Friday, 14 October 2016


STATE power utility Zesa Holdings owes eight Zimbabwean banks a combined US$180 million, which has left the country’s financial services widely exposed to the struggling company whose ability to service debts and continue as a going concern is under threat, an audit reveals.

Zesa is currently reeling from a corruption storm after major energy projects were given to dodgy businessmen with criminal records ranging from fraud to drug trafficking.

The deals were inflated by more than US$500 million, raising suspicions Zesa executives and senior government officials, including ministers, are benefitting from the shady contracts, which the authorities are reluctant to investigate.

The parastatal has paid millions upfront for projects that are yet to commence but is failing to pay for power imports.

Zesa officials say the company is in a precarious financial position because of the rampant corruption and mismanagement.

According to Zesa’s 2015 annual audit conducted by BDO From Chartered Accountants, the group incurred a loss for the year amounting to US$48,1 million compared to a US$134,3 million loss recorded in 2014.

Seven local banks and the Reserve Bank of Zimbabwe (RBZ) and the World Bank, were as of December 2015 collectively owed about US$180 million by Zesa. Zimbabwe has 14 registered commercial banks including state-owned savings bank POSB.

The central bank is owed US$100,4 million relating to electricity import invoices for the period 2006-2008 that were paid by the RBZ on behalf of Zesa while BancABC is owed US$5,2 million, part of which is not secured and NMB Bank is owed US$5 million which is overdue and yet to be renegotiated.

FBC Bank, Stanbic Bank Zimbabwe, ZB Bank and World Bank are owed US$3,5 million, US$13,3 million, US$4,6million and US$7,7 million respectively. The loans from FBC, ZB and Stanbic are unsecured.

Non-banking entities that are owed millions by Zesa are the government of Zimbabwe (US$50,8 million) and Chinese energy firm Afrochine (US$7 million). This brings the total local loan to US$238,8 million as at December 31 last year, up from US$228,1 million in 2014.

Total foreign loans owed to institutions such as the Commonwealth Development Corporation, Lloyds Bank plc, Barclays plc, Afrexim Bank, ZTE Huawei, India Exim Bank, China Exim Bank, Standard Bank and the European Investment Bank amounted to US$583,6 million while interest accrued on all loans stood at US$253,7 million to bring the total foreign and local loans to a figure of US$1,1 billion.

Auditors BDO Chartered Accountants said in the annual report the power company’s loss-making, coupled with current liabilities that exceed current assets, indicate the existence of a material uncertainty over its ability to continue operating as a going concern.

“Without qualifying our opinion, we draw attention to Note 24 to the consolidated financial statements which describe the going concern uncertainty for the holding company and its significant subsidiaries which have been consolidated, namely, Zimbabwe Electricity Transmission and Distribution Company (Pvt) Limited (ZETDC) and Zimbabwe Power Company (Pvt) Limited (ZPC).

“Zesa’s current liabilities exceeded its current assets by US$66 178 820 (2014: US$65 321 390). ZETDC incurred a loss before tax of US$111 474 084 (2014: US$118 312 961) and its current liabilities exceeded its current assets by US$771 383 372 (2014: US$958 567 146),” said BDO.

“The holding company and its subsidiaries ZETDC and ZPC failed to service their loans and consequently loans amounting to US$416 909 476 (2014: US$761 236 942) were due and payable. These conditions along with other matters set forth under Note 24 indicate the existence of a material uncertainty that may cast significant doubt about the ability of the holding company and its significant subsidiaries to continue as going concerns,” added BDO..

Zesa directors also assessed the ability of the company and its subsidiaries to continue operating as a going concern.

The directors said they believe that the preparation of the consolidated financial statements on a going concern basis is still appropriate despite the holding company and its significant subsidiaries, ZPC and ZETDC’s going concern uncertainties as disclosed in Note 24 of the financial statements.

Assessment of the propriety of the going concern assumption involves making judgments about the viability of proposed strategies to turn around the company, as well as estimation of future cash flows.

“Various strategies have been put into place by management and the shareholder to ensure that the group continues as a going concern,” Zesa said.

As part of the strategy, government has undertaken to guarantee the continued existence of the company and its subsidiaries due to the strategic importance of electrical energy to the economy of Zimbabwe. The government is also in discussions with multilateral creditors to address the country’s outstanding arrears and explore the feasibility of debt rescheduling.

“Successful debt rescheduling will improve the group’s working capital and access to new loans,” said Zesa.
Successful rollout of pre-paid meters, affordable importation of power from the region as well as ongoing expansion projects are seen turning around the company. indepednent


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