DDF keeps airline airborne, neglects roads

Source: DDF keeps airline airborne, neglects roads | The Financial Gazette July 20, 2017

THE District Development Fund (DDF) is spending thousands of dollars propping up its loss-making charter airline at the expense of the country’s rural road infrastructure.
Specifically created to develop the country’s communal lands by, for example, maintaining roads and providing tillage services, DDF has, however, been operating an aircraft business called Falcon Air, which has been subsidised by Treasury to the tune of nearly half a million dollars since 2013.
The aircraft operation made a cumulative $804 395 in losses between 2013 and 2016 after spending a total of $1 029 792 during the same period against an income of $227 397.

Auditor General Mildred Chiri, whose concerns over DDF’s ventures appear to have fallen on deaf ears, has warned in her 2016 report that the parastatal needed to seriously look at its unviable aircraft operations, which were being run contrary to the provisions of Section 44 (1) (b) (ii) of the Public Finance Management Act (Chapter 22:19), which directs public entities to invest in viable businesses to safeguard public funds.

“Funds were re-allocated from other needy areas in order to bail out the venture that was failing to break even. Funds needed for core activities such as maintenance and tillage may be spent on propping up loss making ventures like the Falcon aircraft business. There is need to relook at the operations of the venture so that it can be self-sustaining as other costs are being met by the Appropriation Account and the Fund Account,” said Chiri.

Currently, the majority of a total of 32 000 kilometres of the country’s rural road network needs overhaul following years of neglect. DDF’s tillage unit, which at one point provided communal and small scale farmers with tractors and drilling rigs, is almost non-existent; the Fund’s tractors and tilling equipment is now derelict. The Fund also operates a ferry and marine service on Lake Kariba.
In its response to the Auditor General, DDF defended its investment into the loss-making business, describing it as “strategic”.

“Falcon Air within DDF operations is taken as a strategic business unit established through taking advantage of the existing DDF infrastructure in the form of human capital as well as the aircraft, to raise additional resources to supplement Treasury draw-downs. However, the aircraft is operated on the basis of viability with all direct costs being self-financing (through) revenue from the project,” said DDF.

It further argued that the aircraft investment decision was based on the “potential of the project to generate cash-inflows and not profitability because government finances fixed costs such as pilots’ salaries, rents and administration staff salaries, with or without the business unit.
Chiri, however, insists that despite government’s salary payments subsidy, the aircraft business still needed to be viable.

Falcon Air, which operates four 12-seater Cessna 406 Caravans, one four-seater Cessna 182 and one seven-seater Cessna 207, is based at Harare’s Charles Prince Airport. It offers domestic and regional air charters; air cargo services for up to 1 800 kilogrammes; air ambulance; sky diving; group tours and scenic flights.

According to the airline’s website, Falcon Air flies to Victoria Falls, Hwange, Binga, Kariba, Mana Pools, Kanyemba, Masvingo, Beitbridge, Buffalo Range, Bulawayo, River Ranch and Lupane.
Regional destinations include Cape Town, Dar es Salam, Kinshasa, Luanda, Villanculos, Beira and Blantyre.