Why won’t parastatals publish their results?

BY publishing its full year financial report on September 6 2015, TelOne, the state-owned sole fixed telephone operator broke ranks with an infamous clique of parastatals whose financial health remains the subject of conjecture. It naturally joins the lonely company of POSB, which is the only other non-listed parastatal that routinely publishes its statement of accounts.

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The financials of the other 58 odd state entities – excluding listing companies such as Agribank, Hwange Colliery Company Limited (HCCL), Commercial Bank of Zimbabwe (CBZ) and Allied Bank( formerly ZABG), which is now under liquidation – are opaque at best and murky at worst.

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Well, for a Chartered Accountant who has been in the corporate world for more than 17 years, the natural instinct to be financially transparent could be Ms Chipo Mtasa’s second nature.

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But despite having this philosophy wired into her, her belief in the importance of transparency, particularly when it comes to its potential benefits to parastatals, cannot be contested.

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“With the confidence we want from investors, I think there is going to be more and more need for parastatals, especially those which are of a commercial nature, to publish (financial results).

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“It is good accountability, it’s good corporate governance. I think also the code of corporate governance that has been released actually spelt out the need to publish financial results.

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“It’s something that I think investors really look at and they want to value. Zimbabwe is on a mission to attract investment and we also have this Zim-Asset agenda as well as the 10-point economic plan which His Excellency, the President, unveiled.
\n“All this dovetails with the publication of results,” she told this paper a fortnight ago.

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Clearly, there seems to be everything wrong in the current corporate governance system where companies that are listed on the stock exchange, which are only accountable to a small group of investors, are obliged to publish their statements of accounts, while state-owned enterprises that represent the interest of all Zimbabweans do not carry any such burden.

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Logic would dictate that it should be the other way round since the interests of the State supersedes the interests of a small group whose main objective is limited to the need to make a profit.
\nIt is actually absurd.

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Obviously, the main motivation to make statements of accounts public is to invite constructive criticism and to give an appraisal to both stakeholders and stockholders of how the company is faring.

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But in a system where the transactions of a company are away from the glare of the public that it supposedly represents, there is a tendency to abuse resources and general mismanagement.

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It is actually tempting to locate the multiple challenges that local state-owned enterprises are currently experiencing in such a secretive way of doing business.

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At a time when the country and not least the same parastatals are looking for investment and goodwill, there is every motivation to ensure transparency.

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What is however disturbing is that it seems the public entities are waiting for Government to act before they institute such fundamental reforms.

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On September 28, 2009, Government together with the Institute of Directors Zimbabwe, the Standards Association of Zimbabwe and the Zimbabwe Leadership Forum launched the National Code of Corporate Governance project.

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In essence, the code requires state enterprises and parastatals to submit quarterly management accounts, half-yearly unaudited reports and annual audited reports to Government.

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This is in keeping with the public finance management system.
\nBut most often these reports never come to the attention of the public as they need to.

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Part of the legislative agenda for the Third Session of the Eighth Parliament of Zimbabwe that was outlined by President Mugabe last week is to bring the National Code of Corporate Governance Bill before the august house.

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When it is debated, there is crucial need to ensure that such a provision to publish financial statements is made mandatory.
\nOn September 13, 2015; the Communist Party of China’s central committee and the State Council, China’s cabinet, issued guidelines to clean up and integrate some state firms.

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Under the new reforms, Beijing is pushing for “mixed ownership” through which state firms can bring in private investment, while there is an increased emphasis to promote stock market listings.

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Through all this, the Chinese government, which manages 111 companies centrally under the state-owned Assets Supervision and Administration Commission, or SASAC, expects to improve efficiency.

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Beijing-based economic research company Gavekal Dragonomics estimates that the average return on assets for state companies was at about 4,6 percent in 2014, compared with 9,1 percent for private businesses.

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Surely, there is a business case for some of the parastatals to either list or have their financial statements made public.
\nThe Industrial Development Corporation, for example, which was established in 1963 through an Act of Parliament (Chapter 14:10), is so big that Zimbabweans have a right to know what value they are getting from the business.

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The group is so big that it has significant interests in businesses such as Allied Insurance, Almin Metals Industries, National Furniture Industries, Olivine Industries, Sunway City, Willowvale Mazda Motor Industries, Zim Glass and Zimbabwe Copper Industries.

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Its peer, the Industrial Development Corporation in South Africa, which has over the years been financing various projects locally, is wholly owned by the government and yet it regularly publishes its financials.

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Equally, for a country that has a vested interest in mining, the need to get an appraisal of how the Zimbabwe Mining Development Corporation (ZMDC) is operating is paramount.

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On paper, ZMDC appears huge. It is a shareholder in eight diamond companies – Marange Resources, Mbada Diamonds, Diamond Mining Corporation (DMC), Anjin Investments, Jinan Mining, Kusena Diamonds, Rera Diamonds and Gye-Nyame Resources – in Marange diamond fields.

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It also has three gold mines – Sabi Gold Mine, Jena Gold Mine and Elvington Gold Mine.
\nIts tentacles are also found in emeralds (Sandawana Emerald Mine), tin (Kamativi tin mine), copper (Mhangura copper mine) and platinum group of metals.

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So, how can we have such a big mining concern that we all don’t know how its faring, except for a select few?
\nInvestors, too, could be curious to understand its operations.

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As Government redoubles its efforts to see through sweeping economic reforms, this key need, or exigency, should not escape it.

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Feedback: darlington.musarurwa@zimpapers.co.zw