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Friday, 3 September 2010

A Parastatal Horror Show (Chambeshi Water)

I promised a series of post to summarise some of the horrors contained in the latest Report of the Auditor General on Accounts for 2008 on Parastatal Bodies.  There are 21 parastatals covered in the report, not sure how many exists, so expect short 21 random posts, and at times less coherent, in the next few weeks.

We start with Chambeshi Water and Sewerage Company Limited, a company allegedly owned by various northern councils. Its principal activity is allegedly "to provide high quality water and improved sewerage services for high standard of living for the population of the districts of Northern Province".  Don't laugh! The only problem according to the Auditor General (AG) is that the company is dire financial position :
Although during the period under review turnover increased from K1.2 billion in 2005 to K3.0 billion in 2008, and grants also increased from K3.4 billion to K12.6 billion, the company made losses in all the years. The losses increased from K470 million in 2005 to K573 million in 2008. Consequently, the company was unable to declare any corporation tax or dividends.

And of course it has been struggling to meet its debt obligations, among the firms it owes money includes ZESCO (K2.3bn) - fuelling an endless cycle of one parastatal crippling another etc :
The company failed to meet its obligations as they fell due. In this regard, creditors falling due within one year increased from K2.0 billion in 2005 to K4.7 billion in March 2008. The schedule below shows the main creditors owed by CWSC as of March 2008....."
The bottom line is that this company cannot survive without grants (foreign aid grants passed through the Devolution Trust Funds (DTF), National Water Supply and Sanitation Council (NWASCO) and Ministry of Local Government and Housing) :
Although the shareholders funds increased from K2.2 billion in 2005 to K8.9 billion in 2008, the increase was due to the increase in grants from various donors and not to the performance of the company. Accumulated losses (Reserves) on the other hand worsened from K1.0 billion in 2005 to K3.6 billion in 2008. The going concern of the company in the absence of grants is therefore doubtful.
That said it is not rocket science why this company is failing. The AG notes "the company operated without a strategic plan during the period under review. As of March 2009, the strategic plan had not been put in place". It also has no auditors : "Among the positions which were vacant was that of the internal auditor. In this regard the company operated without the internal audit function since its inception". 

People let us take interest in these companies and hold these people to account. It is not too difficult to turn Zambia around if we begin to take these issues seriously. 

Next Stop : Electoral Commission of Zambia

4 comments:

  1. Ba Chola,

    Pardon me a minute while I compose myself after reading this...

    Many of us agree that enough is enough! But how do we keep the people in charge of these parastatals accountable, and see that they follow through with the work they’ve been hired to do? Writing emails and letters is definitely a good first step, as is using platforms such as this blog to bring people’s attention to the issues but what’s the second and third step? Or perhaps we just need to get more people on board at step one to apply the pressure, and the rest comes together as we unite our efforts? It certainly makes an impact to receive angry calls, emails, and letters constantly from hundreds of people as opposed to one from a disgruntled blogger, right?

    Does anyone have any ideas/plans?

    ReplyDelete
  2. What Zambia needs is a Constitution which clearly separates the powers of state, as well as the party in government (UNIP, MMD), the government (cabinet, president), and the state (civil servants and parastatals).

    As it is now, there is interference in their effective operation from political operatives, ministries, etc. which don't pay their bills, force crony hires, using managerial positions in parastatals and the civil service to hand out as rewards for political services. Or ensure loyalty by appointing friends and family.

    This can all be avoided through a good constitution.

    The company failed to meet its obligations as they fell due.

    Question: who was fired? And if not, why not?

    ReplyDelete
  3. The enforcement powers of the Office Auditor General(OAG) should be strengthened. Some NGOs have called for the adoption of a statute (or constitutional provision) requiring direct referral for investigation/prosecution of those suspected of misusing public funds. Alternatively, the OAG could be empowered to levy fines/penalties or enter into oversight or settlement agreements with parastatals suspected to be in violation of Zambian law. Until the OAG is given adequate enforcement powers, unscrupulous government officials and parastatals will be able to sqander public funds with impunity. A good overview of the Auditor General's enforcement powers is found in the "The Budgetary Processes and Economic Governance in Zambia: A Literature Review" (Nov. 2005), available at http://www.nepru.org.na/index.php?id=247

    ReplyDelete
  4. A Parastatal Horror Show (Chambeshi Water) <-- that's what i was looking for
    Dissertation Literature Review

    ReplyDelete

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