NetOne graft under probe

via NetOne graft under probe – The Zimbabwe Independent March 11, 2016

NETONE’s board of directors has ordered a forensic audit into the affairs of the country’s second largest mobile phone operator amid a series of scandals rocking the state-owned telecoms firm, the Zimbabwe Independent has established.

By Bernard Mpofu

A report done by the company’s board chairperson, Alex Marufu, says incoming NetOne chief finance officer (CFO) Sibusisiwe Ndlovu — who is due to be engaged on a permanent basis after completing her probation amid resistance from top management led by chief executive Reward Kangai — unearthed a series of scandals at the state-run firm which have prejudiced the company millions of dollars.

Some of the scandals include lack of suppliers’ reconciliations, payment of funds to companies that are not contracted to NetOne, over-invoicing of contracts and poor accounting methods.

As a result of these, the board, with the concurrence of the Minister of Information Communication Technology, Postal and Courier Services, Supa Mandiwanzira, ordered that a forensic audit must be undertaken to unravel the looting that has been going on at the company.

The audit, according to information gleaned by the Independent from Marufu’s report, will look into the following:

  • The integrity of the payment system;
  • Collection of debts;
  • The airtime distribution system;
  • Payment of salaries and allowances;
  • Acquisition and management of base station sites; and
  • Suppliers of interest.

“Having received the report of the CFO, the board deliberated on actions to take going forward. With the concurrence of the minister, the board decided to undertake a forensic audit …,” Marufu says in the report to government.

“Due to the need to follow the necessary procurement regulations, this work is yet to begin following publication of the article in the press, the board met at an urgent meeting and agreed to break this task into manageable work packages which can be contracted out with minimum hassle and work should begin by the 17th of February with a report expected by end of February 2016.”

He added: “The board is of the opinion that NetOne could potentially be the leading state-owned entity in terms of contribution of taxes and dividends to government. The organisation has not been able to live up to this role as a result of a combination of ineptitude, incompetence, a lack of focus on the commercial aspects of the business and possibly criminal behaviour.

“The board is committed to getting to the root of all these and the restructuring of the organisation, which is now complete, has proved to be invaluable in providing the board with information it requires to be able to act decisively.”

Among some of the misdemeanours unearthed by Ndlovu are irregularities in the awarding of a contract to a company running NetOne’s mobile money platform, OneWallet. The contract, Marufu says, was designed in such a way that the provider of the system, Gemalto, earns US$0,04 for every registered subscriber on the system, even though very few subscribers were usiing the system.

He said the system failed to realise much revenue due to poor marketing, a non-existent agent network and system inefficiencies.

“On the other hand, NetOne was faced with demands from Gemalto to pay support fees adding up to over US$500 000 compared to revenue generated for only October 2015 of US$904,” Marufu said.

“The CFO noted that several ‘rush’ payments were being made to a company called Bopela which in effect had no contract with NetOne, but was being paid all the same. The company was involved primarily in the construction of cellphone towers, but had been paid two payments of US$40 000 each for the provision of a service to sign up 500 000 youths as NetOne subscribers, which service had not been delivered.”

On fuel, Marufu says, prior to the arrival of Ndlovu at NetOne, suppliers would be paid on statement and no attempt was being made to reconcile these statements to invoices and in turn the invoices to goods received. Ndlovu, Marufu adds, then insisted on a reconciliation of the statements for fuel delivery even though she was under pressure from Kangai to pay the supplier Redan Fuels an amount of US$183 000.

“On reconciling the amount, it was found that the amount due was only US$87 000 which was duly paid. The balance would only be paid once invoices were provided and these reconciled to product received by NetOne,” Marufu says.

The NetOne chairman said during the same period, the CFO was inundated with calls from PowerTel, a unit of power utility Zesa threatening to cut off services as no payment had been received.

“Investigations showed that PowerTel was owed far less than the US$400 000 they were claiming was due, after reconciliations were done and the technical department confirmed which circuits were being leased compared to what was in the statement. This underlined the need to reconcile and confirm receipt of service before rushing to make payments based on statements and threats of switching off,” he says in the report.

Turning to setting up of key telecoms infrastructure such as cellphone towers, Ndlovu, according to the report, expressed concern at the payments that were being backdated and in others, payments were being made for rental as far into the future as 2021. The report showed that a payment of US$14 400 was made to Richwood Sports Club for rental of a cellphone tower site from June 1 2015 to June 1 2021. In addition to this being a pre-payment, NetOne offered an increase in rentals at a time the company was considering reducing them.

Marufu says the CFO also noted that bank reconciliations were not being cleared on time, with some dating as far back as 2014 and 2013. This, he says, posed a financial risk to NetOne as there was risk of duplicate payments and unprocessed receipts which would materially affect the fair presentation of financial statements.

“The CFO observed that there was a general lack of interest in the commercial implications of the projects being undertaken by the business. There was tremendous interest in procuring products and services and there was little effort being put into ensuring that these purchases translated into revenue and profit for the organisation,” he says.