Mthuli Ncube slams debt takeover practice

Mthuli Ncube slams debt takeover practice
Published: 27 June 2019 (156 Views)
Government may not take over the debts of State-owned entities such as Air Zimbabwe and Zisco, touted as critical to make them more attractive to investors, after Finance and Economic Development Minister Professor Mthuli Ncube indicated that automatic debt takeover was not good financial practice.

Professor Ncube said while it had taken longer than anticipated for entities such as national carrier Air Zimbabwe and ex-steel making giant Zisco, whose suffocating debts the Government has considered assuming, to find suitors or technical partners to facilitate their turnaround, debt was not the stumbling block.

Air Zimbabwe, which is under administration, approached Government with a proposal to assume its huge debts, a request the Government had agreed to in principle. The Government has also already passed legislation to provide for the takeover of the mothballed former steel making giant's long-standing legacy debts.

"The debt is not scaring investors because if a company is indebted; has a large debt on its balance sheet, it just becomes cheap, so as an investor you just ask for a lower price," the minister said.

"So (as an investor) you always pay a fair price, with or without the debt, so debt is not the issue. Think about it, if you take away the debt from the balance sheet of a parastatal, because you want to raise its price, are you better off as Government? No, you are not better off," the minister said.

The Treasury chief said even if the Government received an attractive purchase price after taking over debts of the highly indebted entities like Zisco, debt liability would remain its obligation.

Further, Minister Ncube said there was need for debt audits and accountability by management around how some of the debts were accumulated before assumption of the liabilities is considered. "It can't just be automatic debt assumption, there has to be a process and not all parastatals would require debt assumption; some of it should be left in there.

"Certainly, in the commercialisation, partial privatisation, I have not come across the issue of debt, as an issue (to attracting investors)."

Minister Ncube said it was not Government policy to assume the debts of all parastatals, but Government was desirous to strengthen the balance sheets of SOEs and debt assumption was but one option.

"It does not mean you then go around taking over the debts of all parastatals, sometimes it is desirable to leave it on there . . . because debt is useful in disciplining managers running these companies," he said. Minister Ncube is spearheading the Government's parastatal and State enterprise reform programme, as part of widespread reforms envisioned under the Transitional Stabilisation Programme (TSP).

"That is why I always say automatic debt assumptions are not good finance, they are actually bad finance. Good finance says that the debt, not necessarily 100 percent, but at least part of it should stay on the balance sheet of the company; it is a disciplining mechanism on the management of the company," the minister said.

AirZim is currently saddled with a debt of US$341 million. Of the debt, 92,2 percent amounting to US$314 million is local debt, while foreign debt constitutes 8 percent at US$ 26,1 million.

Transport and Infrastructural Development Minister Joel Biggie Matiza, said recently that the takeover of Air Zimbabwe's debts by Government remained outstanding and he was looking to expedite and complete the process within the shortest possible time.

And according to a schedule of the Zimbabwe Iron and Steel Company (Zisco) (Debt Assumption) Act, the moribund steel-maker owes US$212 million in external loans, $6 million to external suppliers, $57,6 million in domestic loans and $219 million to domestic suppliers, utilities and statutory obligations.

Government last year rolled out detailed plans for the restructuring of State-owned enterprises, with 41 entities lined-up for privatisation, departmentalisation and listing on the Zimbabwe Stock Exchange.

Other firms would be commercialised, merged while four will be dissolved. It is expected that 13 parastatals would be privatised while 12 are set for ZSE listing. The State enterprises reform programme, targets to turn the companies into profitable firms to avoid perennial reliance on Government handouts for survival.

- the herald

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

MISSING USD$ 3 BILLION: Mnangagwa called to account

by Mandla Ndlovu | 20 July 2019 | 41 Views

Mohadi warns drug dealers

by Staff reporter | 20 July 2019 | 25 Views

Getaway car catches fire

by Staff reporter | 20 July 2019 | 44 Views

Zimbabwe MPs demand Land Cruisers, houses in Harare

by ZimlIve | 20 July 2019 | 25 Views

Probe into Bulawayo Town Clerk suspension begins

by Staff reporter | 20 July 2019 | 25 Views

Anti-Mnangagwa activist released on bail

by Staff reporter | 20 July 2019 | 27 Views

Zec to pilot test display of voters' rolls

by Staff reporter | 20 July 2019 | 26 Views

Mnangagwa's luxury junkets cause storm

by Staff reporter | 20 July 2019 | 28 Views

Chaos, corruption in councils

by Miriam Tose Majome | 20 July 2019 | 12 Views

'External MDC branches key in national politics'

by Staff repirter | 20 July 2019 | 19 Views

Mnangagwa dates San community

by Staff reporter | 20 July 2019 | 20 Views

Zimbabwe police cells; chambers of torture

by Staff reporter | 20 July 2019 | 15 Views

Prosecutors declare incapacitation

by Staff reporter | 20 July 2019 | 22 Views

'Chiwenga on the mend'

by Staff reporter | 20 July 2019 | 23 Views

Lady teacher in trouble for abusing pupil

by Staff reporter | 20 July 2019 | 24 Views

Tshinga Dube pleads with BCC over eviction

by Staff reporter | 20 July 2019 | 21 Views

Headmaster caught pants down with married teacher

by Staff reporter | 20 July 2019 | 27 Views

Chief Mugabe selection process rocked by disputes

by Staff reporter | 20 July 2019 | 19 Views

Government programmes poorly supervised, says Zanu PF official

by Staff Reporter | 20 July 2019 | 64 Views

Zimbabwe govt works on 50:50 principle

by Staff Reporter | 20 July 2019 | 63 Views

Zanu-PF tried and tested, says Obert Mpofu

by Staff Reporter | 20 July 2019 | 55 Views

Poacher gets 9 years behind bars

by Staff Reporter | 20 July 2019 | 53 Views

Woes mount for Prophet Magaya

by Staff Reporter | 20 July 2019 | 53 Views

MDC fights for Japajapa's freedom

by Mandla Ndlovu | 20 July 2019 | 55 Views

Prophet Magaya's powerful enemies revealed

by Mandla Ndlovu | 20 July 2019 | 71 Views

Econet in major blackout

by Mandla Ndlovu | 20 July 2019 | 53 Views

'Mnangagwa redefines corruption'

by Mandla Ndlovu | 19 July 2019 | 145 Views

ZESN condemns Zanu-PF vote buying

by Staff Reporter | 19 July 2019 | 134 Views

Ramaphosa 'deliberately misled parliament'

by Staff reporter | 19 July 2019 | 102 Views

SA Home Affairs has 3000 uncollected Zimbabwe permits

by Staff reporter | 19 July 2019 | 107 Views

How CIOs benefited from Jonathan Moyo's ZIMDEF funds

by Mandla Ndlovu | 19 July 2019 | 140 Views

Mnangagwa speaks on ailing Chiwenga

by Staff Reporter | 19 July 2019 | 270 Views

Police statement on Prophet Walter Magaya

by Mandla Ndlovu | 19 July 2019 | 170 Views

Temba Mliswa writes to Nelson chamisa

by Mandla Ndlovu | 19 July 2019 | 210 Views

USD$ 3 Billion disappears in Zimbabwe

by Mandla Ndlovu | 19 July 2019 | 212 Views