Mthuli’s TSP scorecard | Two years ago, he pledged to privatise parastatals. Fail. His plan never left the station

NRZ is one of the companies now under the sovereign wealth fund (pic: Reuters)

When Finance Minister Mthuli Ncube announced his Transitional Stabilisation Programme (TSP) on October 5 in 2018, he pledged to sell off dozens of state enterprises by the end of this year.

In one article pushing for the sell-off, Mthuli promised what he colourfully called “creative destruction”, under which he would cut off loss-making parastatals or reform them from the roots.

How has Mthuli fared on this score?

The bulk of the proposed sales are stuck at the starting line, with companies unable to pay consultants and the process caught in red tape. The TSP’s plans to merge several other state agencies have also been resisted internally.

Here, two years to the day Mthuli announced TSP, newZWire recalls what the TSP promised on privatisation, and what it has delivered. It is a dismal report card.

Cold Storage Commission: nothing done

Launching the TSP, Ncube announced a draft livestock farming concession agreement with UK’s Boustead Beef. Boustead, whose credibility has been questioned, would take over CSC’s feedlots and abattoirs. Two years on, CSC is nowhere near any rescue, and still US$36 million in debt.

According to Agriculture Minister Anxious Masuka last week, CSC is being placed under reconstruction to protect it from creditors.

“In terms of progress (on a deal to revive CSC), we all know that the expectations have not been met,” Masuka said.

National Railways of Zimbabwe: Derailed

In 2018, government signed a US$400 million deal with the Diaspora Infrastructure Development Group (DIDG) to start fixing NRZ.

DIDG Zimbabwe
So near, so far: A DIDG official stands on a Transnet locomotive supplied to NRZ in 2018

All seemed on track when President Emmerson Mnangagwa travelled to Bulawayo to launch DIDG’s locomotives in 2018. But, in 2019, government cancelled the contract claiming the consortium had failed to show it had the financial backing to complete the project. DIDG said the cancellation was driven by “malice” and is suing the government.

[CLICK: A timeline | NRZ’s tortured journey to nowhere]

Telecoms: the wrong numbers

The TSP’s plan was to sell Zimbabwe’s telecoms assets, which Mthuli’s estimates would earn the country US$350 million. Nothing has happened.

Mthuli’s plan; bundle NetOne and TelOne together and sell. But talks between NetOne and Telkom didn’t go far, showing investors’ lack of appetite for the debt-laden firms.

[CLICK – Zimbabwe’s US$350m telecoms sale: TelOne, NetOne to be sold as one, but debts give bad signal]

The transactions never left the ground; NetOne and TelOne cannot afford the US$5 million transaction fees for consultancy services. Government has since cancelled the consultancy contract with PwC and approached the World Bank’s IFC for help.

The TSP’s plan was also to merge ZESA’s tech company Powertel with Zarnet and Africom. Treasury says that merger has been “painstakingly slow” and that “counter proposals to the merger have been put across.”

Allied Timbers: nothing yet         

The TSP’s plan was to partially privatise Allied Timbers by this year. It hasn’t happened. Allied Timbers cannot afford the fees; the African Development Bank has pledged to pay for the consultancy fees, while government will pay the success fees from the money it gets from the sale.

Industrial Development Corporation (IDC)

The TSP pledged to sell off assets of the state-owned industrial group, which has multiple subsidiaries.

Uralchem, one of the world’s largest fertiliser companies, bid for IDC’s Chemplex, Zimbabwe’s largest fertiliser manufacturer. Uralchem owner, the billionaire Dmitry Mazepin, travelled to Zimbabwe at least twice to push for the deal. He said he would only agree to a deal that gives him at least a 50% stake in Chemplex.

No deal has happened.

Satellite image of ZimPhos’ Msasa plant in Harare. Chemplex owns 100% of ZimPhos

The IDC has received six bids for Willowvale Mazda Industries and three bids for Deven Engineering. No date has been given on the announcement of winning bidders.

IDC has reportedly sold Zimglass to a local company, Brainman, for US$22 million.

Ziscosteel: an old story

The TSP’s promise to get a deal to revive Ziscosteel was just the latest in a series of previous similar promises. Just like those previous promises, it all came to nought.

An agreement with R & F properties of China for Ziscosteel, signed by the previous administration, was cancelled. The TSP supported an alternative plan under which a local company, ZimCoke, would take over Zisco’s coke oven battery in exchange for paying off the company’s old debts. The deal has since been cancelled over unexplained “corporate governance issues”.

Petrotrade: running dry

The TSP promised to partially privatise the state-owned oil retailer Petrotrade. It hasn’t happened.

Cabinet approved the merger of Petrotrade and Genesis, a subsidiary of the National Oil Company (NOIC), as well as CMED fuels, into a fuel retailing business. Petrotrade couldn’t afford the fees charged by consultants, and the contract was cancelled.

ZUPCO: changing gears

TSP planned to sell the bus company. The plans stalled because the company could not pay KPMG Nigeria, the chosen consultants.

In any case, strategy on ZUPCO has changed since the TSP. Deadly protests over fuel prices in January 2019 forced the government to subsidise ZUPCO and acquire new buses for the company. So, selling it to a private investor now seems unlikely.

Zupco has since taken on a more politically strategic role, and is unlikely to be sold (pic: NewsDay)

A legal challenge by ZimRe, in which the reinsurer claims 49% in ZUPCO, remains unresolved. Day River Corporation, linked to Pioneer Transport co-founder Hamish Rudland, is the single biggest shareholder in ZimRe, with 40%. Government directly owns 22% of ZimRe and has influence over the National Social Security Authority, a 15% shareholder in the group.

Zimpost and POSB

Zimpost and POSB were put up for sale, but neither of the two old siblings has been privatised.

According to a recent update from Treasury: “A new Strategic Plan is being finalized which will determine the timing and the model of the privatization.”

ZMDC: big mine sale

Under the TSP, ZMDC placed six of its mines on sale. Within a month, there were 151 bidders. However, in March 2019, government withdrew the sale, saying it had not attracted quality bids.

[CLICK: ‘You don’t know what you want’ – Why Zimbabwe’s big mine sale is failing]

ZMDC’s old mines are desperate for investors, but quality buyers stayed away

In July, it was announced that some ZMDC would go into joint ventures with Kuda Tagwirei’s Landela. Other ZMDC partners would be Sakunda Holdings, Chinese giant Tsingshan, and Tumagole, a little-known South African venture, as well as the Zimbabwe Defence Forces.

Air Zimbabwe: still grounded   

The TSP planned to find strategic partners for the airline. That didn’t work. In October 2018, the airline was placed under administration. A tender opened for new partners a month later. No quality investors made bids.

[Click to read: Forget about ‘missing planes’, is Air Zimbabwe missing its debts?]

POTRAZ, BAZ merger resisted

The TSP proposed a merger of the Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) and Broadcasting Authority of Zimbabwe (BAZ).

This failed “due to diverging views of the parent ministries in as far as the merger is concerned”. In other words, because politicians were not willing to let go, Zimbabwe missed out on catching up with the rest of the world, where telecoms and broadcasting have long converged.

While the state enterprises programme has been largely a failure, there were a few rare promises kept on the TSP’s plan on public entities.

ZIDA: promise kept

The TSP promised to merge agencies that deal with investors into one entity, the Zimbabwe Investment Development Agency (ZIDA). This was done.

ZIDA merged the Special Economic Zones Authority, the Zimbabwe Investment Authority, and the Joint Venture Unit. Zimtrade was initially part of the deal, but it was later decided to let it stand alone.

Over the past two years, the National Investment Policy was launched, and new Investment Guidelines were published. A new board chaired by United Refineries CEO Busisa Moyo was appointed, and respected banker Douglas Munatsi was announced as ZIDA CEO

Grain Marketing Board (GMB)

The TSP’s plan was to split the GMB into two; the strategic grain reserve and a commercial arm, Silo Foods. This was done in April 2019, when Silo was registered as a subsidiary. NSSA is now in talks to take up a 35% stake in Silo Foods. Ernst & Young are conducting due diligence.