Unbundling of Zesa on track | The Chronicle


The Chronicle

Harare Office
LEADING audit firm Ernst & Young, which has completed its advisory report on the unbundling of Zesa, has recommended the elimination of the role of executive chairman at the state power company.

Zesa is currently led by Dr Sydney Gata as Executive Chairman. He was first appointed to head Zesa in 2000, as chief executive, before becoming executive chairman in 2003.

Dr Gata left the electric utility in 2006 and returned in 2019, again assuming his former position as executive chairman, which drew criticism from corporate governance experts.

In what, however, indicates progress in the proposed unbundling of the power entity, Ernst & Young has completed its report on the unbundling, which is now awaiting Cabinet approval.

Part of the recommendations from Ernst & Young, responsible for working with Zesa for the unbundling process, is that the utility should have nine non-executive directors, including its chief executive, but headed by a non-executive chairman.

“For all proposed designs, a consulting structure was proposed. This is based on the main regulations and guidelines in force,” said the renowned global audit firm.

“A minimum of three non-executive directors should be appointed to the board, the majority of them being independent. The board is currently complying with these requirements and therefore this structure can be maintained with any option chosen.

“The company’s chief executive officer (CEO) should not also be the chairman of the board, hence the need for separation.”

Ernst & Young said that under the Companies and Other Business Entities Act, every company must have at least one secretary ordinarily resident in Zimbabwe.

The auditing firm said the company secretary could be a chartered accountant, lawyer, chartered accountant or public auditor.

He also said that the board of any public entity should establish an audit committee consisting of at least two independent board members.

“The audit committee should be responsible for improving management reporting by overseeing audit functions, internal controls and finances.” reporting process.

In addition, he recommended that the board establish an audit committee composed of at least two non-executive directors other than the chairman of the board.

Ernst & Young also recommended that the board also be required to establish risk management, technical, finance and compensation committees.

The campaign to separate the positions of CEO and chairman is rooted in the idea that a stand-alone chairman can balance out a stand-alone CEO.

Globally, it has become common for shareholders to attach more value to the quality of the corporate governance structure through a clear separation of powers.

Zesa unbundled its operations in 2002 in an effort to improve efficiency and take advantage of economies of scale. This resulted in the formation of six companies, owned by a group of holding companies.

But the Cabinet in 2018 ordered its consolidation after noting that the structure had not delivered the desired results because its system implementers had not understood it.

This resulted in separate entities operating from centralized control, which led to a lack of cohesion, which adversely affected the smooth operation and efficiency of the electric utility.


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