Bungled NSSA deal gets dirtier

Source: Bungled NSSA deal gets dirtier | The Herald December 5, 2016

Takunda Maodza Assistant News Editor—
THE National Social Security Authority (NSSA) is up in arms with Matay-Kingdom over a demand for it to pay $4 million Value Added Tax (VAT) to the Zimbabwe Revenue Authority (Zimra) following the acquisition of a Borrowdale property at an inflated price of $32 million, with auditors — Grant Thornton — hammering NSSA management for gross negligence in the whole transaction.

Eventually, NSSA paid $34 million for Celestial Park, inclusive of other charges. If the authority pays VAT, the cost of the property will shoot to $38 million. The property’s price was allegedly inflated by $8 million after BARD valued it at $24 million.

It was even suggested that NSSA could have built the property for $27 million. In its findings, Grant Thornton said Matay-Kingdom had at some point attached a $25 million price tag to the property.

The audit report said NSSA relied wholly on information provided by Matay-Kingdom on the potential of the property to generate revenue for the authority. It did not hire an external consultant to validate Matay-Kingdom’s investment returns claim.

Matay-Kingdom sent NSSA a juicy list of “would-be tenants” and the authority swallowed it hook, line and sinker. The auditors noted, “NSSA management was therefore unable to adequately ascertain the profitability of the investment.”

On payment of VAT, the auditors said Matay-Kingdom was categorical that NSSA must pay the $4 million VAT to Zimra. The agreement of sale is silent on who should pay VAT. The VAT Act is, however, clear on who ought to pay.

Reads Chapter 23:12 of the Act: “Any price charged by any registered operator in respect of any taxable supply of goods or services shall, for the purpose of the VAT Act, be deemed to include any tax payable . . . whether or not the registered operator has included tax in such price.”

VAT on the Celestial Park transaction amounts to $4 173 913. Noted Grant Thornton, “In addition, Matay-Kingdom is also disputing the VAT payment of $4 173 913. In their opinion, the burden of VAT should be borne by NSSA.”

Matay-Kingdom also claims a total amount of $3 565 100 as outstanding from the purchase of Celestial Park. The amount is made up of withhold tax ($1,6m), interest on outstanding balance on purchase price to July 31 2016 ($857 337) and interest earned on funds ($582 504).

Matay-Kingdom charged NSSA a whopping $54 275 for landscaping. The auditors observed that NSSA was tricked by Matay-Kingdom into buying the property after it availed a long list of businesses that could pay rent to the authority.

The Matay-Kingdom list indicated the following as potential tenants – Elizabeth Glaser Paediatric AIDS Foundation, Afrisun Marketing, Heritage Insurance, DAMCO, Ernst&Young, Japanese Embassy, Econet Wireless, Dr Gwenzi, CADCO, Matamba Anonaka, Ecobank, AMG Global, MGP&Partners (a company related to the seller), Clasique Project Management (a company related to the seller), and Iwe Neni Real Estate (a company related to the seller).

The auditors said NSSA was duped on returns per square metre in rentals.

“From our review, we noted that there is a huge gap between what was anticipated when Celestial Park was purchased and what is currently prevailing. The GreenPlan evaluation which eventually provided the purchase price agreed, assumed that the property would generate rental income per square metre of between $14 and $15. In terms of the valuation report, this was too high end of the rates that were being charged by other properties of similar nature at the time,” said the auditors.

“While this was anticipated income, actual rates per square metre have been between $7 and $8. A void rate of zero percent was also anticipated, that is to say, all rental space available would be taken up by tenants. However, occupying rate at the property have been as low as 29 percent 9 (March 2016) with the authority experiencing difficulties in collecting rent from those tenants that they have managed to secure,” reads the Grant Thornton audit report.

It noted that the gap between what was anticipated and what is currently prevailing indicate that the assumptions used in coming up with the value of the property “may have been overly optimistic”.

“In the management investment committee meeting held on the 7th of May 2014, it was recommended that NSSA purchase Celestial Park subject to the following: Investment Division to go back to the seller and find out whether there were tenants interested in occupying space in the property and engage consultant to do a survey on the tenants. While NSSA managed to obtain a list that came directly from the seller through its agent, there was no evidence of any due diligence having been performed by NSSA on the list of potential tenants.”

The list of potential tenants was provided to NSSA by the seller.

“There is no evidence NSSA had engaged an external consultant to perform due diligence on tenants, including analysis of rate per square metre potential tenants were willing to offer for the property prior to the purchase of Celestial Park by NSSA,” added the auditors.

The auditors added, “NSSA management was therefore unable to adequately ascertain the profitability of the investment given that they only used a potential tenants listing supplied by the seller as a basis. This resulted in a very low occupancy to date.”

The auditors criticized NSSA for recklessness. “Due care needed to be taken also considering that public funds would be utilized in this transaction and the return needed to be meaningful for all stakeholders involved.”

COMMENTS

WORDPRESS: 3
  • comment-avatar
    Mukanya 5 years ago

    Its not recklessness!!, but utter corruption by NSSA management team.

  • comment-avatar
    nelson moyo 5 years ago

    Simple question here for anyone who has half a brain and wants to know the criminals in this NSSA cover up :-
    Who are the people behind Matay- Kingdom ?
    These guys – Matay-Kingdom- have/hold the US dollars 14 million defrauded from NSSA – the pension fund of Zimbabwes workers.
    Members of the public or employees of NSSA – here is your stage or time to speak up- please help us all to solve this problem

    • comment-avatar
      veenie zim 5 years ago

      This is a simple definition of corruption and a messy cover up..Zimbabwe has become a colony again, mind imprisoned by greedy.