President Emerson Mnangagwa on Tuesday approved the unbundling of state-owned ISP Powertel from its parent company, the Zimbabwe Electricity Supply Authority (ZESA). This has paved the way for Powertel's merge with other state-owned ISP firms Zarnet and Africom.
Zimbabwe wants to urgently restructure and reform under-performing parastatals, including those operating in the ICT sector and telecom industries, which include mobile phone operator, NetOne and fixed phone operator, TelOne.
Specific parastatals have been running at a loss and have continued to utilise state funds through their dependence on budget allocations.
Finance Minister Mthuli Ncube is looking to end excessive government spending on parastatal funding and has identified companies for privatisation or commercialisation.
Powertel is the first state-owned parastatal to be reformed through unbundling from the state electricity utility.
Zimbabwe's cabinet, chaired by Mnangagwa, agreed to "amend the Electricity Act Chapter 13.19 in order to cater for the proposed changes in the structure" of ZESA.
This will be achieved through the merger of all the group's companies "into a single vertically integrated" entity.
Following the meeting Zimbabwe Information Minister, Monica Mutsvangwa said, "As a consequence of this reform, Powertel (will) be hiked off ZESA and merged with Zarnet and Africom."
Powertel said it will implement a three-year strategy to return to profitability after the country's Auditor General Mildred Chiri confirmed uncertainty around the company's ability to continue.
According to AG's office, Powertel incurred a loss before tax of US$3-million for the year to December 2017. Its current liabilities also exceeded its current assets by US$6.4-million.
"These conditions indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue operating as a going concern," said Chiri.
Executives at the company stated that Powertel had "faced cash-flow challenges emanating from liquidity challenges being experienced" in the wider Zimbabwean economy.