GOVERNANCE activist Rueben Lifuka says President Hakainde Hichilema and the UPND government should not be seen to justify wrong decisions simply because the previous administration did the same.
And Lifuka has wondered what the IDC, with the President at the helm can do, which an independent and experienced business executive or public official cannot do.
On Monday, President Hichilema defended his decision to remain board chairman for the Industrial Development Corporation, saying he found the law in place and he was only following it.
Responding to a question from veteran journalist Frank Mutubila who asked the Head of State to justify his decision to remain IDC board chairman despite his office being too busy, President Hichilema wondered why people never complained about President Lungu being IDC board chairman.
But in an interview, Lifuka recalled that the inappropriateness of the corporate governance system at IDC was raised even during the PF administration.
“First and foremost, it is sad to note that President Hichilema seemingly has appointed himself as Board chair because no one complained when former President Lungu appointed himself to this position. The UPND Government and President Hichilema should not be seen to justify wrong decisions simply because the previous administration did the same. The PF administration was voted out for many reasons including poor economic governance- and it is shocking how the UPND occasionally wants to use the PF as a reference point of good leadership practice. The inappropriateness of the corporate governance system at the Industrial Development Corporation was raised even during the PF administration,” Lifuka said.
“President Hichilema should know that in 2017, the Committee on Parastatal bodies rendered a report to the National Assembly on the management and operations of the Industrial Development Corporation in Zambia. This committee comprised a number of UPND Members of Parliament including Hon Gift Chiyalika, Hon. Douglas Syakalima and Hon. Brian Kambita among others. This Committee received representations from stakeholders on a range of issues including the corporate governance system of IDC. The Committee in its final recommendation unconvincingly ended up agreeing with the President chairing the Board of IDC. President Hichilema indicated that he has continued to serve as Board Chairperson because that is what the law provides but he should have gone further to indicate challenges if any that his administration faces in amending the law to regularize the corporate governance of IDC.”
Lifuka said the process of changing the composition of the Board could easily be done by amending the Articles of Association since the IDC was now under the Ministry of Finance.
“The Industrial Development Corporation (IDC) Limited is a State-Owned Enterprise (SOE) mandated to spearhead the Government’s commercial investments agenda and it was incorporated on 21st January 2014 and is wholly owned by the Government through the Minister of Finance pursuant to the Minister of Finance (Incorporation) Act Cap 349 of the Laws of Zambia. The Minister of Finance is the corporation sole in the case of IDC and allows for continuity of the holding of shares and assets in this State Owned Enterprise. In addition to the Companies Act, the IDC as a public institution is subject to all other laws including those dealing with Public Finance Management and Public Procurement,” he said.
“On the specific issue of who chairs the IDC board, this is in the Articles of Association, specifically in Part 12 clause 57 of the Articles of Association of the IDC and Part 3.2 of the Board Charter. Additionally, it should be stated that under the PF administration, the portfolio of the IDC fell under the Office of the President as promulgated in Gazette Notice No. 836 of 2016. In the case of the UPND Government, the IDC is listed as one of the statutory bodies under the Ministry of Finance. In the light of the above, the process of changing the composition of the Board can easily done by amending the Articles of Association- government has a major stake in IDC and I personally see no insurmountable legal impediments which would prevent the Minister of Finance, with the full approval of the President in effecting this change. Similarly, amendments to the Board Charter can be effected to remove the President as Chair and in his stead, appoint another person.”
Lifuka said the President was already clothed with wide ranging executive authority and he could provide guidance to the IDC without serving as Chairperson of the Board.
“There are many reasons why the President should not chair the IDC Board of Directors and this includes possible continuation of political patronage. IDC supervises an investment portfolio of 41 companies comprising 33 subsidiaries and eight associates. One of the public concerns against the PF government was the deployment of ill qualified political cadres and sympathisers on Boards and Management of State Owned Enterprises. President Hichilema has done well to pronounce his desire to dispense with political patronage, and one expects that he demonstrates this direction of travel on matters of probity by removing himself from being a subject of discussion in the event that there are issues of impropriety in the running of the IDC,” he said.
“The President is already clothed with wide ranging executive authority of the State and he can provide guidance to the IDC without necessarily serving as Chairperson of the Board. In the 2020 Report of the Auditor General on the Accounts of Parastatal bodies and other statutory institutions for the financial year ended 31st December 2020, the IDC was cited for a number of breaches including the investment in loss making companies which was against the IDC Investment Policy and Guidelines which stipulate that the IDC will not engage in equity investments or direct lending in companies that have not operated profitably for three consecutive years. Specifically, IDC made investments in ZAMPALM Limited and Superior Milling Company Limited. These were prohibited investments in line with section 2.2 of the IDC Investment Policy and Guidelines in that the two companies had not been operating profitably for three consecutive years prior to their acquisition by IDC.”
Lifuka wondered if the Public Accounts Committee could summon the IDC Board chairperson who was the President in the event that the Auditor General found breaches.
“This was a direct indictment on both the IDC Board and Management. Now, while it is possible that such breaches may not arise under President Hichilema, the question is in the event that the Auditor General finds breaches of similar magnitude, how does the Public Accounts Committee address such matters? Can PAC summon the Chair of IDC to its hearings? Even if PAC does not summon the President but makes adverse findings on IDC, wouldn’t that in itself be a finding on the Board? Who in this instance would dismiss a non-performing IDC Board which is chaired by the President? Who then in Cabinet will take responsibility for providing strategic and policy direction on how the government intends to address the shortcomings pointed in the Auditor General’s reports? Can other cabinet members sit and hold IDC, chaired by the President, accountable for its poor performance and non-compliance with national laws and regulations?” he questioned.
Lifuka said the President should serve as an example of how not to politicise the Boards of Directors of State Owned Enterprises.
“How do we address situations where a non-performing parastatal points to poor policy guidance or sheer incompetence of the IDC management and the Board? Surely, there is no compelling reason why we should have this conflict of interest. The question that President Hichilema probably should have answered is why does he find it exceedingly important to chair the IDC Board? What is it that the IDC will do with him at the helm which an independent and experienced business executive or public official cannot do? The President should serve as an example of how not to politicise the Boards of Directors of State Owned Enterprises if IDC can be freed of direct political interference, this will serve as a model for all other IDC subsidiaries. There are several examples in the region like Rwanda, Botswana and Mauritius where similar entities like IDC are chaired by prominent captains of industry. Zambia is not short of such personalities who share the President’s vision and can serve with distinction in this role,” said Lifuka.