Analysis: BENEDICT TEMBO
THE call made by the Minister of Finance Margaret Mwanakatwe at the just-ended 2nd Industrial Development Corporation (IDC) group conference that there is need for performance contracts and benchmarks between the IDC and boards signifies Government’s desire to see to it that the State-Owned Enterprises (SOEs) are profitable.
At the conference whose theme was ‘Driving reforms’ Mrs Mwanakatwe said that only chief executive officers that meet the set performance benchmarks should have their contracts renewed.
All SOEs not making profit must downgrade their travel class.
She also directed that no board chairperson should be accorded offices and personal-order-vehicles.
Mrs Mwanakatwe also said SOEs should resolve their tax liabilities to the Zambia Revenue Authority as pointed out by the Auditor-General.
“The significance of this move is that we are now inculcating a private sector mentality into how parastatals are run and this is likely to result in better performing parastatals,” Moffat Chawala, a lecturer in marketing and entrepreneurship at Copperbelt University, said.
During the conference, IDC gave out awards to outstanding SOEs.
The awards should begin to prick the conscience of boards and managements of SOEs that it cannot be business as usual anymore but they must deliver on their mandate to bring returns on investments of the collective Zambians.
In Mrs Mwanakatwe’s words, the IDC’s consolidated balance sheet valued at US$5.6 billion represents the wealth of the tax payers in the country.
And the fact that financials shall be in the public domain even makes the scrutiny more critical as SEOs shall not only be gauged against most likely better performing companies but their relevance of existence shall also be questioned especially now that Zambians have become more critical.
Indo-Zambia Bank was deservingly the biggest winner with five awards in different categories as Indeni Petroleum Refinery walked away with the overall prize.
The bank emerged second runner-up in the enterprise with highest dividends declared in 2018 and second runner-up in most improved enterprise.
IZB also emerged first runner-up in best governance compliant enterprise, winner of the enterprises with highest pay-out ratio and second runner-up in overall best performing enterprise.
What the awards says about IZB is that the inclusion of other truly independent stakeholders (in this case Bank of Baroda (20 percent) Bank of India (20 percent), Central Bank of India (20 percent) and IDC (40 percent) ownership really creates strong oversight corporate governance structures and leads to improved performance of companies.
Mr Chawala said there are several messages that can be picked from the dominance of IZB at the awards.
“The first message that we pick is that it is possible for state-owned enterprises to be profitable and declare dividends. Secondly, the second message that we pick is that there is something right that management and employees of Indo-Zambia Bank are doing for them to dominate the awards and the other state-owned enterprises can learn some lessons from them,” Mr Chawala said.
He said the banking industry in Zambia has become very competitive and management and staff of IZB must be commended.
“The third message we can get from Indo-Zambia Bank dominating awards across different categories is that there is need for the parastatals to consistently deliver on different aspects of their performance targets. It’s not enough to declare dividends when you have issues of corporate governance,” Mr Chawala said.
He said the people of Zambia will only be confident about SEOs when they score on all performance targets.
Economist Chibamba Kanyama said IZB should be congratulated for leading the way and being the reference point for profitability.
“However, its lead in almost all criteria among its peers is due to a number of factors and these include good governance systems dating back to many years of operations as a partially private business. It has also enjoyed significant recapitalisation over the years, implying that it has robust internal structures and systems that ensure it is of international standard,” Mr Kanyama said.
The author is editorials editor at the Zambia Daily Mail.
Analysis: BENEDICT TEMBO