017 to dismantle both historical and current liabilities owed to the Zambia Revenue Authority (ZRA).  ZAMTEL Chief Executive Officer Sydney Mupeta said that the development was significant as it went to reaffirm the company’s commitment to liquidating its historical obligations. He further said that the payment was testimony of ZAMTEL’s commitment to cleaning up its tax books with the tax authority.

“As a State Owned Enterprise, we are fully aware of the need for tax payers like ourselves to be tax compliant. These are the same funds that are channeled towards service delivery for the public good and paying for drugs in hospitals and equipping our schools,” he said, more importantly.

He further added that the payment of historical debt also symbolized the growth trajectory that ZAMTEL was experiencing. Nevertheless, time will tell if this particular SOE’s strategy would pay off, and if Zambian end-users would value all its pricing and service delivery above its style of frugality.

Any further savings under the long-term turnaround strategy would require deeper, more uncomfortable cuts. ZAMTEL, like most legacy parastatals, had hired too many employees on arguably too-generous salaries. It also had a history of elevating the wrong people to the senior management jobs.

Either way, during the reign of the late Levy Mwanawasa and late Michael Sata, they banned flying first-class besides the President and Vice President. However, because these measures were by way of word of mouth and not written policy and enacted as law, as soon as there was regime change, the austerity measures were thrown to the wind. There was policy change as soon as the departed leaders were buried at Embassy Park. So, based on the lesson learnt from the past, the current government needs to do things differently by putting cost-saving measures to paper through written policy and enacted as law – just to make sure that the mindset of lavish management styles in SOEs is either minimized or curtailed altogether.

Ultimately, with the government tightening the screws on wastefulness in all parasitical parastatals, many observers see ZAMTEL as a prime example to all SOEs for improving overall performance across the IDC group.