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Parastatals reduced to shells

SOME of Zimbabwe’s most critical parastatals, which are a perennial burden to the fiscus, are technically insolvent and making huge loses largely because of years of corruption and bad corporate governance, it has now been officially acknowledged.

Owen Gagare

Most of the parastatals are thus failing to fulfil their key mandates.

The National Railways of Zimbabwe, for example, which should be acting as the wheels of Zimbabwe’s economy as a prime mover of local as well as imported and exported bulky goods, had a net current liability of US$131 million as of December 31, 2014.

The parastatal also made a cumulative loss of US$236 million.
According to a report by the Auditor-General Mildred Chiri for the financial year-ended December 31 2014, there were doubts over whether the parastatals could continue operating as going concerns.

“I draw your attention to the fact that NRZ is in a net current liability position of US$131 131 446. The NRZ also incurred a net loss of US$31 607 218 (2013: US$49 103 769) contributing to a cumulative loss of US$235 544 295,” said Chiri.

“This cumulative loss and net current liability position, along with other matters as set forth in Note 27, indicate the existence of a material uncertainty that may cast significant doubt over the NRZ’s ability to continue as a going concern.”

The Grain Marketing Board (GMB), whose mandate is to buy, store grain, manufacture silo products as well as manage the nation’s strategic grain reserves and the input scheme on behalf of the government, made a US$51 million loss in 2014, raising concern over its capacity to discharge its mandate and future.

The same report also highlights that the Civil Aviation Authority of Zimbabwe (Caaz) whose duty is to promote safe, regular and efficient use and development of the aviation industry, while also advising the government on all matters relating to domestic and international civil aviation, is also in the red.

“An analysis of the financial statements for the year-ended December 31, 2013 revealed that Caaz’s current liabilities exceed current assets by US$155 669 420,” said Chiri.

Caaz had domestic and foreign loans amounting to US$242 million, which were not being serviced despite being overdue.

“In addition, the authority also incurred a net loss amounting to US$14 881 295 for the year-ended December 31, 2013. The accumulated loses rose from US$97 861 030 in 2012 to US$112 742 325 in 2013 representing a 15% increase,” noted Chiri.

The Zimbabwe Mining and Development Corporation (ZMDC) and its subsidiaries, whose main business is the extraction and selling of minerals, is also in a bad position. ZMDC is wholly-owned by the government.

ZMDC’s financial statements did not include all the corporation’s subsidiaries including struggling companies like Shabanie and Mashava Mines (Private) Limited where it holds a 76% shareholding, Todal Mining (40%), Gye Nyame (50%), ShinZim Platinum Company 95%), Global Platinum Resources (20%) and Rushchrome Mining (20%).

The corporation also failed to adhere to international accounting standards by among other things failing to recognise its intangible assets such as mining rights at cost or fair value and also failing to carry out a full stock count of physical inventories at year-end.

Chiri, however, concluded that ZMDC and its subsidiaries were struggling despite her not being able to ascertain the true and fair value of the corporation’s financial positionn, as well as its financial performance and cashflows due to the corporation’s failure to adhere to international financial reporting standards.

“Without further modifying my opinion, I draw attention to Note 37 to the group financial statements, which describes the going concern uncertainty for the group. The group incurred a loss before tax of US$26 961 718 for the year-ended 31 December 2013 and its current liabilities exceeded its current assets by US$127 967 264 as at that date,” said Chiri.

“These conditions, along with other matters as set forth under Note 37 to the group financial statements, indicate the existence of a material uncertainty that may cast significant doubt about the ability of the group to continue operating as a going concern.”
Mbada Diamonds, 50% owned by ZMDC, posted a loss of US$49,7 million during the period under review whereas it had made a US$56 million profit in 2012.

“Its current liabilities exceeded its current assets by US$89 916 504 … management did not present a clear turnaround plan on how the company would be able to raise funding to pay its liabilities as they fall due and bring the joint venture to profitability,” she said.

Marange Resources (Pvt) Ltd, which is 100% owned by ZMDC, is also technically insolvent with the company’s current liabilities exceeding current assets by a staggering US$74,7 million, the audit reveals.

The diamond miner posted a net loss of US$1,5 million compared to US$30 million in the prior period in 2013.

The Auditor-General said in light of the company’s financial position, characterised by technical insolvency, there was also doubt over the diamond mining company’s ability to continue as a going concern.

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