WHEN Zimbabwe obtained its independence in April 1980, the country’s first 10 years of independence were characterised by rigorous policy-making efforts to address inequalities and injustices created by policies before independence.
However, despite the commendable efforts by the policymakers, the country started experiencing economic and social challenges in the 1990s, resulting in huge debts, worsened poverty levels and retardation in economic growth.
Since then, the country has implemented a number of policy measures to economically and socially resuscitate the economy. Examples of the recovery programmes are the Economic Structural Adjustment Programme (Esap) and the Zimbabwe Programme for Economic and Social Transformation (Zimprest).
Following the economic and social challenges that Zimbabwe continued to experience, encouraged by international social and economic developments, the country made concerted efforts to restore investor confidence and enhance corporate transparency and accountability in its public and private sectors.
Overview
Governance issues are not alien to Zimbabwe as traditional chiefs have been recognised as custodians and fountains of knowledge of grassroots democracy as they make consultations with their council machinery or court system before taking any decision.
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Pre-colonial chiefs were custodians of peace and human rights. The end result was equitable distribution of resources, justice and harmony. The prevalence of lop-sided corporate governance systems, accentuated by greed-driven and rent-seeking inclinations to graft, as well as lack of integrity, is cancerous (Gono, 2004).
Corporate governance has gained tremendous importance in recent years. In Zimbabwe, corporate governance has attracted a lot of attention since the financial crisis in 2003.
Several companies have faced difficulties associated with corporate governance flaws in Zimbabwe. The major cause of these corporate scandals in Zimbabwe was centered mainly on poor corporate governance.
Zimbabwe did not have a legislated national code of corporate governance along the lines of the King Code, Cadbury Code or Sarbanes Oxley Act until the Public Entities Corporate Governance Act was promulgated in 2018.
Before this, corporate governance practices in Zimbabwe were regulated by the Companies Act (Chapter 24:03) and Zimbabwe Stock Exchange Act (Chapter 24:18), (ZSE) listing requirements, as well as the rules of various professional bodies, such as the Institute of Directors of Zimbabwe (IoDZ).
From a commercial point of view, corporate governance standards are high in Zimbabwe, even though the fear is that the political governance standards might spill into the area of commerce.
Zimbabwe responded to international developments and challenges of poor corporate governance practices by creating a solid corporate governance framework to mitigate further occurrences of corporate failure.
In developing its corporate governance systems, Zimbabwe adopted a mixture of aspects of the corporate governance structures found in developed markets.
Zimbabwe also participated in and benefited from Africa specific corporate governance initiatives like New Partnership for Africa’s Development, African Peer Review Mechanism, Africa Governance Forum, and Africa Governance Inventory.
To further confirm its commitment to good corporate governance, Zimbabwe is one of the 12 African countries, who are founder members of the African Corporate Governance Network launched in October 2013.
The first corporate governance instrument to be established by Zimbabwe, in 2001, was "The Principles for Corporate Governance in Zimbabwe: Manual of Best Practices".
The Manual was produced by concerted efforts of several institutions and individuals.
The main aim of the Manual is to encourage the highest standard of corporate governance in Zimbabwe by recommending standards of conduct for directors and emphasising the need for responsible corporate conduct.
Constitution of Zimbabwe
The Constitution of Zimbabwe, which is the supreme law of the country, raises the quality of governance demanded of the Zimbabwean society and sets out corporate governance as an inherently vital part of a healthy and prosperous nation.
The Constitution states that Zimbabwe is founded on respect for internationally accepted principles of good corporate governance. It states that the government must adopt and implement policies and legislation “to develop efficiency, competence, accountability, transparency, personal integrity and financial probity” in all institutions.
In addition, the Constitution provides that companies and other commercial entities owned or wholly controlled by the state must conduct their operations to maintain commercial viability and abide by generally accepted standards of good corporate governance namely transparency, justice, accountability, and responsiveness, among others.
Companies Act
The Companies Act (Chapter 24:03) has been in existence since 1951, although part amendments have been undertaken where they were considered necessary.
The Act governs the constitution, incorporation, registration, management, administration and winding up of companies and other institutions and provides for regulation of powers, duties, and remuneration of directors.
Although the Companies Act does not specifically provide for corporate governance, it ascribes liability on directors for conducting the business of a company fraudulently or recklessly and for falsification of information.
Acts establishing SOEs
In Zimbabwe, the majority of the SOEs are established through an Act of Parliament. Examples are the Minerals Marketing Corporation of Zimbabwe Act, Zimbabwe Mining Development Corporation Act, the Grain Marketing Act and the Medicines and Allied Substance Control Act (MASCA).
The specific Act provides the main objective of establishing the public entity, how it should be governed and stipulates the functions, powers, and duties of the entity.
PFMA
The Public Finance Management Act (PFMA) (Chapter 22:19) (No. 11 of 2009), was enacted in 2009 to provide for the control and management of public resources and the protection and recovery thereof; the regulation and control of SOEs; general treasury matters; the examination and audit of public accounts and to provide for matters pertaining to financial misconduct of public officials.
National code
The National Code of Corporate Governance (hereinafter referred to as National Code), was developed under the chairmanship of Canaan Dube, signed by the country’s President in 2014 and officially launched in April 2015.
According to the chairperson’s words, “the crafting of the code benefited immensely from the codes of other countries, such as South Africa, which have had national codes for a long time. This ensured that the code would be comparable to the codes in countries which are our major trading partners, and its principles and practices would meet international standards”.
Corporate governance Act
The Public Entities Corporate Governance Act requires SOEs to adhere to prescribed reporting requirements, timeframes and a host of accountability obligations.
The Act places limits on the terms of office of chief executives and board members of SOEs, while also binding them to performance contracts.
Appointments shall be on merit, and board members will be dismissed if they fail to draw up a strategic plan or fail to comply with it.
Remuneration has been capped for appointees and permanent secretaries are no longer allowed to sit on the boards of SOEs.
A Corporate Governance Unit in the Office of the President and Cabinet was established to monitor and evaluate the performance of public entities and their leadership, with its head holding the same rank as a Permanent Secretary.
Bosses at SOEs will have to declare assets and business interests exceeding a given threshold to the Office of the President and Cabinet, and failure to comply will result in disqualification from working as a senior officer or to be on the board of an SOE.
Board members shall serve for a maximum of eight years, no one shall sit on more than two boards, and the primary basis for all appointments shall be merit among other key requirements. Ministers are required to notify the Corporate Governance Unit, in writing, and the justification for the appointments.
Munhenga is a human resources and corporate governance professional. — tendayimunhenga@gmail.com or +263 772 380 340 / +263 719 380 340.