Air Zimbabwe is looking for a strategic partner who must pour in US$750 million. It intends to recapitalise the airline and offers an immediate opportunity to provide a hanger fire protection system.
Long term investment opportunities under the project involve the supply of a new fleet of aircraft and conducting a comprehensive feasibility study.
This is the investment opportunity being promoted by the Zimbabwe Investment Agency.
Transport Minister Nicholas Goche says the airline has a debt of US$149 million. This includes US$30 million that it owes to foreign creditors. Its planes have been impounded over the debts but have been released.
The government, which is struggling to keep afloat says it is taking over the debt. In other words it is just shelving the debt. It has more than US$7 billion debts of its own.
Just looking at the figures, if Air Zimbabwe is looking for a capital injection of US$750 million and has debts totalling US$150 million, this leaves it with US$600 million for recapitalisation if it gets a strategic partner.
Two questions arise. The first is, if Air Zimbabwe is looking for a strategic partner, why is it failing to get one? The second is, is looking for a partner the way to go?
Air Zimbabwe was a profitable airline for years until politicians started meddling, hijacking planes leaving passengers stranded and running the airline by remote control as managers hardly lasted more than a year.
Air Zimbabwe has the potential to become one of the most profitable airlines in the region. It has the infrastructure, the capacity, workshops. It is self-sufficient and can even service other airlines. It has the engineers, technicians, everything.
And Harare is one of the most popular destinations in the regions. Airlines that fly to Harare are always fully booked.
So why is Air Zimbabwe in trouble? Answer: political meddling. The airline has lost credibility. It is no longer reliable. Three-quarters of the time workers are on strike demanding higher wages when they are not working. Where they expect the airline to get the money to pay them when it is not operating and is sinking in debt baffles the mind.
Goche says the airline must cut down staff. Which staff? He also says it must be unbundled, why?
Whispers in the street say Goche is the problem at Air Zimbabwe. He is frustrating management and is blocking partners that want to come in.
This raises the question, why look for a private partner when history has shown that state-owned enterprises that have gone public are doing very well. Why not follow that trusted and proven route?
The Commercial Bank of Zimbabwe was almost broke when the government decided to list it on the Zimbabwe Stock Exchange in 1998. It did not even have to change management. Gideon Gono remained the chief executive officer until he left to join the central bank in 2003. And Nyasha Makuvise has been at the helm since then.
But after the listing, the 20 percent shareholding the government still owned, was worth several times more than the 100 percent the government had previously owned.
Today, CBZ is the largest bank in the country. The government is still the major shareholder in the bank.
The Dairy Marketing Board was a perennial loss maker being subsidised by the government until it was privatised and listed on the Zimbabwe Stick Exchange in 1997. It did not change management either. Anthony Mandiwanza has been at the helm since 1996. But Dairiboard is now a household name not only in Zimbabwe but in countries like Malawi. It bought Lyons and Charhons and is now a force to reckon with.
The Cotton Company of Zimbabwe was another pest to the fiscus until it was listed in 1997. It too did not have to change management. Sylvester Nguni was at the helm until he was appointed a deputy Minister. But the company has grown into what is now called AICO and controls not only the cotton industry but the seed industry as well.
What this indicates is that state-owned companies can thrive once management is allowed to run them as business enterprises. The problem is not with management but with the government.
Air Zimbabwe can therefore turn it into a profitable company if politicians stop meddling. What is important is that the company must be turned public. It must be listed so that investors can publicly scrutinise the operations of the company. The government can remain a major shareholder.
But the company will not do well even if it is listed if political meddling continues. The Rainbow Tourism Group is a typical example. It was doing quite well, and even threatening to overtake the African Sun group. It even got a French hotel chain to come in until someone got greedy and forced major investors out. And now the company is sinking.
What is important therefore is that debate about the future of Air Zimbabwe must be opened to the public. Transparency is very important. Goche must not be left alone to look for a strategic partner. But most importantly the government should never sell state assets. This is not the time do that.
Air Zimbabwe has vast assets, unless they have already been sold. Maybe an audit should be carried out first. The formula advocated by the International Monetary Fund to sell state assets does not work. It only leads to more poverty.
Right now privatisation per se is being questioned worldwide. The West is sinking in debt. Capitalism is not working. The West has failed to recover over the past five years.
China, where state-enterprises rule the roost, is thriving. It is now the world’s second largest economy and is fast gaining on the United States.
If Zimbabwe is really looking East, why does it not copy the Chinese business model. It is the only one working at the moment. Forget about the propaganda from the West. Look at the figures.
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