Source: The Herald – Breaking news.
Despite a recommendation from the audit that a loan agreement was necessary, Mayor Mafume claimed there was no need for it, saying since Harare Quarry is a subsidiary of Harare City Council, drafting a loan agreement would be equivalent to signing one with “ourselves”. 
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There was no agreement in place for Harare City Council’s US$4 500 000 loan advanced to Harare Quarry Private Limited, its purported subsidiary.
Council was also not listed as a shareholder, with evidence showing that two of its former employees were registered as shareholders, The Herald has learnt.
This comes amid revelations that Harare Quarry has been operating in secrecy, failing to declare its revenue, profits or dividends to council since 2018, with salaries amounting to US$56 000 suspected to have been given to ghost workers for 11 months.
Other millions of dollars could not be accounted for as there were no payment vouchers and other relevant documentation.
A special audit report conducted by Parker Randall Chartered Accounts for the period between December 1 2017 to June 30, 2019, revealed that when Harare Quarry received the US$4,5 million loan, its shareholders were then Chamber Secretary Mrs Josephine Ncube and former director of Works Mr Philip Mabingo Pfukwa as reflected by statutory documents lodged with the Registrar of Companies on August 10, 2016.
The firm was engaged on June 12, 2021 to conduct its forensic audit, but its findings had never been made public by the council. The special audit report showed that Harare City Council was never listed as a shareholder of Harare Quarry.
Legal experts are warning that council risks losing its companies, amid indications that the subsidiaries, including Harare Quarry and Rufaro Marketing, are registered in the names of individuals, some of whom have since left the local authority.
Mrs Ncube and Mr Pfukwa took one share each out of the authorised shares amounting to 20 000 as appearing on a memorandum of association dated August 10, 2016.
“Having individuals registered as shareholders of Harare Quarry, a company purported to be a subsidiary of Harare City Council, exposes both Harare City Council and Harare Quarry to potential litigation as the ownership can be disputed based on the Company registration documents lodged with Registrar of Companies,” noted the audit findings.
It also emerged that there were no monthly payroll summaries prepared for the period 1 December 2017 to 31 October 2018.
This allegedly exposed Harare Quarry to potential financial losses arising from payment of ghost employees and salaries that were above the stipulated amounts on contracts of employment.
“There were no payment vouchers for all the payments amounting to US$4 566 407.61 made during the period under audit. Absence of payment vouchers implies either payments made during the period under audit were not authorised or management that was in office during the period under audit deliberately removed payment vouchers from office thereby concealing audit trail.”
The audit further revealed that salaries paid during the period 1 December 2017 to 31 October 2018 amounted to US$56 437.79.
The report noted that the absence of a signed agreement was a sign of a poor corporate governance practice as loans between separately registered parties (regardless of being related parties) must be based on a signed loan agreement which states terms and conditions that include interest rate, repayment terms and repayment period.
In separate interviews, residents blasted Harare City Council for not following due process, saying this explains why it is taking time for culprits to be arrested.
“It’s difficult to investigate such a case and probably, that is why no one has been arrested for the past three years,” an accountant who requested anonymity said.
“The absence of a loan agreement can lead to lengthy and costly litigation, as the parties involved may need to rely on other evidence, such as witness testimony, emails, and bank statements, to establish the terms of the loan and the obligations of the parties involved.”
The director of the Combined Harare Residents Association (CHRA), Mr Rueben Akili, described the scandal as “just a tip of the iceberg” of looting of council resources.
“This exposure is an indicator of the status of the bleeding of council resources at the moment. It is worrying that these activities have been allowed to happen over many years, in full view of the councillors.
“Unfortunately, the same people who are supposed to fight for reclaiming such institutions are also looking for opportunities to loot. It is difficult at the moment because people who claim to fight for sanity are also interested in grabbing those companies,” said Mr Akili.
Despite a 2021 recommendation to update statutory documents lodged with the Registrar of Companies to include Harare City as a shareholder, the city has yet to implement the changes.
The Herald checked with the Registrar of Companies last week and found that only Mrs Ncube and Mr Pfukwa are listed as shareholders, nearly four years after the recommendation.
Although the statutory documents lodged with the Registrar of Companies cite the two sole shareholders, each holding one share out of the authorised 20,000 shares, Mr Pfukwa distanced himself although there was no proof of such.
“No, I am not a shareholder. I gave up my shares about a year ago,” he told The HeraId.
He acknowledged being tasked with spearheading the revival of Harare Quarry in July 2017, but clarified that he resigned by the end of 2017 and, therefore, never had the opportunity to utilise the US$4.5 million allocated for the project.
Efforts to obtain a comment from Mrs Ncube were unsuccessful, as her phone went unanswered.
When contacted for comment, Harare Mayor Jacob Mafume said Harare Quarry had been returned to Harare City Council, emphasising that it had never been transferred to any individual.
He also described the statutory documents lodged with the Registrar of Companies as a mere “piece of paper,” adding that it does not transfer ownership of Harare Quarry away from Harare City Council.
“Harare Quarry is still under Harare City Council; the two were just nominal shareholders, and it was never transferred to anyone.
“In fact, Harare Quarry Private Limited, in which the two individuals had shares, has become defunct. We still own the quarry, as it was merely a company that had no actual quarry and belonged to Harare City.
“It’s similar to City Park’s parking bays, which have always belonged to the council and will remain under Harare City Council’s ownership, even if the company is dissolved.”
Despite a recommendation from the audit that a loan agreement was necessary, Mayor Mafume claimed there was no need for it, saying since Harare Quarry is a subsidiary of Harare City Council, drafting a loan agreement would be equivalent to signing one with “ourselves”.
According to the Harare Quarry Management’s comments in the audit, they tried to obtain loan agreement documents from the City Council but were unsuccessful.
As a result, US$4.5 million remained unutilised from November 2017 to May 2018.
The management also acknowledged that the issue of shareholdings was raised at the annual general meeting on 16 November 2020 and the process of rectifying the anomaly was underway.
However, a cross-check done by The Herald revealed that, nearly five years later, the anomaly remains unrectified.
Mayor Mafume also told the Checkpoint desk that he had finally reported the case to the police.
“We reported the case just after the commission hearings and the CCD (Criminal Complaints Division) is now investigating the case,” he said.
National Police spokesperson Commissioner Paul Nyathi could neither confirm nor deny the report, saying he wanted to verify the information with other departments before making any further comments.
Some legal experts have warned that registering Harare City subsidiaries in the names of individuals, without evidence showing that they are merely nominal shareholders, may pose legal risks.
Mayor Mafume acknowledged that the two individuals are still listed as shareholders, but clarified that the council is working to remove them since a resolution to that effect was passed.
Efforts to obtain a comment from City of Harare’s Acting Chamber Secretary, Advocate Warren Chiwawa, were unsuccessful.
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