9 November 2018

Zimbabwe: Parastatals Sink Deeper Into Debt

More than 20 state-run enterprises are sinking deeper into debts with liabilities running into hundreds of millions of dollars as they face imminent collapse due to poor corporate governance, mismanagement and corruption, among other problems, a new report from Auditor-General (AG) Mildred Chiri shows.

According to the report for the financial year ended December 31, 2017 on State Enterprises and Parastatals, mismanagement at entities and gross corruption, among them, struggling airline Air Zimbabwe, Zesa Holdings and its subsidiaries such as the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), Zimbabwe Power Company (ZPC), as well as the National Railways of Zimbabwe (NRZ), have contributed to the demise of the companies.

Other state-run entities such as the Zimbabwe National Road Administration (Zinara), Grain Marketing Board (GMB) and Civil Aviation Authority of Zimbabwe (Caaz) are also in a precarious position.

Chiri says that most of the audited parastatals are technically insolvent and tottering on the brink of collapse.

"My audit revealed entities which are facing challenges in providing service sustainably. I reported 23 of such cases and these include Zesa Holdings and its subsidiaries, GMB, NRZ, Air Zimbabwe, Zimparks, Zipam, Zimpost, Allied Timbers and Nust, among others," Chiri says.

She noted that flag carrier Air Zimbabwe, which was recently placed under reconstruction as a result of decades of inept management and corruption and weighed by a US$341 million debt overhang, had been grounded owing to shambolic "accountability" systems among other factors.

"Accountability issues have continued to affect the country's airline, Air Zimbabwe. Its most recent audited financial statements relate to the 2010 financial year. Air Zimbabwe had 16 issues that led to a disclaimer of opinion. Among the issues noted was the entity's inability to provide supporting documentation for transactions entered into," Chiri says.

"Of concern were unsubstantiated debit and credit entries amounting to US$213 million and US$168 million respectively. The financial statements also included a suspense account of US$22 million and the entity could not provide supporting documents for expenditure amounting to US$17 million."

Chiri in her audit report also revealed that power producer Zesa was struggling to service its foreign loans amounting to US$29 878 401.

Zesa, currently mired in a web of corruption scandals, had three of its executives Joshua Chifamba, Julian Chinembiri and Thokozani Dhliwayo arrested last month over an allegedly irregular US$35 million transaction involving Indian firm PME contracted to supply transformers to the power producer.

"I draw your attention to the fact that the company's current liabilities exceeded its current assets by US$67 998 471. 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," Chiri says.

Zesa subsidiary ZETDC incurred an operating loss before tax of US$74 472 490 for the year ended December 31, 2017, Chiri revealed. She raised the red flag on the weak balance sheet of Caaz, noting that the parastatal, choked by foreign loans amounting to US$165 464 664, could no longer operate as a "going concern".

"I draw your attention to the fact that the Authority did not service its overdue long term foreign debts amounting to US$165 464 664 and domestic loans amounting to US$100 804 250 during the year ended December 31, 2017.

"As of that date, the Authority's current liabilities exceeded its current assets by US$207 756 363," Chiri says.

The audit report also revealed that GMB, the grain buyer of last resort, made a loss of US$32 391 307 in 2016, and had "accumulated losses amounting to US$208 968 178 as at March 31, 2017."

NRZ, said Chiri, recorded a "net current liability position of US$256 535 751", while the parastatal, which recently clinched a US$4,2 billion recapitalisation deal with South African firm Diaspora Infrastructure Development Group (DIDG) had accumulated a loss of US$388 193 404 for the year ended December 2016.

On Zinara, the audit report noted that the entity's expenditure on salaries, allowances and expenditure ballooned to 10% of revenue in violation of the stipulated 2,5% for the year ended December 31, 2016.

"During the year the Administration engaged some service providers to carry out special and emergency projects on behalf of local authorities. For some of the projects done, there was no evidence to suggest that the projects had been subjected to tender processes," Chiri notes.

Last year, government invited bids from private investors to buy stakes in 24 moribund state enterprises which have continuously been a drain on the fiscus.

Zimbabwe

I Am Already Under Arrest - Ready for Any Eventualities - Chamisa

DEFIANT MDC leader Nelson Chamisa has said he is not fazed by arrest threats made by security service chiefs saying he… Read more »

See What Everyone is Watching

Copyright © 2018 Zimbabwe Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.