HomeLocal NewsGovt racks up US$5m NetOne telephone bill

Govt racks up US$5m NetOne telephone bill

SCANDAL-RIDDEN state-owned mobile phone operator NetOne is choked with a debtors’ balance of close to US$74 million from government entities, politicians and private sector companies due to weak internal controls among other factors, Zimbabwe Independent has established.

By Bernard Mpofu

This is revealed in an audit report on NetOne titled Provision of Comprehensive Forensic Investigation Services to NetOne Cellular Services compiled by PriceWaterhouseCoopers Zimbabwe (PwC) on behalf of the Auditor-General.

NetOne CE Reward Kangai (pictured) was sent on forced leave in March after the company’s board sanctioned a forensic audit into the affairs of the country’s second-largest mobile phone operator.

The report shows the amount of money government entities owe NetOne rose to US$5 075 197,05 last year from US$1 166 080,70 in 2009. The Office of the President accounted for US$907 280,41 of the total debt as of 2015, up from US$80 286,61.

NetOne, the report further showed, was also owed US$13,2 million in 2015 in roaming and interconnection fees from US$3,5 million registered in 2009.

“We obtained the debtors’ balance as at January 18, 2016 and noted that the balance for debtors older than 90 days was US$73 818 487,23 … We sampled the top 35 highest debtors and traced their balances from 2009 to 2015. This was to assess the net movement on the debtor balances between the years,” the report reads.

“We noted that 25 out of the 35 sampled debt balances kept growing over the years without termination of services as stated in the credit policy. This happened despite the majority of the debt balance above 120 days not being services.

“While defaulting customers should be disconnected within 90 days to minimise risk of exposure to defaulting debtors, consideration should be given to essential services such as defence forces, the police and any such institutions of national security.”

The report also shows that in 2011, NetOne management proposed to write off part of the debt to the tune of US$28 million before the board rejected the proposal. Direct customers then owed NetOne US$4,9 million; the defunct Zellco US$15,3 and Firstel US$8 million.

“We investigated why the debt grew as it did over the years. The growth can be attributed to several factors including reduction in commission rates, application of the fixed charge on non-performing contracts. We also noted that Firstel would be invoiced by NetOne for services but Firstel would not remit the full invoice amounts between 2009 and 2015,” the report further reads.

The debt stock of private companies owing NetOne, the report revealed, rose to US$1,4 million in 2015 from US$176 337,45 in 2009.

Turning to recommendations, the auditors proposed an approved and up-to-date procurement policy and procedures manual for the mobile phone operator.

Last month the Independent reported that the company made shady payments totalling US$32 million to several firms without documentation.

Payments totalling US$32 124 987,65 were made to 10 contractors without paperwork in a glaring abuse of public funds, the report said.

The companies include Essar Tubes and Towers which received US$6 168 854,59; Gemalto (US$3 064 374,11); Huawei (US$1 586 248,79); Masimba Holdings (US$3 528 714,03); Bopela Group (US$913 174,24); Sectional Poles (US$987 822); Technotree (US$50 000); Intervoice Convergys (US$7 122 029,99); Redan (US$1 693 086,13) and Nokia Siemens (US$7 010 684,77), bringing the total to US$32 million.

“The probe revealed that NetOne operated 35 bank accounts with 13 banks which increases the risk of complicit and fraudulent activities by management as it may be difficult to efficiently keep track of transactions in the different accounts,” reads the report.

“What was also suspicious was that management had different signatories for the different accounts and, on average, bank reconciliations were done 10 days after the transactions.”

The final report also revealed Kangai made changes to the employment contracts of key managerial personnel without board approval and further allowed them to receive cash in lieu of holiday allowances.

“This resulted in NetOne paying a total of US$274 418,11 to senior management for the holiday allowances during the period under review (last five years). Some of those who benefitted from the payment include: Kangai US$135 701,94; the late finance director Matavire Dzimbanhete who received US$23 589,93; sales and marketing director Spiwe Ndoro who pocketed US$55 264,15; finance director Godfrey Tarupuwa who was paid US$41 726,01 as well as chief technical officer Darlington Gutu who received US$18 136,06,” the report said. “The encashment of holiday allowances by NetOne directors contravenes established best and common practice. It is best and common practice that such allowances as the holiday one have a ceiling. The forensic audit also revealed that management paid themselves, without board approval, a total of US$211 102,20 in special incentives for excellent work done.”

NetOne financial results show that the company incurred a loss of US$3 million in the full year to 2015 despite a 20% growth in revenue to US$120 million.

On the contentious matter of base stations, the report said NetOne had been operating without any formal policies or procedures governing the acquisition of base stations.

Controversial sites where Kangai presided over the installation of base stations include Avondale Christian Church, and Number 103 Good Hope, which is owned by Joyce Kangai, an aunt to the suspended MD.

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