Zimbabwe: Weak public finance systems expose government graft

By The Africa Report
Posted on Thursday, 20 October 2022 10:20

Zimbabwe's Finance Minister Mthuli Ncube arrives to present 2021 National Budget to the parliament in Harare

Weak implementation of the Public Finance Management Act, currency confusion, corruption, and non-compliance with the Auditor General’s audit recommendations have resulted in billions of dollars worth of losses in Zimbabwe’s state entities and local authorities.

Zimbabwe’s government continues to lose billions of public funds every year due to weak implementation of the Public Finance Management Act (PFMA), while corruption magnifies financial leakages at state entities and local authorities.

Worsening during the pandemic, the financial leakages have exposed the weakness of procurement systems at public entities, most of which have failed to submit their financial records to the Auditor General, citing staff shortages in their financial departments induced by low salaries and inadequate information communication technology (ICT) equipment.

“In 2020 and 2021, most of the State entities and local authorities that appeared before the Public Accounts Committee to be grilled over adverse audit reports said they were disturbed by the Covid-19 outbreak, which also hindered the Auditor General’s office from visiting them for audits,” says Public Accounts Committee (PAC) chairperson Brian Dube.

“Others decried the hefty audit fees they have to pay to auditors at $4,300, which government entities say they cannot afford.”

Are AG audit reports useful?

Such yearly losses have persisted for decades, with multiple reports from the country’s Auditor General (AG) Mildred Chiri and the Public Accounts Committee urging, in vain, for the implementation of more effective public finance management.

Public finance watchdogs like the Zimbabwe Coalition on Debt and Development (Zimcodd) now feel that the AG audit reports show several governance anomalies and mismanagement, which has derailed service delivery.

“The challenge continues to be enforcing compliance of state entities to submit themselves for audit,” reads a statement issued last week by Zimcodd.

“Citizens face prejudice every year while services decline and State entities responsible operate with impunity. It now remains with Parliament and PAC to demand answers and ensure that recommendations by the AG are auctioned.”

Harsher approach

Speaker of the National Assembly, Jacob Mudenda, says Parliament ought to adopt a harsher approach and the parliamentary committees must conduct audits to find out whether the ministries have implemented recommendations.

If not, Mudenda says they must be charged with contempt of Parliament.

Citizens face prejudice every year while services decline and State entities responsible operate with impunity.”

For instance, in 2015, a total of 22 out of 33 ministries were exposed by the Auditor General for poor corporate governance, abuse of fund accounts, and flouting of procurement regulations. Some 67% of the ministries had qualified adverse opinions on their appropriation accounts.

Fast-forward to 2021, Auditor-General Chiri still said that some of her recommendations in the previous audits have not been implemented.

Amending Audit Act

Legal think-tank Veritas, in their Economic Governance Watch (2021) suggested that due to continued failure by public entities to hand in financial statements to the Auditor General, and failure to implement audit recommendations, the PAC must push for amendments to the Audit Act to include penalties to ministers and government officials.

“It is unlikely that a minister would ever be prosecuted for refusing to lay an audit report before Parliament. Civil sanctions must be more effective.

“If defaulting ministers were deprived of their salaries and allowances for the period of the default, they would be more likely to obey the law, and the same would apply to civil servants who fail to send audit reports to the Auditor General,” Veritas said.

“It will probably be up to the Public Accounts Committee itself to draft suitable amendments and bring them to Parliament as a Private Members Bill.”

Unpredictable monetary policy

PAC chairperson Dube says unpredictable currency issues in Zimbabwe since 2008 have added to the audit problems.

In 2009, Zimbabwe’s inflation was mind-boggling at 200 million per cent, and to address this hyperinflation, the Zimbabwe dollar was abandoned for the US dollar as legal tender.

The country uses a multiple currency system, which includes the USD, South African Rand, and the Botswana Pula as legal tender. This has been cited as one of the reasons for inefficient financial systems.

“For instance, in 2020 the Zimbabwe Statistical Agency (ZimStat) failed to submit its 2019 financial reports for auditing due to the introduction of new currencies,” Dube tells The Africa Report.

“The agency uses multiple currencies in its transactions and Sage Pastel Evolution System Version 7 database for accounting. The system did not have the foreign currency module to enable multiple currency conversions to the reporting currency.”

Massive financial losses

Institutions like the Parliament of Zimbabwe, which must play a watchdog role on public finances, as well as the Ministry of Finance and Economic Development, are among entities that are accused of misappropriation of public funds through loopholes in the financial systems.

  • September 2022 – Parliament of Zimbabwe authorised a tender of 173 over-priced laptops valued at $9,200 each to shadowy companies without following proper tender procedures. The tender also included 79 overpriced desktop computers that cost $3,000 each.
  • May 2022 – $89 million in Covid-19 funds for the vulnerable could not be properly accounted for. PAC had to recommend a forensic audit to be done and that the Zimbabwe Anti-Corruption Commission and police investigate the misuse of funds.
  • In 2020, Zimbabwe’s former Minister of Health and Child Care was arrested for over $60 million in corruption regarding the procurement of Covid-19 medical supplies. He was later fired from the government but released from jail.
  • To date, the Ministry of Finance has failed to account for US$9.6bn budget over-expenditure incurred between 2015 and 2018, raising suspicion of corruption as the money was used in contravention of the Public Finance Management Act and outside Parliament approval.
  • In 2017 and 2018, $3.2 billion was spent by the government over a period of six months through the issuance of Treasury Bills for the Command Agriculture Programme. The Ministry of Agriculture denied receiving the amount, which amounts to nearly two-thirds of Zimbabwe’s 2018 national budget, before the PAC. Opposition MPs suspect the money was used by the ruling party Zanu PF for 2018 election purposes.

PFMA weaknesses

PAC chairperson Dube says the problem is not weaknesses in the Public Finance Management Act, but the lack of implementation and enforcement of the public finance regulations and Constitution by State entities.

“The Executive is an accomplice […] boards that must supervise state entities are either not there or are very weak; or under-resourced […] that they are unable to monitor and supervise operations and compliance to the PFMA and AG recommendations by entities,” Dube says.

“However, the PFMA must be improved by criminalising non-compliance by accounting officers. The PFMA must also give specific penalties for deliberate non-compliance with audit recommendations.

“There is also a need for Zimbabwe’s legislation to empower PAC to work with the Anti-Corruption Commission and other law enforcement agencies for speedy enforcement of AG reports.”

If defaulting ministers were deprived of their salaries … they would be more likely to obey the law.”

Dube says the Priviledges Immunities and Powers of Parliament Act and Parliament Standing Rules and Orders stipulate that the AG audit recommendations must be enforced.

Imposing sanctions and penalties

“The Public Finance Management Act in Zimbabwe has provisions for penalties and sanctions that can be imposed for the abuse of public funds. Section 87 of the PFMA deals with disciplinary procedures, while section 91 outlines offences and penalties which can see someone being imprisoned for a period not exceeding five years for mismanaging public funds, and it must be enforced.

“Very few public officials have however been arrested for misuse of public funds or failure to adhere to public finance management regulations.  Those that are arrested are later released despite compelling evidence of corruption.”

The Africa Report could not reach Auditor General Chiri for comment. She told the media last week her audit reports can only make recommendations, but her office has no mandate to force State entities to submit their reports for audit.

She said her office does not have prosecuting powers, adding that State entity boards should take corrective action and implement her audit recommendations.

Chiri continues to produce audit reports that expose massive corruption every year, but no public official has been jailed yet over audit reports.

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