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Zimbabwe: Mnangagwa’s Government To Sell State-owned Enterprises To Offset Budget Deficit

Zimbabwe is planning a mass sale of state owned enterprises as it looks to offset a ballooning budget deficit.

The country aims to attract private investors to rescue the state power utility, the national airline and other institutions.

President Emmerson Mnangagwa, who took over from Robert Mugabe, is under pressure to deliver on his promises to revive the economy and reduce government spending.

  
Zimbabwe’s former vice president Emmerson Mnangagwa arrives ahead of his inauguration ceremony to swear in as president in Harare, Zimbabwe, November 24, 2017. REUTERS

 

Most government run businesses are perennial loss makers, heavily in debt and have survived thanks to treasury bailouts.

24 of 92 parastatals including the national airline are up for disposal as Mnangagwa’s government seeks a break from the past.

“One of the biggest failings of the Mugabe government, demanding that government be in control all the time and even have 51 percent ownership of every new business and that sort of thing prevented investors from coming so hopefully we have swept that all aside now and investors will begin to come,” economist John Robertson said.

They will have to look past a history of poor performances to find a compelling value proposition.

“Clearly there are some parastatals in my view, which might be difficult to sell on the basis of weak balance sheet”, said trade economist Dr. Gift Mugano. “But there are some, which have good value on the basis of their strategy, how they are located within the whole economy and what value can they give.”

One such enterprise is the National Railways of Zimbabwe, which is due to be recapitalised to the tune of $400 million by a consortium of Zimbabweans in the diaspora and South African rail company Transnet.

The ground breaking deal has been touted as a model for successful private public partnerships, a model that government may adopt as an alternative to outright disposal.

“As a board we were able to get approval to provide various models of recapitalisation that is wholly debt or debt plus equity…NRZ is an attractive asset, but moreso Zimbabwe is an attractive asset,” said Larry Mavima, the Chairperson of National Railways of Zimbabwe. Mavima also says Zimbabwe’s location within Southern Africa itself positions it in a very strategic point.

The new government has repeatedly said Zimbabwe is open for business and the country’s leaders hope that punters have heard that and turn up for the big sale.

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