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Big Saturday Read: Looters' Paradise -Zimbabwe's Road to Perdition

The story of Zimbabwe’s fragile circumstances cannot be attributed to a single cause. However, corruption, looting and leakages dominate. The chief engineers are political elites and their associates. Only a handful of wealthy people derive their estates from legitimate business activities. There is no private enterprise to justify the conspicuous consumption evident among the elites. Very often tales of corruption and looting are couched in little anecdotes. However, once each year, the Auditor General, who is the chief auditor of governmental affairs presents a review of her work. Her name is Mildred Chiri. She has been at it for years. Unfortunately, her reports have barely won any serious attention in the corridors of power. Her output is probably dismissed as functional nuisance. Beyond government, civil society activists and opposition who should take an active interest are probably daunted by the volume of the reports. Newspapers pick a few highlights but there is no sustained investigation of issues arising. Anyone researching the kleptocratic tendencies of the Zimbabwean regime should take interest in the AG’s reports. More importantly, the AG’s reports should be compulsory reading for law enforcement authorities - the Zimbabwe Anti-Corruption Commission, Police and the National Prosecuting Authority. The reports present a big picture of the state of corruption and looting in the public sector. Law enforcement authorities should be concerned by the criminality revealed in the reports. While the Mnangagwa government has made anti-corruption one of its flagship policies, the rhetoric has not been matched by action. Nearly two years after taking power and promising to clamp down on corruption, the results have been woefully disappointing. There is not a single high profile conviction. A few low level convictions in the lower courts are on appeal. This week, Mnangagwa appointed new members of the ZACC, the anti-corruption body. The old ZACC was disbanded last year, with the incumbents resigning en masse - most likely forced to jump. With a new ZACC much is expected and much has been promised, but the public is still skeptical partly because of previous history of inaction and also because of the new board’s composition. As with most boards of public entities, the new ZACC has a retired military general among the commissioners. Such a figure is largely seen both as a sentry and gatekeeper for the powerful military sector. It’s unlikely that ZACC will do anything where military interests are affected. Curiously, Gabriel Chaibva, a man who underwhelmed the nation with a dubious testimony at the Motlanthe Commission which investigated the August riots made the cut. Some see the appointment as a sign of an unrepentant ZANU PF, ready to reward loyalists and to pack gatekeepers with pliable members to safeguard its interests. The Chairperson of ZACC is a judge of the High Court but some people have questioned her independence since she is married to one of the most powerful members of the Mnangagwa regime, Foreign Minister SB Moyo, also a retired general. She has come out fighting to assert her independence since her appointment. Her message is that she is not defined by her marriage to the general, which is a legitimate point. After her tough talk and apparent readiness to engage, some will be willing to give her the benefit of the doubt. But it will be deeds, not words that will convince people that she means business and is by no means captured; that marital association is no restraint on her fight against corruption. The jury will be out but not for long. She has a very short window to prove herself and allay concerns that this is yet another window-dressing exercise. The new ZACC comes just weeks after the Auditor General presented her reports covering 2018 and previous years. These reports, as with previous ones that have been ignored, are very revealing. If ZACC is serious about its mandate, a thorough study of the AG’s reports is a good starting point - compulsory reading for each of the new commissioners. There is so much potential criminality in its content that warrants further investigation. Although publicly available, the reports are to most ordinary people too long and probably boring, written as they are in the dry and functional language of persons whose primary tools of trade are figures, not words. This article highlights key themes of criminality and misconduct from the report into state-owned entities. The public may learn a few things about how public funds are misused and abused while ZACC and Police might pick a few leads to pursue in their investigations. A casual reader wishing to understand corruption in Zimbabwe and why the its institutions have been been failing may also find this useful. This is, therefore, an account of Zimbabwe’s road to perdition, as described by the Auditor General. To be sure it is a financial horror story with jaw-dropping tales of corruption, skullduggery and gross negligence. Framework Of Analysis Analysing and organising the data has not been an easy exercise. The Auditor General’s report is written with details on each state-owned entity. I have organised it by picking recurring themes and then referring to instances where that theme relates to the different entities. That way, repetition is avoided but also the commonality if the issue across the public sector is highlighted. This shows that the problems are not random but systematic. It also means solutions cannot be ad hoc or entity-specific. What is needed is a fundamental overhaul of the entire system; the way we manage public entities. Theme 1: Goods Paid For But Never Delivered The report has a number of instances where a public entity has paid for goods or services in advance but the goods or services are never delivered. What is worse is that nothing appears to have been done over the years by the public entity to recover the goods or the payment. And the amounts involved are significant, which represents a huge loss for the public entity and for the taxpayer who funds them. These cases reveal clear abuse of public funds and suggest criminality on the part of those involved. ZETDC and Pito Investments In the first case, ZETDC, a wholly-owned subsidiary of the power utility ZESA paid $4.9 million to Pito Investments for the delivery of transformers. The transaction was done in 2010. Pito Investments has never delivered the transformers. Zimbabwe Power Company and Pito Investments In a second case, in 2016 the same company Pito Investments was paid $561 935 by Zimbabwe Power Company, another wholly-owned subsidiary of ZESA. Again there has been no delivery. Zimbabwe Power Company and York Investments In a third case, the Zimbabwe Power Company paid ZAR196 064 to York Investments for gas but there has been no delivery. It is not clear who are the beneficial owners of Pito Investments and why it was awarded a contract by a ZESA subsidiary 6 years after it got another large contract with a member of the ZESA corporate family in which it had failed to deliver. How did the same company with such a bad credit record get a new contract from a member of the ZESA family? Serious lines of enquiry are likely to reveal criminality or at the very least, gross negligence on the part of public officers and their associates. ZACC should identify the ultimate beneficial owners of Pito and York Investments and carry out deeper investigations into how these contracts were awarded. The non-delivery of goods after getting fines amounts to theft of public funds. Grain Marketing Board and another In a fourth case, in 2016, the Grain Marketing Board paid $1 million in advance for maize but this was never delivered. The party or parties to whom these funds were paid is/are not named. The management’s response to the AG was that their lawyers had advised them to seek engagement with the contractor and that engagements were in progress. It’s not clear why the lawyers did not recommend legal action to recover the debt. It is important to identify the contractor and if it’s a corporate entity, the beneficial owners. This might shed more light into why the GMB has been slow to act. Ideally, the board of the GMB should be demanding action from management but it seems the board is complicit or sleeping on the job. The solution to this is to recover the money already paid and to pursue the debtor for willfully misusing public funds. It doesn’t make sense that the country is facing food shortages and will soon be begging for assistance, yet there is someone who got a million dollars to deliver maize but never did. The fact that this debt has not been pursued vigorously is scandalous. ZIMSEC and the printing machine In a fifth case, ZIMSEC, the national examinations body bought a printing machine and paid $3.1 million in 2016. However, there was a balance of 1.3 million which delayed the commissioning of the machine. As a result, ZIMSEC outsourced the printing of examinations papers in 2017 at a cost of approximately $2.2 million. This defies both economic and common sense because the cost of outsourcing the printing the examination papers was more than the balance for the printing machine ZIMSEC had bought. This is an important line of enquiry for ZACC to pursue. Another line of enquiry to establish the identity of the printer to whom the job was outsourced. They obviously benefited from the continuing relationship, getting a contract where ZIMSEC could have paid less for the balance of the machine. NetOne’s million dollar contract The sixth case involves NetOne, the mobile network operator. It paid $1 million in advance to a contractor without a performance guarantee. NetOne management tried to explain this by suggesting that the production of bank cards for its mobile money service was an on-going process. However the AG rightly raised concern over the absence of performance guarantees before the prepayments were made because this exposes the public funds to loss. This is another case for ZACC to establish the identity of the contractor and the beneficial owners and whether in fact this debt has been liquidated. NSSA, MetBank and Treasury Bills There is also the case of NSSA and MetBank. The AG found that in 2017 NSSA invested Treasury Bills worth $20 million in MetBank against the advice of the authority’s Risk Management Department. The advice was based on concerns over the bank’s financial vulnerability and the high risk of default. Furthermore, the NSSA board went on to invest a further $62.25 million worth of Treasury Bills with MetBank but they were to be utilised only with the authority of the board. However, TBs worth $37.35 million were utilised on the authority of an officer but without the board’s authorisation. This exposed NSSA to a high risk of financial loss. The response by NSSA was lukewarm and unsatisfactory. It simply referred to the taking of corrective measures but did not specify that offenders were or would be held to account. It did not explain why this had happened and whether those who had broken the rules were held accountable. There is once again potential for corrupt dealings and misuse of public funds which warrants deeper investigations. CAAZ and airport furniture Finally, the Civil Aviation Authority of Zimbabwe was found to have paid for furniture at the JM Nkomo International Airport in Bulawayo but this furniture was not delivered. The AG recommended legal action for delivery of the furniture or to recover the money. A consistent theme in all these cases is that state entity paid for goods in advance but the goods were never delivered. And the worst this is this is the bit that is known and revealed. An auditor can only do so much. There is enough information to raise suspicion of criminal dealings or general misconduct in the use of public funds both by persons within these entities and outside. Theme 2: Dubious Donations and abuse of public funds It has been known for some time that the ZANU PF regime has successfully conflated the party and the state. The ruling party has generally behaved like a tick, sucking blood from the state and contaminating it with disease in the process. The Auditor General’s reports give concrete illustrations of this blood-sucking behaviour often under the guise of “donations”. It is not only a use of public funds but it also compromises political processes like elections. The entity that demonstrates in good detail the abuse of public funds under the guise of donations is the Zimbabwe Tourism Authority, which was headed by Karikoga Kaseke at the relevant time covered by the audit. There were several payments made for things that were completely out of line from the authority’s core business. First, in 2013, the ZTA paid up to $22 000 for sewing machines and “campaign material”. In 2014 it donated $6 000 to a constituency rally and a similar amount to a charity dinner. $5 000 was spent on maize seed donation while another $5 000 went to a High Court judge event. The High Court judge is not named and it’s a matter of interest to ZACC because it presents opportunities for compromising judicial independence and raises suspicions of corruption. By far the biggest expenditure in donations was $50 000 which went to “the wedding” and more on this shortly. In 2015 $10 000 went to “the Birthday Dinner” and $5 000 was described as “holiday expenses” for the then newly deputy minister. $4 000 went to pay the Minister’s mobile phone bill. A large amount was described as “ministry-related expenses”, which included repair of vehicles and travelling costs for ministerial staff. The ZTA’s attempts to explain these “donations” were farcical and ridiculous. Some of them were described as the “CEO’s social responsibility”. This includes a donation of cement, the recipient of which is not stated. This requires investigation. The identity of persons involved in what were simply described as “the wedding” or “the birthday” was not revealed. But presumably these were events related to political elites. The most high profile wedding around that period was the wedding of Bona Mugabe, the daughter of the then President and her husband. The ZTA tried to justify the wedding donation by saying “like any other corporate citizens [we] were invited to the wedding and in line with its core business the authority pledged a holiday package to the bride and groom as sponsorship from its corporate social responsibility budget”. It is dishonest to justify a wedding gift to a member of the political elite under the guise of “corporate social responsibility”. “The birthday” is likely to have been former President Mugabe’s birthday which ZANU PF had turned into a national event. The management states that they had bought a table for 10 ZTA officials “after an invitation to participate at the Birthday Dinner”. It is impossible in both cases to justify the use of public funds for what were essentially personal events and in any event the ZTA has no business deploying public funds to such projects. As for “the charity dinner” at which the ZTA bought a table for 10 guests, the management’s explanation is typically obscure and cryptic: “The ZTA works closely with some stakeholders hence pledging its support on their activities such as buying a dinner table”. It does not state the identity of the “stakeholder” in this particular instance and what activities it does which the ZTA was supporting. While there is a high likelihood that the stakeholder was ZANU PF to avoid doubt and speculation it would be good for ZACC to investigate and establish the identity of this stakeholder. This would help establish whether public funds were used properly or misused for purposes that are prohibited by law. The “campaign material” and donations of maize seed and finding a constituency rally all suggest political activities which reveal potential abuse of public funds and a violation of electoral laws. Public entities are supposed to remain apolitical and objective. They are prohibited by the constitution from acting in a manner that gives an advantage to or prejudices a political party. The identity of the party that benefited from the donations is not stated but it is likely to have been ZANU PF. The campaign material was described as “a gesture to the then tourism Patron”, namely the then leader Mugabe. This was blatant abuse of public funds for political ends. The donation of maize seed was described quite bizarrely and dishonestly as part of “marketing domestic tourism to rural folk” and “as part of enhancing agro-tourism”. However, in order to avoid any doubt or speculation, ZACC can easily carry out an investigation into these issues raised by the Auditor General and establish identities of the recipients of the ZTA’s so-called donations. It would help establish a pattern: were these events related to one political party or to all parties? Was the ZTA being partisan in the use of public funds? It would help establish whether this was criminal abuse of public funds and even more whether the ZTA was involved in bribery contrary to the Electoral Law. However, it is the answers that these questions are likely to yield which will mean ZACC or any other law enforcement authority will probably do nothing about them. The Auditor General also found that NetOne had no donations policy which meant there was no accounting for $334 154 between 2017 and 2018. In the words of the AG, “I was not able to determine the basis on which amounts totalling $334 154 were donated”. The AG rightly raised the risk of “financial loss due to irregular donations”. These matters require deeper investigation. The management’s weak response was that the company had now adopted a donations policy which was awaiting board approval. This does not answer questions over the $334 154 which could not be accounted for. ZACC can take up this investigation to identify the nature of donations, the recipients and to determine their propriety. Public funds can easily be abused under the amorphous label of “donations”. Another company which also made “donations” that were unaccounted for is Petrotrade which donated $152 644 which was in excess of the cap of $50 000. It warrants a similar investigation to establish the nature of the donation, the recipients and its propriety. Theme 3: When the gatekeepers run amok One of the key organs of corporate governance is the board of directors which is expected to provide strategic direction to the company and to supervise and monitor the executive management. In the case of state entities there is an additional layer of the relevant Ministry which is responsible for political accountability and represents the interests of the shareholder. With the government as the sole or majority shareholder in a state entity, the responsibility for appointing the board lies with the Minister. The Minister is also responsible for approving certain decisions such as payment of board fees, allowances and other benefits. This is because to leave the board to make such decisions would result in a conflict of interest. They would almost always favour their own interests ahead of the interests of the state-owned entity they are supposed to serve. The Public Entities Corporate Governance Act was enacted to guide and regulate how state-owned entities are governed. The system is broken when the board breaks the rules it is supposed to enforce. Problems arise when the Minister has a close relationship with the state-owner entity such that he or she draws benefits from it with the agreement of the board and management. Such cases remove the layers of oversight as all parties - the minister, the board and management - are virtually on the same side. It is hardly surprising that it is the state-owned entity that suffers from plunder. The gatekeepers are consuming what they are supposed to safeguard. Ultimately, since these are public funds, it is the taxpayers who carry the losses. The Auditor General found that at the Grain Marketing Board the tenure of the board had expired on 14 November 2017 and it had not been formally extended. When the Minister was told that the board’s tenure had expired he simply issued a verbal instruction that it had been extended. This was tantamount to having no board at all which meant there was no lawful oversight. This is no way to run any company. Even the tax collecting agency ZIMRA was found to have an improperly constituted board. There were not enough board members which meant key committees which should be kept separate such as the Risk and Audit committees were occupied by the same persons thereby compromising their performance. The Tobacco Research Board was also improperly constituted with only 5 of the required minimum 7 board members. The management explained that the Minister was not responding despite repeated requests. The most common feature reported among the state-owned entities was the payment of board fees and allowances without approval by the Minister. Boards even increased their fees and benefits without seeking ministerial approval demonstrating a blatant disregard for oversight rules and exposing public funds to abuse. At the Zimbabwe Parks and Wildlife Management Authority, $11 421 was used for the installation of WiFi at the individual residences of board members. This expenditure was not approved by the Minister. According to the Auditor General, the management of ZimParks “relied on the Board approval” for the WiFi installation at board members’ residences. The management said the WiFi installation was to ensure easy access to emails. There are three problems in this situation: first, there was no approval by the minister which means the decision was made without proper oversight and they broke the law. Second, there was a clear conflict of interest since the board members a decision that favoured them in a matter in which they had a direct interest. Third, the justification is lame. If a director cannot afford WiFi in his own residence he is probably not fit to hold that office. Imagine a situation in which a person has multiple directorships in state-owned entities and has such benefits from each of them. The Zimbabwe Tourism Authority had many violations. The AG found no evidence to show that board fees after 2013 had been approved by the Minister. In the 2104 audit, the AG found that executive directors were getting a monthly fuel allocation worth $2 000 (equivalent to 1.316 litres per month) but found no grounds for such allocation. The management’s response was that the fuel allocation was for “both conditions of service and operations”, which by all accounts is ridiculous given the magnitude of the allocation relative to the national economic conditions. The ZTA was also paying for various unauthorised benefits to employees including security services at staff residences, electricity bills, holiday and education allowances. The Robles is that ZIMRA the tax collector found that these benefits were not being taxed, the ZTA was hit with a penalty of $706 000. The board and management failure to comply with basic tax laws is gross incompetence and someone must take responsibility for the unnecessary loss of public funds. Besides, such lavish packages are outlandish and wasteful. They make no sense in a poor country struggling to make ends meet. Their counterparts in better resources countries can only dream of such largesse from their employer. It’s abuse of scarce public funds and a review is needed across state entities where such practices are rampant. The lack of ministerial oversight might be explained by the incestuous relationship between the Ministry and the Zimbabwe Tourism Authority. We already saw how the ZTA made numerous donations to the Ministry under the auspices of assisting the Minister, his deputy and staff. For example, the Minister’s phone bill worth $4000 was paid by the ZTA which also funded holiday expenses for the deputy minister under the guise of a “familiarisation” tour. The then Chairman of the Public Service Commission, Mariyawanda Nzuwa, was also given a $6000 package as part of “promoting domestic tourism”. The audit also revealed that the ZTA was owed $62.8 million by the Ministry. It had been advanced as a “loan”. Given the close proximity between the Ministry and the ZTA, and the apparent dependence of the former on the latter, it is not surprising that the board and management misused public funds under the guise of donations and promoting tourism. The Tobacco Industry Marketing Board (TIMB) and the Tobacco Research Board are other state entities that were found to be paying board fees and allowances without Ministerial approval. At the TIMB the board had even paid itself a performance-related bonus for the year 2015 without ministerial approval. Theme 4: Lack of controls There are more cases of poor controls and negligence that show how public funds are plundered. For example, the ZTA was found to have two luxury vehicles, Mercedes S600 and S350 which were bought by the authority but were registered in individual names. In another case, a ZBC employee was found receiving the corporation’s funds into his personal EcoCash account. The mixing of personal and corporate assets clearly exposes public funds to abuse. At Allied Timbers up to 8 bank accounts were in other persons’ names. At the GMB the AG found significant variations in the depot-to-depot transfer of maize which suggested that there were fraudulent activities taking place when maize was being moved. At ZIMSEC, three contracts - for cleaning and security services and supply of bond paper were signed in retrospect, suggesting nepotism and corruption. At ZESA the AG found that the power utility was paying insurance premiums for goods that did not exist. The computers had long been stolen back in 2010, but years later ZESA were still paying premiums. At ZUPCO, the AG found that there were 8 properties without title deeds. Likewise, Petrotrade claimed to have property in Epworth but upon inspection the AG found that the land was occupied and the company had no title deeds or agreement on sale. At NSSA the AG found that several posts were filled without the job being advertised and where it was advertised, persons who had not applied had been shortlisted and eventually employed. NSSA had also engaged an “investment expert” based in South Africa incurring a bill of more than $20000 in violation of the governing law which prohibits employment of non-resident persons. In probably the most blatant case of impropriety, the CEO of ZTA was appointed without a contract. Instead the ZTA used his old contract at the Civil Aviation Authority PF Zimbabwe from where he had been transferred. The management explained that they had complied with an instruction from the Chief Secretary to the President and Cabinet, Mishell Sibanda who directed them to take Karikoga Kaseke on the same terms as his old job offered. Leakages: Underdeclaration of Mineral Exports While Zimbabweans like to refer to their rich mineral resources, most will be shocked that the bodies responsible for ensuring they get maximum value from them are all at sea when it comes to critical issues. According to the AG, the Minerals Marketing Corporation of Zimbabwe could not provide geological maps of areas covering its mining claims. In other words, they have no clue of the very assets what they are supposed to oversee, control and protect. Secondly, there are lots of leakages at ports of exit when minerals are exported. This means ZIMRA is failing to collect full mining royalties due to a combination of lack of proper systems and knowledge. The AG found that there were no policies and procedures for regular inspections in order to verify production output and sales volumes that are declared by miners in order to determine royalties. There was “no structured exports’ clearance documents and equipment to confirm the mineral quantity and quality on export declarations at ports of exit”. Instead ZIMRA relied on documents provided by clearing agents. It is not surprising that there are probably serious leakages due to under-declaration of mineral exports. This means the country is getting only a tiny fraction what is otherwise due to its coffers. In other words, a grand heist is taking place right in front of the gatekeepers. It is damning when the country’s chief auditor says, “There is currently no way of confirming the quantities of raw (ores) minerals being exported”. The irony is that it is the political elites, the ones who should be protecting the family silver who are exploiting the loopholes for personal gain. This means they are conflicted. They have incentive to fix the loopholes and plug the leakages because they are the chief beneficiaries. Conclusion The purpose of this BSR was to put together in a simple and accessible way the detailed information contained in the Auditor General’s comprehensive report. We have only focused on the report of state-owned entities. There is a lot more, covering actual government departments and councils and also some public companies which we intend to cover in the second part. The idea is to make this information more intelligible to the ordinary person so that people have a better appreciation of how their funds are misused and abused by both elected and unelected political elites. It is also to assist law enforcement agencies, including the Zimbabwe Anti-Corruption Commission, Police and National Prosecuting Authority to identify lines of enquiry if they are really serious about fighting corruption. WaMagaisa

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