AirZim rot exposed

via AirZim rot exposed | The Financial Gazette by Shame Makoshori 26 Sep 2013

FRESH details of the leadership crisis at Air Zimbabwe (AirZim) have emerged, with forensic auditors exposing possible manipulation of aviation insurance policies by past and present bosses, which could have prejudiced the State-run airline of millions of United States dollars between 2009 and this year.

The AirZim fleet, which has eight planes, is insured for US$750 million per aircraft per incident, which means every aircraft is annually covered up to US$750 million.

The Financial Gazette is in possession of documents alleging underhand transactions in multimillion-dollar aviation insurance deals.

They indicate that AirZim paid US$13,8 million to Navistar Insurance Brokers, whose appointment is now at the centre of a crack investigation by BCA Forensic Audit Services.

BCA alleges that Navistar, which was appointed the local aviation insurance broker in March 2009 in violation of tender regulations, “fraudulently” overcharged premiums by 5,1 million euros between April 2009 to April 2013.

Premiums to the tune of US$422 304 collected from AirZim by another local broker, during the period were not remitted to global risk carriers.

AirZim acting chief executive officer (CEO), Innocent Mavhunga has been sent on forced leave to allow investigators to pry into AirZim’s operations dating back to 2009 when Peter Chikumba was CEO.

Mavhunga, who took over from Chikumba in 2011, is under investigation for allegedly misinforming his board that as at March 20, 2013, AirZim owed Navistar US$2 million for aviation insurance, among several other issues.

BCA alleges that its investigations had revealed that AirZim was up-to-date with payments.

Both Mavhunga and Chikumba, accused by investigators of approving a string of alleged irregular payments, declined to comment on the BCA findings.
The report said AirZim paid 713 921 euros in additional charges for three MA60 aircraft between April 2009 and April 2010, bringing total transactions under investigation to about US$20 million.
AirZim (Private) Limited acting managing director, Grace Pfumbidzayi has also been suspended.

Auditors have questioned her role in what appears to be murky insurance deals, while she worked under both Mavhunga and Chikumba as company secretary.
She denies any wrongdoing, blaming some of the decisions taken by the airline during the period to the hard-hitting European Union (EU) sanctions slapped on Zimbabwe, which are estimated to have cost the country a massive US$42 billion, which made it difficult for AirZim to operate normally.

The BCA report submitted to the AirZim board in July showed the predicament of an airline in dire need of a solid leadership.
It insinuated that insurance brokers have been acting as they please. They have been keeping critical airline information to themselves and failing to remit premiums. They have doubled payments and destroyed crucial data, the report claims.

It took the grapevine to alert AirZim management that for two months in 2009, aeroplanes had globe trotted without insurance cover after ZimRe had defaulted payments to Willis UK, the global insurer.
ZimRe had been placed on EU sanctions, but kept the cancellation a secret while it continued to collect premiums from AirZim, the report said.
ZimRe has not replied to questions sent seven days ago.

The listed insurance firm lost the contract after it was placed on the EU sanctions list, resulting in Navistar being appointed to run AirZim’s aviation insurance, which is now being questioned, with Pfumbidzayi facing a barrage of questions.
BCA is alleging that Pfumbidzayi irregularly awarded the Navistar contract and failed to ensure that the payments AirZim made  were correct and in respect of the aviation insurance.
She argues however. that aviation insurance contracts were awarded collectively with full knowledge of the CEO and board.

Despite its lack of expertise in aviation insurance, Navistar was chosen as the local broker to work with a British insurer (name supplied) in transactions which involved busting sanctions that had started to threaten AirZim.
Navistar did not furnish AirZim with proof of professional indemnity cover, a critical requirement for insurance brokers.

Immediately after Navistar’s appointment, AirZim’s insurance bill shot up by 88 percent to over 4,4 million euros between April 2011 and April 2012, from 2,2 million euros between July 2008 and July 2009.
“The growth (in premiums) was not supported by fleet growth, route expansion, increased landing and departure estimates, and fleet valuation,” alleges BCA.

“To the contrary, AirZim’s routes were reduced and some aircraft were grounded hence the reduced landings and departures between April 2009 and April 2013. The drastic increase is attributed to the appointment of Navistar on March 18, 2009 who upon being appointed started charging outrageous flat broker fees of 300 000 euros per quarter and other fraudulent claims…Navistar was appointed without going to tender in breach of the Procurement Act,” BCA alleges.

The documents further allege;
– Navistar “fraudulently” overcharged aviation insurance premiums from April 2009 to April 2013 by 5,1 million euros;
-Navistar did not remit US$205 000 for hanger property damages between April 2009 and March 2010;
-AirZim paid US$360 000 as premiums for two A320 aircraft leased last year to Navistar. The planes had already been insured by the leaser;
– Navistar “fraudulently” charged and received US$142 300 as a top up to the insurance premium of EC regulation 898-2005 which relates to EU sanctions;
-AirZim was charged an additional 713 921 euros to insure its three MA60s between April 2009 and April 2010.
Navistar’s operations director, Vukile Hlupo, said the issue of tenders would best be answered by AirZim.

He said some of the issues raised by BCA, such as the alleged overstatement of premiums, had been deployed to deal with the global embargo.
“Whatever action taken was for the purpose of addressing the circumstances,” he said in e-mailed responses to The Financial Gazette.
“Our charges were outlined to (AirZim) management and were approved and paid… we are not aware of any overpayment. Our charges were based on agreed rates and these were necessitated by circumstances prevailing and the client was fully aware (of these),” said Hlupo.

Investigators were still trying to understand if Pfumbidzayi had no personal interest in Navistar after discovering that apart from the controversial contract, she held a private policy with the firm.
She has told auditors that this was a mere coincidence.
Pfumbidzayi declined to speak to The Financial Gazette when contacted for comment.

But in her responses to BCA seen by this newspaper, she reinforced Hlupo’s argument that the handling of the aviation insurance was an offshoot of the crippling sanctions.
She said decisions which were now viewed as irregular, including the Navistar deal, were sanction-busting measures undertaken to save AirZim.
“In December 2008, Willis UK, the airline’s overseas insurer wrote to inform ZimRe that due to sanctions on ZimRe, it was no longer able to receive premiums for the AirZim programmes without breaching the regulations imposed by the UK and EU authorities,” Pfumbidzayi explained.

“ZimRe did not notify the airline…what was clear was that (ZimRe) had been misrepresenting facts and the fleet was uninsured. Enquiries with the major overseas insurance companies were fruitless…indicating inability to assist for political reasons. The airline was then advised by some industry players to approach a company called…who specialised in ‘sanctions busting’ insurance programmes. (It) agreed (and) requested the airline to submit profiles of local brokers…(it) informed AirZim that Navistar had been approved and advised the airline to appoint Navistar and provide proof to them. This was duly done…because of sanctions, the overseas insurance company which had agreed to handle AirZim under those circumstances was the one dictating the companies it was able to deal with based on the dictates of the UK compliance authorities. The decision was not AirZim’s or the tender board to make. The overseas insurers were calling the shots.”

“The difference between what could have been declared without falling foul of the overseas authorities and compromising third parties that had assisted, is what is now viewed as prejudice now that the crisis is over,” said Pfumbidzayi, who has worked for AirZim for 28 years.

BCA has alleged creative accounting in the aviation insurance policies.
“We established that the SAP accounting system showed an outstanding amount of US$2,2 million to Navistar as at March 2013, whilst an excel schedule provided by the finance department showed an outstanding amount of US$620 470.

“The schedule provided by the finance department as the correct outstanding balance for creditors, including Navistar was maintained in excels in such a way that the outstanding amount could not be traced to individual invoices and debit notes.”

BCA alleges that Mavhunga had misrepresented facts in a report to the board in February.
“AirZim had no outstanding premium for 2012 fourth quarter,” alleges BCA.

AirZim chairman, Ozias Bvute confirmed the suspensions yesterday but said his board was working hard to cleanse the airline of mismanagement.
He said AirZim had been on a growth path recently, and the strategies his team had put in place were beginning to bear fruit.

Incoming Transport Minister, Obert Mpofu is said to have been fully briefed of the situation at the airline as well as the measures being implemented by the board to remedy the situation. Mpofu is said to be unhappy with the endless twists and turns at the parastatal which has been haemorrhaging for decades.

COMMENTS

WORDPRESS: 6
  • comment-avatar
    Tjingababili 7 years ago

    THE NEW MAKHIWAS HAVE DESTROYED THIS COUNTRY!

    • comment-avatar

      Excuse me, but the “Old Makiwas” ran a tight ship in the face of proper world sanctions at least everything worked, Air Rhodesia was in the Black when it became Air Zimbabwe, in fact all Government controlled Companies in Rhodesia were professionally managed,in a few short years Zanupf has reduced these Companies to bankruptcy.

  • comment-avatar

    This is news to me. First I ever heard that AirZim was in any way effected by EU sanction. Sounds like more excuse making to cover up corruption by ZANU-PF.

  • comment-avatar
    munzwa 7 years ago

    and might as well look what happened to Zim Cricket before hoping this mess will be sorted!!1

  • comment-avatar
    Peter 7 years ago

    The South African novel “Cry the Beloved Country” more than applies to Zimbabwe now. Air Zim was formed out of Air Rhodesia and then later on Afretair was brought in as well, both Air Rhodesia and Afretair operated safely and profitably under genuine sanctions and restrictions. What a sad situation. Power corrupts, absolute power corrupts absolutely.
    Is there anything that Mugabe and his cronies have not destroyed? Anything they have built and maintained?

  • comment-avatar
    Macon Pane 7 years ago

    Designed convolution, and you can bet sticky fingers were somehow involved. How about looking into the personal finances of ZimRe, Navistar, and AirZim management. Has all the smells of a ZANUpf scheme to continue to loot Zim.

    Bring in a real audit team that really understands how the SAP system can be manipulated, and give them access to those personal finance records, and you’ll find your money… if that’s the actual goal of this exercise.

    (Funny how top management all love SAP. They insist the people in the organization’s A/R and A/P departments use the SAP system… but the people in those accounting departments also use Excel spreadsheets to track their business to know the real numbers.)