THE unfolding story of the collapse of the once mighty Zimbabwe United Passenger Company (Zupco) is a case study of how parastatals in Zimbabwe have been destroyed by graft. It illustrates how po
litical appointees have run down parastatals by failing to comply with corporate governance principles.
The collapse of Zupco helps to explain why state companies have remained a burden on the treasury. Taxpayers’ funds have been doled out to these parastatals whose bosses line their pockets.
Zupco was not brought down by lack of capital injection as widely claimed but by a combination of financial mismanagement and political appointees whose business ignorance was matched only by their venality.
Confidential audit reports that have been kept under wraps for the past two years show that there were no proper systems of either accounting or internal controls at Zupco.
The reports compiled by Kudenga & Co Chartered Accountants for the period 2002 to 2004 reveal that about six accounts with different banks were not recorded in Zupco’s records and no bank reconciliations were prepared for these accounts. These accounts, as evidence shows, could have been used to siphon billions of dollars out of the company. The accounts could have been used to “embezzle” funds, says one of the documents seen by this newspaper.
Zupco’s capital deficit deteriorated to $22 billion and it made a loss of $19 billion before tax in 2004 despite an injection of $42 billion by government.
Zupco made crippling losses during deputy Information minister Bright Matonga’s reign as chief executive: $9,6 billion in 2002, $9,7 billion in 2003 and $19,3 billion in 2004.
The losses were made at a time when Zupco had increased its fleet for both rural and urban commuters through purchases of Volvo and Isuzu buses. Transport companies usually make profits when the fleet is still new as operating costs are low.
The reports unearthed a trial balance imbalance of $10,6 billion, which could not be explained by top management.
Too many accounts were maintained at the same branch. There seems to be no justification for the existence of some accounts. For instance, Zupco has two accounts at Barclays Bank Pearl House branch, three accounts at Metropolitan Bank Belgravia, two accounts at Standard Chartered Bank Africa Unity Square branch, and two Royal Bank Rusape accounts.
Zupco maintained bank accounts which were not supported by detailed cashbooks, the auditors said. Schedules which were prepared for some bank accounts had serious discrepancies which varied from $6 million to $200 million. No statements or reconciliations were prepared for creditors and invoices for creditors’ payments could not be provided. There was no schedule of loans opening balances, additions or payments kept throughout 2002.
It was not known to whom the long-term interest-bearing loan of $43 567 929 and long term non-interest bearing loan of $92 188 207 were owed. There were no proper purchasing procedures leading to the payment of people who had not supplied anything to the company. For instance one of the reports notes that a payment of $64 million was made to a Mrs Majoni who had not supplied anything to the company.
Cash collections from bus income were not properly accounted for and there was no proper supervision of the work of junior staff. Many of the bank reconciliations had errors in them indicating that no senior person had checked them.
“The filing system of the company is very poor and a lot of documents which we needed for purposes of our audit could not be provided as they could not be found,” Kudenga & Co revealed.
Stocks of uniforms, tyres and fuel had negative balances which management were unable to explain. There was no stock count at year-end and recording systems were poor.
No creditors reconciliations were available at the time of the 2004 audit. Receipted amounts could not be traced to the ledger because no posting sheets were prepared. Receipts were simply summed up and recorded directly in the ledger, the auditors said.
Employees’ PAYE amounting to $64 million was not being remitted, for instance for the whole of 2002. This resulted in Zupco paying an extra $64 million and $30 million as penalty and interest respectively.
Matonga could not explain to the company’s board the difference of $495 million between the ledger and the retrenchment package schedule and the auditors felt that payment might have been made to non-existent employees.
Zupco board minutes of August 20 last year said Matonga accepted full responsibility for the anomalies highlighted in the audit reports. The now deputy minister who was at the helm of the government-owned passenger transporter from June 2002 to late last year failed to control the company’s finances as mismanagement took root.
He was forced to resign after his response to the damning audit reports was deemed not comprehensive enough by the board.
“From a general point of view the financial statements are adverse and do not portray a good picture of the organisation,” the minutes said.
“The increase in revenue was well below inflation indicating a negative growth. In year 2003 the finance charges were higher than the core costs because the instrument used to finance the debt was inappropriate for the project.”
Zupco’s balance sheet was in a shambles the board noted. “There is therefore a negative shareholders balance of $10 billion. Both capital and profits are negative,” it concluded.