AFTER the Mutapa Investment Fund project in which he arbitrarily commandeered 20 public entities into one private board, President Emmerson Mnangagwa has gazetted aa general notice exempting 21 entities from the Procurement and Disposal of State Assets Act in a move to avoid public accountability and potentially create room for corruption.
BRENNA MATENDERE
Through General Notice 164B of 2024, Mnangagwa is exempting financial entities such as the Reserve Bank of Zimbabwe (RBZ), AFC Commercial Bank and the Infrastructure Development Bank of Zimbabwe (IDBZ) from scrutiny.
This could create room for asset stripping. The RBZ is banker to the government, also acting as lender of last resort to provide liquidity assistance in exceptional cases.
The IDBZ, on the other hand, is a state-owned development bank, mandated to provide long and medium-term funding for big projects such as construction and rehabilitation of roads and dams; development of infrastructure such water reticulation, housing, sewerage, technology, amenities and utilities.
Economists and legal experts have previously warned that the exemption of state-owned entities from public procurement law could create fertile ground for unrestricted looting, mismanagement, backdoor privatisation, and lack of parliamentary oversight.
Part of the latest general notice by Mnangagwa reads: “His Execellency President Emmerson Dambudzo Mnangagwa, President of Zimbabwe and Commander-in-Chief of the Defence Forces of Zimbabwe. Whereas it is provided by section 3(9) of the Public Procurement and Disposal of Public Assets Act [Chapter 22:23], that the President may, after consultation with the Authority, by notice in the Gazette, exempt from the application of the Act a prescribed public entity on specified grounds; and whereas the public entities below mentioned are operating in competitive markets and/or are managed by a third party under a management contract and accordingly need to be prescribed for the purposes of exemption by virtue of section 3(9) abovementioned:
“Now, therefore, under and by virtue of the powers vested in the President as aforesaid, I do hereby give notice that the public entities mentioned below are exempted from the application of the Act.” The entities exempted are AFC Commercial Bank Limited Registration number 4503/1995; Aurex (Private) Limited Registration number 1846/92; Bindura Nickel Corporation Limited Registration number 552/664; Zimbabwe’s sole gold buyer Fidelity Gold Refinery (Private) Limited Registration number 564/1978 5; Freda Rebecca Gold Mine Limited Registration number 1326/80; Great Dyke Investments (Private) Limited Registration number 2599/2006 7; and HomeLink (Private) Limited Registration number 8701/2004 8. Also exempted is the IDBZ established in terms of the Infrastructure Development Bank Act [Chapter 24:14] and businessman Kuda Tagwirei’s mines which include Jena Mines (Private) Limited Registration number 6/1941 10 and Kuvimba Mining House (Private) Limited Registration number 13291/2020 11. There is also the National Venture Company (Private) Limited Registration number 6529/2020 12; government mobile network provider NetOne Cellular (Private) Limited Registration number 2225/2000 13; Printing and Minting Company of Zimbabwe (Private)Limited Registration number 847/2021 14. the Reserve Bank of Zimbabwe established in terms of the Reserve Bank of Zimbabwe Act [Chapter 22:15] and RESZIM Investments (Private) Limited Registration number 458/1984 16. Mberengwa-based lithium mining firm Sandawana Mines (Private) Limited Registration number3593/92 17; Shamva Mining Company (Private) Limited Registration number 9219/2012 18 and government parastatal TelOne (Private) Limited Registration number 4658/2000 19 are also exempted. The People’s Own Savings Bank of Zimbabwe established by the People’s Own Savings Bank of Zimbabwe Act [Chapter 24:22], which is a state entity; Trojan Nickel Mine Limited Registration number 252/64 and Tagwirei’s Zimbabwe Alloys Limited Registration number 43/1950 concludes the list.
The spectre of backdoor privatisation looms large. Russian oligarchs made their money by snatching up valuable state assets at dirt-cheap prices and this trend is now manifesting in Zimbabwe due to these developments.
The Kremlin-connected oligarchs used various methods to grab assets. Sometimes they stripped their acquisitions of assets or acquired natural resources and then sold them off and shipped the money abroad.
Mnangagwa on 19 September gazetted Statutory Instrument (SI) 156 of 2023, which changed the name of the Sovereign Wealth Fund of Zimbabwe to Mutapa Investment Fund and brought 20 state-owned entities under one board.
According to the SI, entities under the Mutapa Investment Fund will be exempt from the Public Procurement and Disposal of Public Assets Act, which compels public enterprises to go through the Procurement Regulatory Authority of Zimbabwe to pay for goods and services.
The affected companies are Defold Mine, Zupco, Kuvimba Mining House, Silo Investments, National Oil Company of Zimbabwe, Cold Storage Commission Limited, PetroTrade, POSB Bank, NetOne, National Railways of Zimbabwe, TelOne, Arda Seeds, Zimbabwe Power Company, PowerTel Communications, Allied Timbers, Telecel, Air Zimbabwe, Industrial Development Corporation of Zimbabwe, Cottco and Hwange Colliery Company.
The placement of these entities under the Mutapa Investment Fund has stoked fears that the board of the fund would covertly sell assets of the parastatals to politically connected individuals with links to the ruling Zanu PF.
The recent exemptions of the 21 companies and the Mutapa Investment project has galvanised suspicions that the politically connected would plunder the country’s assets similar to what obtained in Russia during the rule of Boris Yeltsin who became president of the country in July 1991.
During that period, the oligarchs emerged as well-connected entrepreneurs who started from nearly nothing and became filthy rich through purchasing expensive public assets for a song using their connections to corrupt government officials.
This was during Russia’s transition to a market-based economy. In post-Soviet Russia, the corrupt system saw the rise to international prominence of Russian billionaires who now own expensive superyachts such as Roman Abramovich, Alisher Usmanov, Boris Berezovsky and Oleg Deripaska.
They were the opportunists who took advantage of the messy and corrupt market that emerged in Russia after the dissolution of the Soviet Union in 1991.
In the aftermath of the collapse of the Soviet Union, the newly formed Russian government set about selling off Soviet assets to the public via a voucher privatisation programme.
The Soviet state assets which were sold to the oligarchs for a song included hugely valuable industrial and energy machinery which they, in turn, sold abroad and stashed their earnings in foreign bank accounts rather than investing it back in the Russian economy.
The first generation of Russian oligarchs were mostly hustlers who had made their money on the parallel market or by seizing entrepreneurial opportunities in the late 1980s, when the Soviet Union began to loosen its stringent restrictions on private business practices.
Scholar Harry Atkins in a study report titled How Did Russia’s Oligarchs Get Rich from the Fall of the Soviet Union? explained the issue.
Atkins wrote: “Arguably, in his haste to transition Russia into a market economy, Boris Yeltsin, the first President of the Russian Federation, helped to create a set of circumstances that perfectly suited the emergent oligarchy. Assisted by the influential economist Anatoly Chubais, who was tasked with the role of overseeing the privatisation project, Yeltsin’s approach to transforming the Russian economy — a process that no one expected to be painless — was to deliver capitalism via economic ‘shock therapy’. This entailed the sudden release of price and currency controls. Though this approach was widely advocated by neoliberal economists and the International Monetary Fund (IMF), many felt that the transition should be more gradual.” In an interview with The NewsHawks, prominent economic analyst Professor Gift Mugano said his fears were centred around the lack of transparency and accountability on projects which are exempt from public scrutiny. “The reason whywant public scrutiny is that we want to make sure that there is no wastefulness in terms of how procurement is done. So, for me that is the first thing I am worried about,” he said.
“It worries me a lot because we need transparency. Number two, I am not a lawyer, but I can follow that in things like these, you would like the Parliament to be involved, but when there is a presidential decree in it, again it creates challenges in terms of economic governance, because Parliament has a legislative role and it looks like its mandate has been taken away.”
Mugano added that the importance of subjecting parastatals and transactions involving public entities to parliamentary scrutiny is to provide much-needed oversight.
Under section 340 of the constitution, neither the President nor ministry of Finance secretary George Guvamatanga can seek not to exclude the operations of Public Procurement Act and Disposal of State Assets Act from any transaction.
