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President Emmerson Mnangagwa’s move to transfer shareholding of 20 state-owned companies to the renamed sovereign wealth fund without the involvement of Parliament exposes the entities to looting, observers have warned.
Mnangagwa used the Presidential Powers (Temporary Measures Act) to rename the Sovereign Wealth Fund to Mutapa Investment Fund (MIF).
In the process, he transferred shareholding of state-owned enterprises that include the Cold Storage Company, NetOne, TelOne, Powertel, Air Zimbabwe, Hwange Colliery Company, Cottco, POSB and Zupco to the MIF.
The fund is empowered “without restriction or delay” to move foreign currency outside the country to pay expatriates or “in connection with investment of the fund,” among other controversial privileges.
Former Finance minister Tendai Biti said Mnangagwa does not have powers to make law as this was the preserve of Parliament.
Biti said the statutory instrument used to change the name of the Sovereign Wealth Fund and to move the shareholding of the state enterprises was illegal as the president had usurped Parliament’s powers.
“Secondly, there is a problem of simply usurping state assets and taking them from the state, particularly the government which does not have a clean record of transactions,” he said.
“Those assets should have remained administered by line-ministries and if there is any intention to dispose of them you go through a transparent process of privatisation.
“This new vehicle allows money-laundering. Zimbabweans are going to be prejudiced.”
Businessman and former banker Nigel Chanakira said the president should have involved Parliament before making the far reaching decision.
“The process is too important for the executive to go it alone without legislative debate,” Chanakira told The Standard.
“Considering the implications to public finance management, parliamentary debate would have been advisable before commitment.”
Veteran economist Tony Hawkins said the government has never understood the role of a sovereign wealth fund.
Hawkins said countries such as Norway, Botswana and others in the Middle East used sovereign wealth funds to utilise domestic savings to diversify their economies by investing offshore.
“The inclusion of loss-making parastatals is just one more attempt to hide public finances from parliamentary scrutiny and pretend the national budget is in surplus when it is not,” he said.
Hawkins said Finance minister Mthuli Ncube was claiming that there was a budget surplus when public debt had increasing to $144 trillion.
“He cannot expect anyone to take him seriously. Zimbabwe has a longstanding record of very low domestic savings and investment,” he said.
Hawkins said the purpose of sovereign wealth funds was to use domestic surpluses from extractive industries like mining, which are depleting national wealth to diversify the economy.
“The government does not understand this and ignores the country’s massive dependence on a handful of mineral exports and tobacco most of which are environmentally unfriendly,” he added.
“It also believes the role of a sovereign wealth fund is to attract foreign savings rather than generate increased domestic savings.”
Economist Gift Mugano said transferring shareholding of the parastatals into the MIF would have made sense if they were profitable.
“Our parastatals are not working and this is more of taking a credit from the right hand and giving it to the left hand in terms of ownership because the government owns these parastatals and now Mutapa Investment Fund now owns them temporarily,” Mugano said.
“It would make sense if the parastatals are profitable and they declare their dividends with their shareholder who is the Mutapa Investment Fund.
“With that then that can be called an investment fund for the future generation. Naturally, talking about those funds, they work very well in minerals.”
Former Industry minister Welshman Ncube said although there was nothing wrong in renaming the Sovereign Wealth Fund, the move would not solve anything as long as the government does not address fundamental issues affecting the economy.
“Generally, the whole point of a sovereign fund is to set up a fund so that it raises money and it can invest that money in strategic business or industries which are in the national interest to make sure that they are properly capitalised. That’s normal,” said Ncube, who is also a constitutional law expert.
“But the renaming of the fund doesn’t change anything. The fundamental question remains:
“You have a malfunctioning economy, you have a state that is unable to administer the economy and the country in the best interests of its citizens, you have widespread poverty, you have business failures across the board, and you have the productive sector, particularly the manufacturing industry not doing well.
“You can rename these funds, you can rename these parastatals, you can rename these financial institutions or anything, but without addressing the fundamental structural issues in the economy to get the economy to function, you are getting no way.”
Association for Business in Zimbabwe chief executive officer Victor Nyoni also said “changing names without necessarily changing attitude in our view as business sectors particularly for the private sector point of view, is not an initiative.”
“Government must have minimal involvement in what businesses do; perhaps it should not be that of regulatory, giving directives and too much control,” Nyoni said.
“The parastatals should do business in a manner that is profitable and sustainable for business to thrive in Zimbabwe.
“Particularly most parastatals pay a civil sanctuary to the manufacturing, and to the industry.
“I think we have to advise the government to step back from the day-to-day business and make sure that our businesses are acting under the directives of the economy and not what the government would want to see in terms of collecting funds.”
He added: “Now as you know there are many other parastatals, which have been brought into that definition.
“Therefore, what it means is that we have less freedom in terms of the companies operating freely and deciding on what they should be doing on a daily basis which is more important.”
Nyoni said it was not too late for government to consult on the MIF.
“If the parastatals are going to be ignorant in externalizing funds that worries us as private sector actors. We would want to have consultation from the government,” he said.
“That means we would then advise the government that it needs to be done,” he said.
“However, it’s never too late. If the government comes back to us, we are going to be writing to the government, giving it our thinking around it.
“Government should concentrate on creating the environment that is conducive for doing business rather than to be a business actor inside.
“So, it’s an issue that we are still trying to engage the government and once a condition has been taken, we make it public.”
Mnangagwa has in the past been criticised for overlying on statutory instruments to introduce far reaching measures without involving Parliament. _*Standard*_