The state enterprises under the Mutapa sovereign wealth fund still have to comply with procurement rules despite an exemption issued for the fund itself, The Ministry of Finance says.
In a government gazette last Friday, President Emmerson Mnangagwa said Mutapa 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 announcement raised concern that firms in which Mutapa has shares – from mining companies such as Kuvimba to state-owned enterprises like TelOne – will no longer have to comply with procurement regulations.
But Treasury Secretary George Guvamatanga told a meeting of businesspeople in Victoria Falls on Monday that the entities under Mutapa are not covered by the exemption. Only Mutapa, as a standalone investor holding government shares in each of the firms, has that privilege. The parastatals in which Mutapa has shares will remain separate legal entities that must still go through procurement regulations.
“To be clear, in terms of the law, as contained in the general notice published last Friday, the exemption applies only to the fund, and not to any other entities listed on the schedule. The fund merely owns shares in those entities, but (the SI) does not change their legal character or separate legal entities distinct from the fund,” says Guvamatanga.
He adds: “All this noise that we’re seeing, that every entity has been exempted, is not correct.”
Why has government exempted Mutapa? According to Guvamatanga, this is because the fund will need to make quick decisions as an investment fund.
“Because the fund, by its nature, will operate and compete in competitive markets, in both the international and competitive markets, competing against private equity funds and such types of businesses, the fund will need to be quick, efficient and cost-effective,” Guvamatanga said.
“In some instances, by its nature, it will be involved in market-sensitive transactions which as investment brokers will know, will require such transactions to be handled differently. As such, it was important to place it at par with its peers.”
A new management is expected shortly for the fund.
Mutapa, will hold some of government’s worst performing entities, raising concerns over what they bring to a fund supposed to preserve value for the economy.
“These companies form part of the initial capital of the fund. They may not be performing well, they may have liabilities, but they also have assets. These assets form part of the capital of the fund,” says Guvamatanga.
On why it was necessary to put these loss-making enterprises under the sovereign wealth fund to start with, he said: “The left pocket has holes. We simply removed it from the left pocket to the right pocket, but it’s the same pair of trousers. If you have a pocket with holes, are you going to put your money in there?”