Focus on State-Owned Enterprises Transparency International Is the Global Civil Society Organisation Leading the Fight Against Corruption
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Annual State of Corruption Report: Focus on State-Owned Enterprises Transparency International is the global civil society organisation leading the fight against corruption. Through more than 90 chapters worldwide and an international secretariat in Berlin, we raise awareness of the damaging effects of corruption and work with partners in government, business and civil society to develop and implement effective measures to tackle it. ISBN: 978-0-7974-6473-5 Authored by Hadebe S, Mandaza I, Moyo G, Mutondoro F, and Ncube M. J, Edited by: Ibbo Mandaza and Edwin Mhandu Reviewed and Edited by Mandaza I Every effort has been made to verify the accuracy of the information contained in this report. All information was believed to be correct as of April 2015. Nevertheless, Transparency International Zimbabwe cannot accept responsibility for the consequences of its use for other purposes or in other contexts. Printed on 100% recycled paper. © 2015 Transparency International Zimbabwe. All rights reserved. Table of Contents Acronyms ii Acknowledgements iv Preface v Foreword vi Executive Summary vii Chapter 1 The Political Economy of State Owned Enterprises in Zimbabwe 1 Chapter 2 Legal and Institutional Landscape of State Enterprises and Parastals in Zimbabwe 9 Chapter 3 Assessment of Transparency and Accountability in State Owned Enterprises 19 Chapter 4 Corporate Goverance of State Enterprises and Parastatals in Zimbabwe 35 Chapter 5 Unlocking the potential of State Owned Enterprises in Zimbabwe 47 Appendices Appendix 1: List of State Owned Enterprises in Zimbabwe 56 Appendix 2: Salaries of Top Executives in State Owned Enterprises in Zimbabwe 59 References 62 Annual State of Corruption Report: Focus on State-Owned Enterprises i Acronyms AG Attorney General ARDA Agricultural and Rural Development Authority BAZ Broadcasting Authority of Zimbabwe CAAZ Civil Aviation Authority Zimbabwe CCZ Consumer Council of Zimbabwe CHRA Combined Harare Residence Association CMB Cotton Marketing Board CMED Central Mechanical Department CRIB Cotton Research Board CRV Central Vehicle Registry CSC Cold Storage Commission DMB Dairy Marketing Board DZPL Dairiboard Zimbabwe Private Limited EMA Environmental Management Authority of Zimbabwe EPO Exclusive Prospecting Order ESAP Economic Structural Adjustment Program FCC Forestry Commission Company GDP Gross Domestic Product GMB Grain Marketing Board GNU Government of National Unity ICT Information Communications Technology IDBZ Indigenous Development Bank of Zimbabwe IDC Industrial Development Corporation ITU International Telecommunications Union MCAZ Medicines Control Authority of Zimbabwe MMZ Minerals Marketing Corporation Zimbabwe NOCZIM National Oil Company of Zimbabwe NRZ National Railways of Zimbabwe NSSA National Social Security Authority OECD Organization for Economic Cooperation and Development OPC Office of the President’s Cabinet PAZ Privatization Agency of Zimbabwe PEA Political Economy Approach POSB Postal Office Services Bureau POTRAZ Postal and Telecommunications Regulatory Authority PPPs Public Private Partnerships PSMAS Premier Services Medical Aid Society RBZ Reserve Bank of Zimbabwe SEPs State Enterprises and Parastatals SERA State Enterprises Restructuring Agency SOEs State Owned Enterprises SPB State Procurement Board T/A Transparency and Accountability TIZ Transparency International Zimbabwe TSCZ Traffic Safety Council of Zimbabwe UDI Unilateral Declaration of Independence ii Transparency International WMMI Willowvale Mazda Motor Industry ZACC Zimbabwe Anti-corruption Authority ZANU PF Zimbabwe African National Union- Patriotic Front ZBC Zimbabwe Broadcasting Corporation ZEDTC Zimbabwe Electricity Transmission and Distribution Company ZERA Zimbabwe Energy Regulatory Authority ZESA Zimbabwe Electricity Supply Authority Zim Asset Zimbabwe Agenda for Sustainable Socio-Economic Transformation ZIMSEC Zimbabwe Schools Examination Council ZINARA Zimbabwe National Road Authority ZINWA Zimbabwe National Water Authority ZISCO Zimbabwe Iron and Steel Company ZMDC Zimbabwe Mining Development Corporation ZPC Zimbabwe Power Company ZUPCO Zimbabwe United Passenger’s Company Annual State of Corruption Report: Focus on State-Owned Enterprises iii Acknowledgements The 2014 Annual State of Corruption Report: An Assessment of Transparency and Accountability in State- Owned Enterprises was made possible due to the support of the Swedish Embassy and the European Union. Transparency International is grateful for the support of various authors who worked tirelessly to produce this report. We are indebted to Gorden Moyo, Ibbo Mandaza, and Samukele Hadebe. We thank Butler Tambo for his invaluable input and assistance in quantifying the revenue losses in the corruption scandals. TI Z appreciates and acknowledges all the authors cited in this report who provided a wealth of information on State Enterprises in Zimbabwe. Certainly, previous studies by the various authors who have explored the role and functions of State Enterprises in Zimbabwe and in other countries provided a firm scholarly and policy foundation on which the report is grounded. This Report could not have successfully explored the different dynamics of Transparency and Accountability if it wasn’t for the insights and knowledge of various individuals and institutions that were consulted during the research process. At Transparency International Zimbabwe, we acknowledge the meticulous work of the Research Team in particular Nancy Gweshe and Dereck Hamunakwadi. They worked tirelessly in gathering information from various stakeholders. We are indebted to Ibbo Mandaza and Edwin Mhandu for their editorial input and tremendous support throughout the production process. Farai Mutondoro Senior Researcher and Regional Coordinator iv Transparency International Preface The 2014 Annual State of Corruption Report is a comprehensive analysis of Zimbabwe’s State Owned Enterprises. The 2014 ASCR builds on previous sectorial studies on corruption in Zimbabwe with the 2013 Annual State of Corruption Report, which focused on the Mining Sector being the predecessor. In developed and emerging countries, SOEs contribute to a substantial part of the economy’s Gross Domestic Product (GDP) and employment (OECD, 2006). The Singaporean model of State Owned Enterprises has shown the world that SOEs can drive the national economy and they thrive in an environment where there is good corporate governance, professionalism and most importantly, where there is transparency and accountability in the management of SOEs. In Singapore where SOEs are popularly known as Government Linked Corporations (GLC), the management and control of these GLC is done through Temasek Holdings which is a commercial investment company owned by the Singapore government. Under the Singapore’s Constitution, neither the President of Singapore nor the Singapore Government is involved in Temasek’s business decisions, except in relation to the protection of Temasek’s past reserves. According to the Temasek Review of 2013, as of 31 March 2013, Temasek owned and managed a net portfolio of S$215 billion, mainly in Singapore and Asia. Based on 2008 to 2013 market capitalisation data, SOEs or GLCs accounted for 37% of the stock market value. Literature suggests that SOEs have thrived in Singapore as a result of a combination of factors. The most important among them are; good corporate governance, transparency and accountability in the management of these GLCs. As of August 2013 Temasek had a rating of 10/10 in the Linaburg-Maduell Transparency Index (LMTI), making Temasek the most transparent of all Sovereign Wealth Funds around the World. In India,Shapiro (2009) notes that the 240 SOEs that are outside the financial sector produce 95 percent of India’s coal, 66 percent of its refined oil, 83 percent of its natural gas, and about one-third of its finished steel and aluminium. The Indian Railways alone employs 1.6 million people, making it the world’s largest state-owned commercial employer. Closer home, South Africa has over 300 publicly owned SOEs across all levels of government, the number is as high as 500 if subsidiaries are included (Balbuena, 2014). The economic importance of SOEs is concentrated in the top 30 companies, with four accounting for 91% of the assets, 86% turnover, and 77% of SOE employment. (Government of South Africa, 2011). Therefore at a time when Asian countries such as China and Singapore have built strong economies supported by State Owned Enterprises, Zimbabwe’s SOEs remained bound by chains of corruption, patronage and political interference, poor corporate governance and poor performance. It should be noted that the problem of corruption in SOEs is not something unique to Zimbabwe as countries such as China face similar challenges; the only difference being that, the Chinese government has demonstrated a commitment in addressing corruption challenges in SOEs unlike Zimbabwe. Notwithstanding the problem of corruption in SOEs, China has built a strong economy around SOEs. Although sources don’t seem to agree on the exact contribution of SOEs to the Chinese economy, most sources seem to suggest that SOEs contribute more than 30% to China‘s national GDP This report by Transparency International Zimbabwe seeks to make a contribution to the ongoing public and policy debate and dialogue on proper and transparent governance of SOEs. This report builds on previous work by academics, the media and the OECD as well as the Southern Africa Network for State Owned Enterprises. Using the lenses