HomeLocal NewsIn-depth Interview: ‘Public sector needs more CAs’

In-depth Interview: ‘Public sector needs more CAs’

LAST week the Institute of Chartered Accountants of Zimbabwe (Icaz) cast doubt over the validity of financial statements, citing hyperinflation and exchange rate volatilities, which have been a recurring problem since 2019, when Zimbabwe relapsed into an exchange rate crisis and high inflation. As the profession is dealing with several challenges to stay afloat, senior business reporter Melody Chikono (MC) discusses the issue of exchange rate in relation to property valuation as well as other issues with Icaz technical manager Owen Mavengere (OM). Below are excerpts:

MC: What is your comment on the determination of the appropriate exchange rate in the accounting profession in line with property valuations in Zimbabwe?

OM: Any attempt to perform a conversion will invite challenges of compliance with IAS21 (The Effects of Changes in Foreign Exchange Rates) and IFRS13 (Fair value measurement) stemming from the appropriateness of the rate applied rate. Furthermore, a valuation determined in one currency and converted to another factors in further risks which are ideally irrelevant when determining fair value of property and that is likely to result in a misleading valuation. As a result, one would rather just have their valuation performed in their reporting currency. Generally speaking, there are enough inputs to allow for a valuation in either of the two main currencies, that is Zimbabwean dollar (ZWL) or United States dollar (USD).

MC:  What is your comment on that in relation to accounting for capital gains tax (CGT)?

OM: CGT is determined upon the sale of a specified asset, thus where no sale has occurred no CGT will arise regardless of appreciation in value of the property. Upon the disposal of a property, however, it is important to note that ordinarily the Zimbabwe Revenue Authority (Zimra) accepts values of properties as declared by clients for CGT purposes and also that Zimra itself requires payment of taxes in the currency of the transaction.

Therefore, the amount of CGT usually depends on the value agreed upon by the seller and the buyer. As stated above it is possible to obtain the value of a property both in USD and ZWL, thus rates have a minimal impact.

MC: The property sector has been affected by currency changes in the economy, how do you think this has affected the whole sector and do you think there is a certain way of valuing property in a turbulent economy like Zimbabwe?

OM: Currency changes have had effects on the property market, but in my view the greatest concern has been inflation. Most sellers have a preference towards the USD, which is deemed to be more stable, against the local currency because of concerns around inflation. The fears are around loss of value of the proceeds if a transaction is in ZWL. However, there are still some sales occurring in ZWL, although the rates that are implied in these transactions may be different from the official rate.

There are enough inputs and data to perform valuations in ZWL or USD. Valuations by the way are not absolute and have a number of assumptions, even in other economies. Therefore, the concerns locally are for the most part similar to global concerns. The major issue is the implied rates differing from the official rates.

MC: In light of that, what is your comment on investing in property in the future?

OM: In my own view, the on-going challenges should not deter from investing in property. One should just satisfy themselves of the value versus the likely returns and capital appreciation in the future. Covid-19 is the one that has really disrupted the property market as we are now reviewing the whole model around big office buildings. I believe this is the best time to invest in Zimbabwe, be it properties or equities on the Zimbabwe Stock Exchange  or Victoria Falls Exchange, after performing due diligence.

MC: A past interview with the institute shows that by February 2021 there was no chartered accountant in government. What have you done about this?

OM: There are some CAs, for example, at the Office of the Auditor General. However, your question still remains. In response, I would say Icaz continues to engage with the government to provide advice, comments or any other input. We will continue to be a partner when called upon.

Secondly, and more importantly, Icaz is launching the CA of the public sector known as the Public Sector Professional Accountant (Zimbabwe) [PSPA(Z)]. This programme is going to see its first 10 members graduate this quarter. This is a mirror of the CA programme complimented with public sector specific competencies.

We also hold an annual event for the public sector which has been rebranded and has become known as the Public Sector Convention where critical issues are discussed. The seventh version of the rebranded convention is going to be held in September 2022.

MC:  Could there be a reason why your professionals opt for the private sector rather than the government?

OM: At a personal level I have previously worked in a parastatal and there are a few others in the public sector. Admittedly, more members are in the private sector. To address this, the Public Sector known as the PSPA(Z) as above, is being launched with students already having been enrolled.

MC:  What strides have you made to ensure adherence to accounting standards in public sector accounting?

OM: We have been supporting the government’s initiative to adopt International Public Sector Accounting Standards (IPSAS) by 2026. Such efforts include the IPSAS Certification Course which assists in the interpretation and application of Public Sector Accounting Standards. The course has been undertaken by about 400 government officials with intakes for the February session currently underway.

MC: Over the years the accounting books in government institutions have been in shambles. Besides the programmes you are offering to the public sector what are other recommendations do you make for the public sector accounting to be vibrant?

OM: Whether it is the public sector or the private sector, there is always room for improvement. My recommendations will be: –

Initiatives to retain key talent

Continued support of the initiative to migrate to accrual accounting through the IPSAS adoption by 2026

Continued support of the initiatives by Professional Accountancy Organisations (PAOs) such as ICAZ’s own PSPA(Z) and similar projects from other PAOs.

Increased visibility by PAOs e.g. ICAZ is partnering with a government arm to offer training to various public entities.

Ensuring greater monitoring of members in the profession by PAOs with increased emphasis on ethical conduct.

Lastly, the public has a role to play as well e.g. reporting instances of unethical behaviour.

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