Govt fumes over shady POSB affairs

Government is fuming over poor corporate governance practices at its wholly-owned financial institution POSB, businessdigest has learnt.

Taurai Mangudhla

Sources close to both government and the bank say Finance minister Patrick Chinamasa, who represents the shareholder, expressed displeasure over corporate governance irregularities and the low level of disclosure by the bank ahead of an annual general meeting held on Wednesday.

Chinamasa’s displeasure, which comes amid concerns the bank has continually scored poorly on the country’s independent corporate governance rankings, caused panic in the POSB board ahead of the AGM. According to a well-placed source, who requested not to be named, the board is said to have been “making last minute preparations to respond to any corporate governance concerns.”

So concerned is government about the governance at state-owned entities, including POSB, that President Robert Mugabe’s office has made a formal enquiry into the affairs of the bank.

POSB’s poor rankings on the Institute of Chartered Secretaries and Administrators in Zimbabwe (Icsaz) excellence in corporate governance awards became a contentious issue ahead of POSB’s AGM in Harare, with government pushing for progressive corporate governance reforms and improved reporting standards.

However, POSB executives say they have dealt with issues raised by Mugabe’s office.

“The President’s Office came to us with questioneers on our corporate governance. We are happy that we were able to answer them and they were seemingly happy with our responses,” POSB CE Admore Kandlela said at the company’s AGM.

By Kandlela’s own admission, POSB’s corporate governance practices are questionable.

“We are not where we would want to be,” added Kandlela.

POSB was ranked last at position 15 in 2015 and 13 out of 17 in 2014 under the banking category. Icsaz noted companies scored poorly as they disclosed as little detail as possible and skirted painting a picture on directors profiles, remuneration, related party transactions, securitisation issues as well as the existence of the required board committees under the Reserve Bank of Zimbabwe Act.

Chinamasa quizzed the Matilda Dzumbunu-led POSB board over a number of financial and corporate governance items in the annual report which he felt were not adequately explained.

Chinamasa asked the board and executives to give clarity in respect of a US$1,3 million impairment loss provision, average interest rates on deposits and loans, non-performing loan ratios, related party transactions as well as board composition in terms of skills and gender.

“We should get more clarity on related party disclosures particularly how many members constitute key management because there is US$1,1 million in outstanding loans to key management,” Chinamasa said.

“I see you make loans to non-executive members of the board and there is an amount outstanding from a retired executive board member. It should be discouraged, non executive members should not be granted loan facilities because it compromises their oversight role. If you owe money, how are you going to perform that role?”

Although management later furnished Chinamasa with responses, the Finance minister demanded that the information be clearly presented in detail in the company’s future annual reports.

In an update of the company’s financial performance, Kandlela said POSB made a profit of US$1,7 million in the first quarter of 2016 ended March.

Kandlela also said the bank’s capital stood at US$33 million as at the end of 2015 after government gave the bank treasury bills worth US$20 million for capitalisation after the shareholder abandoned plans to privatise the bank late 2015.

POSB said the Treasury Bills had been discounted to US$12,8 million.

Chinamasa said government will, in the coming few months, assist POSB on capital adequacy with a view to grow the bank.

In 2015, POSB reported a US$7,91 million profit, up from US$1,25 million in the prior year on account of growth in income and cost containment.

The bank declared a US$1,98 million dividend, which translates to 25% of net profit, a figure largely in line with the company’s dividend policy.

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