State enterprises should be forced to issue corporate governance compliance reports


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State enterprises and local authorities should not just be asked to produce annual reports but they should also issue corporate governance compliance reports to curb corruption and the obscene salaries some of the chief executives have been getting.

This was said by the Hwange East Member of Parliament Tose Wesley Sansole during his contribution to the good governance debate.

He agreed with Munyaradzi Kereke that the obscene salaries some of the CEOs were getting were a form of corruption because they were using resources inefficiently.

“I was disheartened to see that small local authorities like Plumtree and Gwanda, out of 91 local authorities, Gwanda was number two in terms of high salary payments. It was even higher than cities like Kwekwe, Gweru and Bulawayo.

“If you look at Plumtree, in terms of its revenue, I think the Town Clerk was actually taking in more than what the residents were taking. He was siphoning money from that local authority in such a small town.

“If you were to drive through Plumtree, you could hardly recognise the town, it is so small and for a Chief Executive Officer to pay himself such a huge salary is not acceptable,” Sansole said.

He said each public enterprise or parastatal should issue a corporate governance report and this should be a requirement which should be enforced.

“Each of the state enterprises’ annual reports must have a report on corporate governance to show compliance or none of it in all areas. Where the State enterprise fails to comply, it should give reasons outlining why this would have happened.

“If this is done, the ‘haemorrhaging’ of these state enterprises can stop and they will cease to become a drain on the fiscus. That way, they can create the much needed employment and growth in the country.”

 

Full contribution:

 

MR. SANSOLE: Thank you Mr. Speaker Sir. I want to thank the mover of the motion, Hon. Madzimure for this important motion. We have debated this motion looking at the symptoms of the non-implementation of the corporate governance framework. We need to go a little bit deeper and look at what Government sought to achieve. What are we seeking to achieve by coming out with a corporate governance framework and what are the outcomes of failure to implement?

First and foremost, what Government wanted to see was the efficient use of public resources. Corruption has become endemic in some countries to the extent that they no longer even refer to it as corruption; they refer to it as exchange of courtesies. That is how bad it is. So, in order for us to avoid a situation where we go down to that level, there is need to come up with this corporate governance framework to ensure that, particularly State enterprises and parastatals perform as expected by the tax payer.

The framework itself is premised on four pillars; responsibility, accountability, fairness and transparency. Whatever organisation we are in, we have to look at these four pillars and ensure that we are operating in a manner that is responsible, that we are accountable, fair in our dealings and transparent.

Without pre-empting some reports that will come to this House; I want to look at, for instance NSSA. The way that it has used public funds and invested them in non-performing banks – they have put millions of money in banks that have gone down. Is that being responsible of an organisation? Are we using public resources in an efficient manner?

That enterprise or organisation was set up especially to look after the funds or to look after the welfare of people when they have left employment, in their old age or for some reason, when they are no longer able to be in full time employment. We entrusted them with public funds to ensure that those funds are used efficiently but they take those funds and put them in a bank that is collapsing. I think that is being irresponsible.

If we look at some organization, like Air Zimbabwe for instance, we know about the insurance saga at Air Zimbabwe. Passengers are being short-changed. The shareholder is being short-changed through an insurance scam. Passengers’ lives were at risk when insurance was not being paid for to perform the task of protecting passengers. We look at local authorities, they perform various functions and some of the functions….

MR. HOLDER: On a point of order Mr. Speaker.

MR. SPEAKER: What is your point of order?

MR. HOLDER: My point of order is that he is discussing matters that are in the courts and I do not think Parliament has the mandate to discuss matters that are in the courts.

MR. SPEAKER: Hon. member, can you repeat your point of order.

MR. HOLDER: I am saying the hon. member is discussing matters that are in the courts. Air Zimbabwe, their plight is in the courts and I do not think we have the mandate to discuss matters that are in the courts.

MR. SPEAKER: The hon. member who was holding the floor, Hon. Sansole – because the matter is before the courts, normally they call it sub-judice. Therefore, I am not sure to what extent you were going to give that example without infringing upon the court’s process that is going on at the moment.

MR. SANSOLE: Thank you Mr. Speaker, I was only going to address those aspects that are already in the public domain. I think everyone knows what has transpired regarding the insurance scam. I was going to proceed to local authorities, to say that they were set up to provide services. Some of those services are actually social in nature. Some of them are provided on a cost recovery basis and they are not supposed to be profit making organisations. For instance, if you look at water, it is a human right and its provision is basic.

However, there are local authorities which go to an extent of putting an additional charge to recover the cost of providing that water. They put a mark-up which is as high as 20 to 25% on the cost of water. Instead of ploughing it back into the provision of services, it is used to pay the obscene salaries that we have seen.

I want to agree with the previous speaker, that obscene salaries are in fact a form of corruption because you will not be using the resources efficiently. One of the products of the failure to use resources efficiently is a rise in inflation. Once the local authorities started paying themselves the obscene salaries, they began to fail in the provision of even the basic services like water, from which they derived that profit. I was disheartened to see that small local authorities like Plumtree and Gwanda, out of 91 local authorities, Gwanda was number two in terms of high salary payments. It was even higher than cities like Kwekwe, Gweru and Bulawayo.

If you look at Plumtree, in terms of its revenue, I think the Town Clerk was actually taking in more than what the residents were taking. He was siphoning money from that local authority in such a small town. If you were to drive through Plumtree, you could hardly recognise the town, it is so small and for a Chief Executive Officer to pay himself such a huge salary is not acceptable.

There are many instances where resources have not been used efficiently and what is it that we need to do? I think that at the end of each year, each public enterprise or parastatal is required to produce a report. They produce an annual report in which the auditors’ report is found. However, one thing that is missing is a report that shows that they comply with corporate governance framework. I think that should be a requirement which should be enforced. Each of the state enterprises’ annual reports must have a report on corporate governance to show compliance or none of it in all areas.

Where the State enterprise fails to comply, it should give reasons outlining why this would have happened. If this is done, the ‘hemorrhaging’ of these state enterprises can stop and they will cease to become a drain on the fiscus. That way, they can create the much needed employment and growth in the country. I thank you Mr. Speaker.

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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