Finance Minister Condemns Govt Assumption Of State Owned Entities' Debts

Finance Minister, Professor Mthuli Ncube has condemned the assumption of State-owned entities’ debts by the government. The government has been taking over debts for state enterprises such as Air Zimbabwe and Zisco in an endeavour to make them more attractive to investors.

Ncube said that the practice was not a good financial practice. He also said that investors are not scared away by huge debts the SOEs carry. He said:

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.

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 added that there was no logic in assuming the debt since the debt remains the government’s obligation even after it would have received an attractive purchase price from investors. He also said that there was need for debt audits and accountability.

Ncube also observed that it was not a government policy to assume the debts of all parastatals. He added that sometimes debt works to instil discipline in managers.

The Treasury chief is spearheading the government’s parastatal and State enterprise reform programme.

More: The Chronicle