ZIMBABWE’S public enterprises sector includes approximately 123 state enterprises and parastatals (SEPs) across various sectors, each playing a significant and important role in the country’s economic landscape.
This sector in the 1990s contributed about 40% of GDP, which has declined to about 10% of GDP due to various governance, economic and operational challenges. Over the years, the government has been undertaking various public enterprise reforms including privatisation even though at a slow pace.
While existing pieces of legislation, such as the Public Finance Management Act (PFMA), Public Entities Corporate Governance Act (PECG Act) and the Public Procurement and Disposal of Public Assets Act (PPDPA Act), aim to improve governance and accountability, these laws alone are insufficient for effectively managing the privatisation of SEPs.
A dedicated Privatisation Law is essential for a country such as Zimbabwe to address the unique challenges and nuances involved in privatisation, streamline processes, and ultimately enhance economic growth.
Privatisation law establishes the legal framework for a country’s privatisation programme, including the principles, institutions and legal steps involved. The following summarises the importance of Privatisation Law:
Complex ownership
SEPs in Zimbabwe often suffer from complex ownership and management structures that blur accountability lines. While the PFMA, PECG Act and PPDPA Act impose certain oversight standards, they are designed primarily for the management of public finances and procurement.
The PFMA, for example, mandates financial reporting and accountability but does not lay out guidelines on how to restructure SEPs or transition ownership to private stakeholders.
- Importance of privatisation law
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A Privatisation Law would provide a structured approach to handling these complexities, defining clear roles and responsibilities for the government, management teams, and potential private investors in the transition process.
The recent transfer of about 22 SEPs to Mutapa Investment Fund, formerly Sovereign Wealth Fund, formulated through the Sovereign Wealth Fund Act as an adoption of a centralised ownership model of SEPs, calls for a need of a Privatisation Law, which will ensure transparency, accountability and credibility of the privatisation process so as to attract the necessary domestic and foreign investment.
Efficient, transparent privatisation
The PPDPA Act covers aspects of asset disposal but is limited in its capacity to handle privatisation effectively, as it does not address the specific concerns of large-scale asset transfer.
Privatising an SEP involves multiple stages — engagement of transaction advisors, valuation, selection of suitable investors, negotiation, and transfer of control — all of which require a structured framework. A dedicated Privatisation Law could streamline the process, introducing transparent procedures, competitive bidding requirements, and standardised evaluation criteria. By codifying these steps, Zimbabwe can increase investor confidence and prevent the corruption and mismanagement risks that often accompany complex privatisation transactions.
Investor confidence through policy
Uncertainty in government policies is a significant deterrent to potential investors in Zimbabwe’s SEPs. A dedicated Privatisation Law would signal to both domestic and international investors that Zimbabwe is committed to following a structured, transparent process for privatisation.
Unlike public finance and procurement laws, Privatisation Law would provide investors with greater clarity on regulatory obligations, anticipated timelines, and dispute resolution mechanisms.
This transparency is essential to reassure investors that their interests will be protected, promoting a favourable business environment that attracts reputable investors and reduces the chances of asset undervaluation.
Social, economic safeguards
Privatisation in Zimbabwe, as in many countries, brings a risk of potential job losses, reduced public service coverage, and price increases for essential services.
A Privatisation Law could address these social impacts by mandating that privatisation plans include social impact assessments, employee transition plans, and provisions to protect public interests.
Unlike the PFMA and PPDPA Act, which focus on financial and procurement integrity, a Privatisation Law can help mitigate adverse social outcomes, ensuring that privatisation decisions are economically viable and socially responsible.
Monitoring and accountability
Post-privatisation monitoring and accountability are critical for assessing the success of privatisation efforts and ensuring compliance with agreed terms.
Currently, the PFMA focuses on ongoing financial accountability within public institutions but lacks provisions for ongoing monitoring after assets are transferred to the private sector.
A Privatisation Law could introduce mechanisms to hold new private owners accountable for maintaining service quality, protecting employee rights, and meeting agreed-upon investment targets.
By establishing clear performance benchmarks and monitoring requirements, Zimbabwe can ensure that privatised entities continue to contribute to national development goals.
Managing large-scale privatisation
The Zimbabwean government’s limited capacity to manage large-scale privatisation highlights the need for a specialised legal framework.
The complexities associated with privatising state enterprises — ranging from legal, economic, financial and operational restructuring, specifically huge debt management to stakeholder management - demand expertise and resources that public finance and procurement laws are not designed to support.
Privatisation Law would create an institutional framework for the establishment of dedicated oversight bodies, such as a privatisation commission/agency or task force, responsible for executing and monitoring privatisation policies effectively.
It is important to note that the Zimbabwe Investment Development Agency Act (Zida) deals with the promotion, entry, facilitation and protection of investment in Zimbabwe by creating a business-friendly environment to both local and foreign investors.
However, the ZIDA Act does not mandate Zida to manage the complex privatisaton transactions of SEPs. I am aware that Zida has been working with the Ministry of Finance, Economic Development and Investment Promotion to develop Public Private Partnership’s (PPP’s) guidelines that align with international best practices.
The recent transfer of these SEPs to Mutapa Investment Fund brings necessity for the Privatisation Law to ensure transparency, credibility and accountability in their privatisation process.
This will call for a need for the Mutapa Investment Fund to come up with a clear Privatisation Plan with detailed objectives and timeliness for each SEP targeted for privatisation for easy monitoring and evaluation by the government, development partners, investors, both local and foreign, and all key stakeholders in public enterprises reform programme.
The Mutapa Investment Fund should ensure the privatisation transactions are managed by reputable transactional advisers appointed through transparent processes in line with global best practices.
Economic diversification
Zimbabwe’s reliance on SEPs has limited opportunities for private sector participation and economic diversification. An effective Privatisation Law would outline how SEPs could be privatised in a way that supports sustainable development, boosts competitiveness, and fosters private sector growth.
With structured guidelines, the law could ensure that privatised assets contribute to broader economic goals, including job creation, industrial growth, and market competition.
By facilitating an orderly transition from public to private ownership, Zimbabwe can create a thriving private sector that complements state-led economic initiatives.
Best international, regional practices
Several African and global countries have implemented successful privatisation laws, paving the way for economic transformation and growth.
In Africa, Kenya's privatisation policies have spurred significant improvements in key sectors, especially telecommunications, leading to increased private sector involvement and improved service delivery.
Ghana also stands out, with privatisation efforts boosting economic diversification and enhancing private investment in industries like utilities and agriculture.
Globally, Chile's privatisation laws in the 1980s are notable for transforming sectors such as mining, telecommunications, and banking, helping drive economic growth.
Similarly, the United Kingdom’s large-scale privatisation under prime minister Margaret Thatcher’s government set a precedent, with successful transitions of industries like telecoms, railways, and utilities into private hands, leading to increased efficiency and innovation.
These cases illustrate how privatisation laws, when well-designed and strategically implemented, can foster economic growth, improve service quality, and attract investment across various sectors.
Conclusion
A dedicated Privatisation Law for Zimbabwe is not merely a redundancy alongside the Public Finance Management Act and Public Procurement and Disposal of Assets Act.
Rather, it serves a unique and necessary role, addressing the intricate and often challenging requirements of privatising state-owned enterprises.
By providing a structured, transparent, and investor-friendly framework for both domestic and foreign investors, a Privatisation Law can enhance economic growth, improve public service efficiency, and ensure that Zimbabwe’s SEPs are managed responsibly during and after the privatisation process.
This law would not only safeguard the public interest but also support the government’s broader economic vision for a prosperous, diversified Zimbabwe.
Nyoni is an independent consultant/public enterprises reform specialist and a Doctor of Business Administration student with Binary University, Malaysia. — [email protected]. These weekly New Perspectives articles, published in the Zimbabwe Independent, are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Pvt) Ltd, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — [email protected] or mobile: +263 772 382 852.
