20 May 2012

Zimbabwe: Parastatals Hit Hard By Capital Constraints

Under-capitalisation and use of obsolete machinery were militating against most parastatals' ability to effectively discharge their mandates, a recent audit by the Comptroller and Auditor-General has revealed.

According to the audit, carried out in December 2010, this has resulted in repairs and maintenance constituting a higher percentage of administrative costs.

The Comptroller and Auditor-General, Mildred Chiri, said some parastatals still operated with poorly-constituted boards or without boards, thereby creating a policy vacuum at the top, leaving those below to act without proper guidance.

She underscored the fact that parastatals were established with financial resources from taxpayers, which meant that the main stakeholders in State-owned enterprises were members of the public, whose taxes have been invested in the said corporations.

A case in point shows that going concern findings reveal that NetOne was defaulting in remitting licence and spectrum fees to the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) and the debt had grown to US$7 213 546 by the end of the period under review.

NetOne did not remit annual licence and spectrum fees for the financial years ended December 31 2009 and 2010.

"This matter indicates the existence of a material uncertainty, which may cast significant doubt on the company's ability to continue as a going concern," said Chiri.

She noted that the entity was failing to service its non-current liabilities, which had become overdue, thereby increasing the company's risk of failing to service short-term obligations, as they fell due.

NetOne promotions lacked Insight: Chiri

Another anomaly noted was that NetOne increased marketing expenditure not in line with revenue growth.

Revenue decreased by US$23 million but marketing expenditure increased by US$4 million in 2010.

This resulted in potential loss due to promotions which did not add value to revenue contribution and Chiri's office recommended that management carry out a cost-benefit analysis of the promotions they intended to make.

Promotions embarked on, include the Valentine promotion for post-paid customers. Customers were given a reduced tariff of 50% for NetOne to NetOne calls.

A total of 1 260 calls were made during the promotion.

Another promotion included the Independence promotion, where participants got five short message services (sms) if they recharged US$1 worth of airtime. A total of 570 663 US$1 vouchers were loaded during the promotion.

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