By Dennis Ndlovu I Zim GBC News
The Bulawayo City Council suffered a significant financial loss after investing in a local bank that was closed by the central bank two years ago, prompting Parliament to call for an investigation into the agreement.
A recent report from Parliament’s public accounts committee, which examined the council’s 2019 and 2020 audited accounts within the 2023 Auditor General’s Report for Local Authorities, indicates that Bulawayo will recoup only a very small portion of the funds it placed in Tetrad Investment Bank.
The Reserve Bank of Zimbabwe revoked Tetrad’s banking license on August 30, 2023, after the bank did not restart operations following a period of provisional judicial management.
The council had purchased shares valued at US$500,000, which accrued an interest of US$26,220, before the bank entered liquidation prior to the investment’s maturity date.
The liquidation process resulted in shares being valued at 10 cents each, producing a total of 5,262,200 shares. Parliament found that no proper assessment was conducted before public funds were invested in the financially unstable bank.
“The value of the shares was now too small compared to the initial investment, which was worth US$500,000 and an interest of US$26 220,” the committee said in its report.
The committee noted that the management and councillors of the Bulawayo City Council failed to perform due diligence before approving the equity investment in Tetrad Investment Bank.
“Whereas section 302 of the Urban Councils Act provides the guidelines for equity investment of urban local authorities, the committee notes that all such intentions for private equity investment should be aptly scrutinised by the minister of Local Government and Public Works before any approval is made in terms of section 302 (2f). ii.”
Parliamentarians believed that the equity investment in Tetrad required closer examination by reviewing the paperwork, council resolutions, and all associated documents.
They advised that before any public money is allocated to equity investments by local authorities, the Minister of Local Government and Public Works must “exercise expert scrutiny on all intention to do so, to guard against financial losses of public funds.”
In a separate matter, the parliamentary committee noted that the assessment of the council’s investments in the City of Kings Business Ventures was taking an excessive amount of time, despite concerns raised by the Auditor General about its failure to adhere to the Public Finance Management Act.
Parliamentarians also stated that the council’s business entity lacked a properly balanced board from a corporate governance perspective.
“The committee observed that the evaluation of capital investments in City of Kings Capital ventures had taken too long to be implemented in order to address the observations made by the Auditor General,” the report added.
“City of Kings Business Ventures does not have a balanced board of directors in terms of good corporate governance ethics.
“The oversight by a management committee over business affairs of City of Kings Business Ventures can create conflict of interest and undermine effective checks and balances.”
It recommended that to achieve full compliance with the Public Finance Management Act, the Bulawayo City Council should finalize the revaluation of its capital investment in City of Kings Business Ventures by July 31, 2025.
City of Kings Business Ventures was established via a charter to manage the council’s non-essential services.
These services comprise Mzilikazi Pottery, Mzilikazi School of Arts, Parks Nursery, Caravan Park, and subsequently, the sewage farm known as Aisebly Farm.
The committee learned that the Bulawayo City Council is in the process of hiring an independent appraiser to evaluate its capital investment in the City of Kings Business Ventures.
Council stated that the valuation of the capital investment is scheduled for the first quarter of 2025.
Despite these issues, the committee expressed confidence that the problems identified by the Auditor General in the Bulawayo City Council’s 2019 and 2020 audits would be resolved.
“In this regard the committee implores all the tasked stakeholders to take the recommendations made by the committee seriously so as to ensure financial prudence, restore sanity, transparency and efficiency in the use and management of public funds by Bulawayo City Council,” the report added.
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