Corporate Governance in Zimbabwe’s Public Entities

Comparisons with South Africa and Australia

Nomsa Jane Moyo

• Publisher: Routledge
• Year: 2022
• Print ISBN:
  9780367767327
• eBook ISBN:
  9781000555219
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This study focuses on the corporate governance initiatives, laws and regulations aimed at enhancing the effectiveness of boards of public entities in Zimbabwe. The key question addressed is whether or not the corporate governance initiatives and legal and regulatory reforms in Zimbabwe are sufficient to enable boards of public entities to effectively discharge their duties and meet internationally accepted corporate governance standards. A comparative analysis of Zimbabwe's public entities corporate governance framework to that of South Africa (a developing country like Zimbabwe) and Australia (a developed country with similar common law heritage) is also conducted. Recommendations are made on how best to enhance the effectiveness of boards of public entities in order to promote good corporate governance practices in Zimbabwean public entities.

1
CORPORATE GOVERNANCE IN PUBLIC ENTITIES

Introduction

The degree to which a country's public entities observe basic principles of good corporate governance is an increasingly important factor for attracting investment capital, maintaining economic stability, and encouraging growth. Zimbabwe is faced with the challenge of restructuring for greater efficiency and creating an investment-friendly environment; therefore, practicing good corporate governance in public entities is crucial for economic growth. As corporate organisations, public entities need to be managed effectively by a competent board, which can construct and implement strategies that are in the best interests of the entity and all stakeholders.

This book examines the corporate governance initiatives, laws, and regulations aimed at enhancing the effectiveness of boards of public entities in Zimbabwe. The key question addressed is whether the corporate governance initiatives and legal and regulatory reforms in Zimbabwe are sufficient to enable boards of public entities to effectively discharge their duties and meet internationally accepted corporate governance standards. And, if the initiatives and reforms are considered sufficient, to understand what challenges boards of public entities have encountered in effectively discharging their duties and promoting good corporate governance within this framework. Furthermore, a comparative analysis of Zimbabwe's corporate governance frameworks against those of South Africa and Australia is presented with a view to establishing the extent to which Zimbabwe has tried to harmonise its corporate governance framework with other international players, and what Zimbabwe can learn from these two countries.

To achieve these objectives, a literature analysis was conducted, questionnaires were circulated, and interviews were held with board members, senior managers, company secretaries, chief executive officers, and selected shareholder representatives in four public entities in Zimbabwe. The entities surveyed were the Minerals Marketing Corporation of Zimbabwe (MMCZ),¹ the Zimbabwe Mining Development Corporation (ZMDC),² the National Railways of Zimbabwe (NRZ)³ and the Grain Marketing Board(GMB).⁴ The aim was to assess corporate governance issues and challenges encountered within the prevailing corporate governance framework from the perspectives of the selected participants. The book considers corporate governance developments and the law as at December 2018.

1 MMCZ is a state owned enterprise that was established in terms of the MMCZ Act 2 of 1982 to control and regulate the export, sale and stockpiling of all minerals. MMCZ is a body corporate that is capable of suing and being sued and subject to the provisions of the Act. 2 ZMDC is a public entity which was established in terms of the ZMDC Act 31 of 1982. Its main fonctions are to, on behalf of the state, invest in the mining industry in Zimbabwe, plan, coordinate and implement mining development projects and engage in prospecting, exploration, mining and mineral beneficiation programmes, among other tilings. 3 NRZ is a state owned enterprise that was established in terms of the Railways Act 41 of 1972 to "provide, operate and maintain within its area of operation, either by itself or through its agents or jointly with others" an efficient system of public transport of goods and passengers by rail and by road. 4 GMB was established as a wliolly-owned government entity in terms of the Grain Marketing Act 20 of 1966 to regulate and control the prices and marketing of certain agricultural products and their derivatives.

What does corporate governance entail?

Corporate governance is a multi-faceted subject. The Cadbury Report defines the term to mean 'the system by which companies are directed and controlled'.⁵ Cadbury's⁶ view is that corporate governance refers to all aspects of the control and management of companies and focuses almost exclusively on the internal structure and operation of the organisation's decision-making processes.⁷

5 Cadbury'Report (1992) 14. 6 Sir Adrian Cadbury is known as a global governance pioneer having chaired the development of the world's first 'corporate' governance code. This was known as the 'code of best practice' (commonly known as the Cadbury Report) which was published in 1992 by the UK Committee on the Financial Aspects of Corporate Governance 7 Ibid.

Another view is that corporate governance relates to the relationships between a company's management, its board, its shareholders, customers, and other stakeholders; it provides the structure through which the objectives of the company are set; and places a strong emphasis on the welfare of shareholders.⁸ It therefore encompasses matters such as directors' duties, financial accounting, and the protection of the interests of various stakeholders.⁹ Similarly, the Zimbabwean Corporate Governance Framework for State Enterprises and Public Entities (CGF) defines corporate governance as 'a set of processes, customs, value codes, policies, laws and structures governing the way a corporation is directed, controlled and held accountable'.¹⁰ The CGF further states that 'corporate governance ensures that the organisation is run properly, that goals are being achieved and funds are being managed with high standards of propriety and probity'.

8 Du Plessis (1994) 81-82. See also OECD (2015) 9. 9 Ibid. 10 Para 1.3 of the Corporate Governance Framework for State Enterprises and Public Entities (2010).

Scholars and practitioners of corporate governance have given the term a wider variety of definitions. Some economists and social scientists have defined corporate governance largely as 'the institutions that influence how business corporations allocate resources and returns'.¹¹ John and Senbet give a broader definition, which states that 'corporate governance deals with mechanisms by which stakeholders of a corporation exercise control over corporate insiders and management such that their interests are protected'.¹² According to Salacuse, these definitions focus on the informal practices that develop in the absence of effective formal rules and not only on the formal rules and institutions of corporate governance.¹³ Also, 'they encompass not only the internal structure of the corporation but also its external environment'.¹⁴ The internal structure refers to the mechanisms within the corporation that determine how it is run while the external environment includes government regulatory agencies, stock markets on which corporations list their shares, and the courts that enforce remedies for violations of corporate governance rules. According to this view, corporate governance is concerned with practices and procedures for trying to ensure that a company is run in such a way that it achieves its objectives.

11 O'Sullivan (2000) 153-172. 12 John and Senbet (1998) 371-403, See also World Bank (2002) 68. 13 Salaciise (2002) 6-9. 14 Ibid.

In support of the views of economists and social scientists, the Organisation for Economic Co-operation and Development (OECD) Task Force defines corporate governance as follows:

Corporate governance ... involves a set of relationships between a company's management, its Board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the Board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring.¹⁵

15 OECD (2015) 9.

According to the OECD, corporate governance encompasses not only internal aspects of corporate governance but takes into account other stakeholders and the impact of the company on them.¹⁶ It also entails that a company, especially its directors, abide by the provisions of relevant statutes, societal norms, standards and codes of best practice as well as manage the company reliably.¹⁷ The same principle was adopted by Gabrielle O'Donovan who defines corporate governance as a

16 Ibid. For similar definitions, see Gopalsamy (2008) 20-21. 17 Van der Menve et al. (2009) 15.1-15.32.

system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs.¹⁸

18 O'Donovan (2003) 22-30.

Similarly, in support of this view, Crowther defines corporate governance as

an environment of tr...

Table of contents

• Cover Page
• Dedication Page
• Title Page
• Copyright Page
• Contents Page
• Preface Page
• Abbreviations Page
• 1. Corporate governance in public entities
• 2. The fundamental elements of an effective board
• 3. Corporate governance in Zimbabwe
• 4. Corporate governance in South Africa and Zimbabwe
• 5. Corporate governance frameworks in Zimbabwe and Australia
• 6. Evaluating corporate governance frameworks
• 7. Enforcement and compliance
• 8. What should Zimbabwe do?
• Bibliography
• Index