HomeBusiness DigestCamelsa Unearths Irregularities at Premier

Camelsa Unearths Irregularities at Premier

CAMELSA, a firm of Chartered Accountants, has uncovered governance shortcomings and statutory non-compliance concerns at Premier Finance Group, after its holding company Premier Banking Corporation violated the provisions of the Companies Act (Chapter 24:03), Section 177, as read with Section 73.

In violation of the Act, the auditors noted that the Group granted an interest free loan to its Chief Executive Officer Barry Hounsel to acquire 1% shareholding in the Group without the “necessary special resolution” of the bank as required by the law.

The Companies Act makes it unlawful for a bank to grant a loan or any other form of assistance to a person to buy or subscribe to its own shares or those of its subsidiaries unless such assistance is given in accordance with a special resolution of the bank.

According to the auditors this violation of the law “renders this transaction null and void”. The auditors reported that the shareholders have the right to invalidate this transaction at an AGM. Further concerns noted were that, the Board of Directors of Premier Finance Group was conspicuously not in line with sound corporate governance guidelines formulated by the RBZ.

The Board, made up of three members, has only one non-executive member, which is its Chairman, Sengi Mlambo. The auditors did not elaborate on whether this situation complies or does not with the Memorandum and Articles of Association of the Group.

The auditors reported further prejudices to the bank on other transactions.

One was when the bank was swindled of US$245 000 by a cotton merchant called Roysen Traders. The bank paid Z$100 trillion in May 2008 to Roysen Traders for the supply of 29 servers. 

The payment was made on the basis of an invoice 2008-S012 that Roysen Traders had provided. The auditors reported that the amount paid was adequate to supply the 29 servers at an exchange rate of US$1:Z$180 million, which Premier Banking Corporation was applying on other transactions. The 29 servers had a total cost of US$580 000.

However, the auditors uncovered that Roysen Traders paid US$335 000, which was short the agreed amount by US$245 000. The bank ultimately paid the invoice difference to the supply of the servers in on September 15 2008, resulting in a double payment for the same servers. The audit could not be furnished with the evidence of any attempt to recover the money from Roysen Traders by the time they issued the report.   

On being approached by the auditors for explanations, it is reported that the Head of Financial Markets at Premier Banking Corporation said that Roysen Traders was contracted to supply foreign currency at  a rate of US$1:Z$300 000 and not the servers contrary to what is documented on the invoice and relevant documentation in the bank.

Upon analysing the management response, the auditors queried the validity of management explanations on logical grounds and have raised the following questions which as shown in the report, management failed to answer satisfactorily.


  •   If indeed the transaction was a foreign currency purchase from Roysen Traders, why was it not documented on the foreign currency deal notes instead of ZW dollar invoices raised by Roysen Traders?
  •  At the exchange rate of US$1:Z$300 million, the rate given by the Head of Financial Markets, Roysen Traders was supposed to supply US$333 440 and not US$335 000 that they paid to the vendor of the servers.
  •  Why did Roysen not settle the full amount with the vendor of the servers when their invoice was for the 29 servers?
  •   Why the person entrusted to negotiate with Roysen Traders failed to document the exchange rates agreed and the actual US dollars amount expected from the transaction?

Should the bank not have started a process of recovering the US$245 000 owing from Roysen Trading for their failure to fully deliver on their side of the contract?


  • Whether the Bank got value for money in this transaction considering it is a custodian of depositors’ funds and duty bound to use those funds prudently.
  • Why foreign currency transactions with Roysen Traders were left open ended as to the exchange rates, amounts and delivery dates?

The auditors felt that the Bank violated exchange control regulations in this transaction, in addition to suspicion that lack of audit trail was a deliberate ploy to either hide exchange control violations or siphoning of funds from the bank.

Further, the auditors queried unequivocally the competence of the Head of Financial Markets for failure to maintain documented audit trail for such a significant transaction and the implications it would have on controls, financial accounting and reporting.

The auditors recommended that the Bank should recover the prejudice of US$245,000 from Roysen Traders on the basis of sufficient evidence in place that the bank had paid for the full invoice to Roysen Traders.

Premier Bank has like other banks been sending employees on forced leave due to low business volumes. Bankers said they wondered why under such difficulties conditions, the bank could afford to lose such huge amounts of money without recognition. It is believed the amount lost could have met the bank’s operating costs over a period of more than four months.

Premier Finance Group is a holding company with wholly-owned subsidiaries that are involved in merchant banking, asset management, venture capital and nominees activities.


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