Page 4 - WEEKLYDIGEST 13042022

ANALYSIS April 13-18 2022 Weekly Digest 4

Cottco’s future hangs in the balance

BY TAURAI MANGUDHLA However, the recent turn of event indi- of them in intensive care and bleeding the phoned hundreds of thousands of dol-
cate otherwise. fiscus due to massive graft, the govern- lars from the Zimbabwe Manpower De-
OVERNMENT’S decision to “We have already identified advisors for ment has demonstrated lack of capacity velopment Fund and donated some of
take full control of the coun- this and it will be done by 1 July (this year),” to run these institutions efficiently. Taking the money to Zanu PF.
try’s largest cotton buyer and Masuka told Weekly Digest in a brief in- over Cottco will unlikely produce different The party’s 2016 conference pro-
processor Cottco could place terview on the sidelines of Cottco nation- results. posed that late former President Robert
G the company on long list of al prize giving ceremony in Chinhoyi last By its own admission, the ruling Zanu PF Mugabe’s office, in consultation with
Zimbabwe’s many ailing parastatals. week. party in 2016 demanded sweeping para- the Ministry of Finance, should expedite
The Standard newspaper reported this “We had wanted to get it done by the statal reforms. the finalisation and the effective imple-
week Anxious Masuka revealing that the end of March, but we faced some delays.” Concerned that the enterprises had mentation of new remuneration frame-
government will take full control of Cottco Masuka could not be drawn to shed become feeding troughs of rogue and work for State entities and local author-
by July this year. Currently, the govern- more light into the ongoing transaction, corrupt public officials and politicians, ities to reduce expenditure and unjus-
ment has a 37% stake in the cotton firm. but Weekly Digest has it on good author- through corruption and other malpractic- tified salaries and allowances/benefits
Government has a keen interest in cot- ity that the State wants a 51% stake in es, Zanu PF’s various organs put pressure for boards and executive management
ton production and has heavily subsidised Cottco and has engaged a reputable ac- on government to cut salaries of execu- of some parastatals.
the crop, pumping millions every season. counting and auditing firm for the trans- tives and boards of struggling parastatals While it is not the mandate of a gov-
Last year, government pumped in ex- action. as well as expedite implementation of the ernment to be active in business, but to
cess of $3 billion subsidizing cotton pro- The government is currently strug- Public Entities Corporate Governance Bill. create an enabling environment for in-
duction. gling to privatise its non-performing par- This was after the economy had suffered vestors who have special skills in vari-
And Cottco management had previous- astatals. losses of more than US$500 million owing ous sectors to create and run business-
ly indicated plans to re-list the company On the list of State-owned enterprises to inflated energy tenders that were allo- es profitably, creating employment and
on the Zimbabwe Stock Exchange and di- up for privatisation are NetOne, Telone, cated to unqualified contractors. The call paying taxes, the Zimbabwe govern-
versify operations with the introduction of POSB, Fidelity Printers and Refiners and for reform also came following allegations ment has been actively involved in busi-
oil processing and garment manufactur- Air Zimbabwe. that then Higher and Tertiary Education ness since independence in 1980. Gov-
ing units to the group. With dozens of ailing parastatals, most Minister Jonathan Moyo could have si- ernments are not producers of goods
and services and when businessmen
are running key institutions in govern-
ment they have a political agenda.
Flag carrier Air Zimbabwe has been
grounded by gross mismanagement
and corruption while the National Rail-
ways of Zimbabwe is a pale shadow of
its former vibrancy moving millions of
tonnes of goods every year.
AirZim creditors approved a May 2021
reconstruction scheme which involved
debt assumption by the government
owed about US$379 million by the flag
carrier. NRZ is now retrenching workers
after being hit by locomotive shortag-
es and a ballooning debt which closed
2018 at a staggering US$575million.
This culture of mismanagement and
politicisation of issues will dent Cottco’s
image and probably even affect com-
pany exports given that some State-
owned enterprises are on the sanctions
list. This will also most likely drive out
competent professionals who can turn
around the company. Investors also
generally don’t trust governments and
this spells doom for the envisaged re-
structuring which - whether it is for
small ginneries and garment manufac-
turing - needs capital.
Cottco recently announced it is mull-
ing introducing micro-ginneries as part
of its strategic remodelling expected to
see the company investing in oil pro-
duction and fabric weaving technol-
ogy. This was after agriculture econo-
mist Mandivamba Rukuni pointed out
that Cottco’s current model needed a
re-look, including setting up micro-gin-
neries and toll processing cotton to give
farmers more value.
Corporate governance expert Brad-
well Mhonderwa noted that poor cor-
porate governance results in corruption
and corruption in Zimbabwe is causing
capital flight.
“Surely, no serious investor, whether
foreign or domestic, wants to invest in
a corrupt environment because corrup-
tion increases the cost of doing busi-
ness and paralyses value chains. Cor-
ruption is an albatross to serious invest-
ment because it undermines property
rights, weakens the rule of law, and it
signals doom and gloom. Investment is
a risky undertaking in such nations,” he
said in an interview.
Taking over a struggling company
when the economy has, until recent-
ly when cosmetic surpluses have been
reported, suffered successive budget
deficits is suicidal and amounts to fur-
ther draining already empty coffers.
With most parastatals running on
derelict equipment, there is a massive
need for investment which will certain-
ly come out of taxpayers’ pockets and
crowd out social spending and infra-
structure projects that are key to the
economy.
Efficiency of running Cottco will al-
most certainly be sacrificed at the al-
tar of nepotism, graft and all-manner of
malpractices that characterise State run
institutions. This takeover could spell
doom for Cottco and the cotton indus-
try and puts the sincerity of government
to privatise State entities in doubt .