via Gushungo Holdings’ doldrums: Microcosm of mismanagement – The Zimbabwe Independent October 30, 2015
PRESIDENT Robert Mugabe’s revelation that mismanagement was reigning supreme at his Gushungo Holdings business — an empire widely brandished within government and Zanu PF as a success story of the country’s chaotic land reform programme — is a microcosm of mismanagement within the public and private sectors.
Gushungo Holdings, a business venture which marked Mugabe’s switch from his 1980s socialist ideals to a modern-day capitalist, is in the doldrums and is struggling to remain viable because of looting, at least according to Mugabe.
The reported looting at Gushungo Holdings is symptomatic of the appalling corporate governance deficit that has become commonplace in government, state entities, as well as corporates operating in Zimbabwe.
Addressing guests at his niece Petronella Nhetekwa’s 80th birthday celebrations in Mhondoro, a fortnight ago, Mugabe expressed his frustration over the state of affairs at his company before suggesting corruption was rife because of society’s failure to mould upright citizens.
“I decided to start a dairy business,” he said.
“We hadn’t moved into cheese production, but we had started producing ice cream. See what was happening: nobody can tell us where the money is.”
He added: “Some (of the employees) did accounts, but prefer not to follow proper accounting procedures to hide their thievery. We have hired auditors from Ernst & Young and what they are unearthing is shocking.”
The irony however, is that the culture of poor corporate governance that has become a way of life, at Gushungo Holdings, can be placed firmly on Mugabe’s doorstep.
His failure to address corruption in government is one of the indicators that provide plenty of evidence for the prosecution who point to his dismal failure as a leader.
Over the years, Mugabe has built a large patronage network, to sustain his stay in power.
He has among other things given critical positions in government and parastatals to his loyalists, among them military personnel without necessarily considering qualifications or competence.
In many cases he has done nothing as his cronies looted from government or ran down parastatals, resulting in bad corporate governance becoming deep rooted.
Rather than being decisive on corruption, he instead has gained a reputation of speaking out against the vice at public forums but crucially failing to act.
Because of his failure to walk the talk many believe Mugabe has actually been promoting corruption.
Politically-connected individuals know they can run down companies or loot and simply be moved to other positions.
His reluctance to tackle corruption was highlighted by his failure to act after receiving evidence from former South African President Thabo Mbeki that his ministers were demanding bribes.
Despite promising to take action, while addressing the 2012 Zanu PF conference, Mugabe did nothing thereafter giving the impression that his outburst was only because he had been exposed by a former head of state.
“I was getting complaints from outside. Former South African president Thabo Mbeki was saying some of their people in the ANC wanted to come intending to do business and this is what they have been told: ‘If you want to do this business, you bring US$5 million and from that US$5 million we take US$1 million that we will take to the minister to give to the president’,” Mugabe said.
Even as far back as the early 1990s, Mugabe failed to act decisively against those found guilty of abusing the war veterans compensation fund and the VIP housing schemes.
One only needs to look at Mugabe’s failure to act on the numerous reports compiled by auditor general Mildred Chiri, which reveal gross violations of corporate governance principles by various arms of government, further evidence of his failure or unwillingness to address the situation.
Successive narrative reports on state enterprises and parastatals highlight that loss-making parastatals, which are a perennial burden to the fiscus, are failing to fulfill their key mandates while also flouting good corporate governance tenets, resulting in huge financial losses.
Appropriation Accounts and Miscellaneous Funds for the year ended 2014, released by Chiri this year indicate that even Treasury made direct payments of about US$180 million on behalf of ministries without supporting invoices and receipts from service providers.
This, among many other horrendous examples of flouting of corporate governance principles is exposed year in and year out but Mugabe has failed to crack the whip on the culprits.
“Governance issues were observed in areas of internal control, record-keeping, diversion of resources from fund accounts to parent ministries, reconciliations of the sub-paymaster general accounts with the public finance management system records, late submission of fund accounts and management of government property and resources,” Chiri noted in her report.
She says although section 49 of the public finance management act requires that public entities keep full records of their financial affairs for accountability and transparency purposes, some ministries and funds failed to submit assets and property registers.
Air Zimbabwe, National Railways of Zimbabwe and the Zimbabwe United Passenger Company are some of the state entities that continue to struggle due to lack of adherence to good corporate governance tenants revealed in the auditor general’s reports as well as forensic audit reports.
Economist and former Zimbabwe National Chamber of Commerce president Oswell Binha believes the culture of impunity has worsened since the government embarked on the chaotic land reform programme. “I think what has happened is that since we embarked on the land reform in 2000, a certain level of impunity has crept in those working in government and quasi government institutions,” Binha said.
“We started losing our work ethic and our level of accountability. Very few state owned companies have published financials annually and religiously between 2003 and 2010.”
Binha said there was an urgent need to strengthen institutions such as the auditor-general’s office mandated to enforce good corporate governance.
The need to strengthen these institutions is emphasised by the continued trashing by parastatal bosses of the government directive not to earn salaries of more than US$6 000 with management at these state entities continuing to earn huge salaries and perks.
Corporate governance failure has also spread its tentacles to the private sector especially in the banking sector with unauthorised insider loans featuring prominently in many banks which have collapsed, among them, Interfin and Tetrad.
Economist John Robertson says failure by government to stop the culture of corruption has had a contagious effect on the country resulting in the vice being wide spread.
“When the leadership behaves badly, especially on issues of failing to respect property rights, those outside the leadership also behave badly,” Robertson said.
“This has become contagious and the contagion is both damaging and corrosive. While other countries are striving for excellence we in Zimbabwe are striving for mediocrity.”
He said the rot in the financial sector largely emanates from the dishing of banking licences to individuals without carrying out checks on their suitability to run financial institutions.