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Friday, 3 April 2015

Parastatal Madness, 21st Edition

We have long observed that the failure of many government institutions to perform has largely been down to the failure by other parts of GRZ and the private sector to pay these governments institutions the debt owed to them. We usually refer to this problem as "parastatal madness". Here are some recent examples:

The National Pension Scheme Authority (NAPSA) is currently owed around K2.6 billion in outstanding contribution arrears and penalties by various GRZ institutions e.g. government ministries, grant-aided institutions, parastatals and councils. The non-payment and continuous delays in contributions, including failure to pay penalties continues to hamper the viability of the pension scheme. 10% of the debt is from arrears in statutory contributions and 90% is in statutory penalties.(Source: Times of Zambia)

ZESCO is currently owed around K1.4 billion in outstanding electricity bills by Copperbelt Energy Corporation (CEC), Lumwana Mine and GRZ institutions due to the non-payment of electricity bills by CEC following an increase in bulk supplier agreement tariffs approved by the Energy Regulation Board in 2011 and 2014,. CEC and Lumwana Mine’s debt stands at around K1 billion. Government owes around K0.4 billion. The failure to pay bills is a challenge for ZESCO in improving its efficiency and funding new investments. ZESCO is now installing prepared meters in army barracks, schools and hospitals to mitigate the debt by GRZ institutions from increasing. (Source: Daily Mail)

University of Zambia (UNZA) says Government owes  the institution around K90 million in unpaid tuition fees. UNZA says that failure by government to pay its debts on time makes it delay for the university to pay its staff on time. It also notes that failure by government to pay makes it difficult to push students on "self-sponsorship" to always pay when the government is not paying as well. The students on self-sponsorship are already fighting hard to meet the school fees. (Source: The Post)


Why do these institutions struggle with 'parastatal madness' and what is the best way to deal with it?
Chola Mukanga
Copyright © Zambian Economist 2015

1 comment:

  1. For what it's worth, this kind of dysfunction is all the rage in Ghana. For one it makes it very hard to budget or to discern where the economy is going. Indeed these arrears mean that official budgets bear little relation to actual performance on the ground.

    As far as strategies to combat this, I think whoever cracks the code deserves the Nobel Prize.


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