Zarnet riddled with mismanagement

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GOVERNMENT-owned entity Zarnet, which took over Telecel nearly three weeks ago after purchasing a 60% equity stake in the mobile network operator, is riddled with corporate governance failures and mismanagement issues, documents seen by the Zimbabwe Independent reveal.

Hazel Ndebele

One of the documents indicates that Zarnet was mismanaged as irregularities were uncovered relating to grading, salaries and allowances.

Zarnet was founded in 1997 and has been operating as an internet service provider. It runs government internet services. On its website,the company touts the presidential e-learning programme, government digital villages and community information centres as some of its major projects.

The firm has a staff complement of 25 and two interns. One of the documents suggests Zarnet was servicing a debt of undefined quantum.

The former CEO of the company was on the payroll, with total gratuity which amounted to US$55 000 plus a vehicle, laptop and cellphone.

The company has no clearly defined delegations of authority, hence all decision- making lies in the office of the chief executive.

As a result it is dogged by underhand dealings on how salary adjustments were made and implemented by management without requisite approval from the board and parent ministry.

“The company had no attendance register for board and committee meetings for the years 2012 and 2013,” an audit report says.

“There was no evidence that board members declared business interests and there were no formal procedures to declare business interests for the company’s key management staff.”

The report also says the company operated with a single committee, that of human resources.

“The company incurred losses from 2011 and has been operating negatively as up to December 31, 2013. Poor cash inflows have impacted negatively on the operational effectiveness of the company, hence the company might fail to fulfil its mandate in the not-too-distant future,” it says.

It is also shown in one of the documents that company assets were being used for private purposes. Moreover staff allowances were not taxed in contravention of the Income Tax Act. Zarnet has substantial outstanding payments to service providers and statutory bodies. These include Old Mutual (Corporate Group Cover), Cimas (Medical Aid), the Zimbabwe Revenue Authority and Nssa. The report says remittances to these are from funds disbursed by treasury every month, but are being diverted staff allowances have also fallen victim to this abuse as well.

Documents show the company had crafted a turnaround strategy which seeks to enhance internal controls and corporate governance so as to realise revenue that can be ploughed back into capital projects.

“Payment plans have been agreed on with creditors, including statutory bodies, the issue of benefits that are not being subjected to taxation is being looked into and the board will ensure compliance to the Income Tax Act,” one document says.

Documents further show the company is facing other bottlenecks, including that is owed US$389 128 of which 83% is traceable to government departments and ministries.

State-owned enterprises audited by the government’s chief auditor Mildred Chiri plunged to cumulative losses of about US$470 million between 2012 and 2014.

Government has come up with a 2016 turnaround plan for the company as it believes the bankrupt Zarnet has the capacity to operate profitably.

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