Government has enacted a law that will see the unbundling of the Civil Aviation Authority Zimbabwe (Caaz) and the establishment of a separate entity, the Airports Company of Zimbabwe.
By Kuda Chideme
The Civil Aviation Amendment Act was promulgated this week.
According to the new law, Caaz’s assets will be transferred to the Airports Company of Zimbabwe while assumption of the liabilities will be subject to negotiations between the Transport minister Joram Gumbo, the aviation regulator, the Airports Company and Finance minister Patrick Chinamasa.
The authority’s most recent financials show that Caaz is technically insolvent and officials have raised the red flag over its going-concern status as the regulator continues to pile on fresh debt despite failing to service its current obligations.
For the year ended December 2017, Caaz reported long-term borrowings of US$416,2 million against a non-current asset base of US$444,5 million while current liabilities of US$279,8 million outweigh current assets of US$38,1 million, an unfavourable situation which has led to the Caaz board engaging government to take over the debts.
The bulk of the debts are legacy loans incurred by government from as far back as the 1980s which were then transferred to the authority in 2003.
This year, Caaz secured an additional US$153 million debt from the China Exim Bank which will be used to finance an upgrade of the Robert Gabriel Mugabe International Airport.
For the full year, Caaz reported a deficit of US$29,9 million compared to US$5,7 million in the previous year.
The deficit was despite 2% growth in total revenue from US$38,5 million in 2016 to US$39,2 million, as finance costs and an exchange loss of US$15 million stemming from the foreign legacy loans ate into the top line.
A huge chunk of the loans are denominated in euro and pound sterling.
Depreciation expenses amounted to US$17,2 million during the year under review.
“The going concern Caaz might be compromised if assessed from the continued loss-making point of view which in this case is mainly attributed to low capacity utilisation due to depressed business volumes,” a source close to the developments told businessdigest this week.
“The loss is mainly attributed to a high depreciation figure which shows that the huge asset base is not optimally used to generate revenue. The Authority has huge and high value assets which do not generate the expected business levels.”
Caaz incurred an operating loss of US$6,9 million, up from US$2,2 million in the previous year.
Total operating expenditure increased by 13% from US$40,7 million in 2016 to US$46,2 million with depreciation expenses chewing up 25% of that amount.
The exchange loss accounted for 22% of total expenditure while finance costs took up 11%. Overheads accounted for 9%.
The ratio of employment costs to total revenue was at 43,5% while capacity utilisation remained relatively low at 26%.
In terms of traffic volumes aircraft movement increased 12% to 44 507. Cargo movements also increased by 12 % to 15 768 while passenger movement was up 9% to 1,6 million.
Demand for domestic air travel registered a marginal 3% growth compared to 2016 with a total of 301 318 passengers travelling on 20 500 domestic flights.
At its peak in 1997, domestic travel reached 1 160 613 passengers, accounting for 50% of total air traffic with up to 34 major airlines flying into the country.
The following years witnessed a massive exodus of airlines from the southern African nation primarily due to political tensions which heightened during former president Robert Mugabe’s reign.