ZAMTEL incurred losses of over K4 billion during the financial year ending December 31, 2018, due to excessively high distribution and administration costs compared to low revenues generated during the same period, says the latest Auditor General’s Report.
According to the Auditor General’s Report on the Accounts of Parastatal Bodies and other statutory institutions for the financial year ended December 31, 2018, the struggling telecommunications company’s accumulated losses were worsening year-on-year from over K2.5 billion in 2015 up to K4 billion in 2018.
The Report equally disclosed that Zamtel’s failure to meet its revenue targets contributed to its huge loss-making position.
“During the period under review, the company recorded losses of K1,155,323,000 in 2015, K272,349,000 in 2016, K475,865,000 in 2017 and K546,394,000 in 2018. In addition, the financing costs of K461,058,000 in 2015, K72,156,000 in 2016, K43,078,000 in 2017 and K496,102,000 in 2018 also contributed to the losses. Consequently, the accumulated losses for the company were worsening year-by-year from K2,536,415,000 in 2015, to K4,000,203,000 in 2018. During the period under review, budget provisions in amounts totalling K3,694,997,513 were made to cater for various activities, against which amounts totalling K2,422,599,000 were generated resulting in a deficit of K1,272,398,513. The failure to meet the revenue targets contributed to the loss-making position of the Company,” the Report revealed.
The Report also revealed that in 2017 and 2018, Zamtel lost revenue amounting to over K7.1 million due to Zamtel’s network failure.
“According to the Zamtel Revenue Loss Reports (Tracker) for 2017 and 2018, the Company lost revenue in amounts totalling K7,110,562 (2017 – K5,142,800 and 2018 – K1,967,762) due to Zamtel’s network failure. Further, the reports revealed that due to poor network quality and failure to comply with other requirements, Zamtel was charged penalties in amounts totalling K7,415,000 (K2,400,000 in 2017 and K5,015,000 in 2018) by the regulator Zambia Information Communications Technology Authority (ZICTA) resulting in loss of revenue,” it stated.
The Report further revealed that Zamtel’s short-term borrowings increased from over K1.3 billion in 2017 to over K3.2 billion in 2018, representing a 148 per cent increment and attracted interest cost of K166,409,000.
“Current ratio is a liquidity ratio that measures a company’s ability to pay off its short-term liabilities as and when they fall due using its current assets. The ideal ratio is 2 to 1. During the period under review, Zamtel’s current ratio worsened from 0.13:1 in 2015 to 0.05:1 in 2018. The working capital of the company worsened from negative K1,464,701,000 in 2015 to negative K4,519,714,000 in 2018. The low current ratio and worsening working capital implied that the company had challenges to meet its short-term obligations. Consequently, the short-term borrowings increased from K1,322,656,000 in 2017 to K3,275,248,000 in 2018, representing a 148 per cent increment and attracted interest of K166,409,000,” read the Report.
“According to the Company’s Accounts Payable and Disbursement Policy, all payable and purchases must be settled within a month or 30 days. During the period under review, the payable days increased from 223 days in 2015 to 1,047 days in 2018 representing a percentage increase of 370 per cent. As at 31st December, 2018, Zamtel had not settled statutory obligations and accumulated penalties in amounts totalling K168,992,539; K80,437,781 in Pay as You Earn; K88,439,093 as penalties to NAPSA; and K115,664 as penalties to Workers Compensation Fund Control Board.”
The Report revealed that Zamtel also had no title deeds for 75 of its properties valued at nearly K88 million.
“The Lands Act No. 29 of 1995 requires that institutions or individuals owning land should have or possess title deeds as proof of ownership. A review of the asset register and other relevant documents carried out in December, 2019, revealed that Zamtel did not have title deeds for 75 properties such as Mwembeshi Earth Station, warehouses, workshops and repeater stations valued at K87,951,277. In addition, the Lands Act No. 29 of 1995 provides for renewal of leases upon expiry for institutions or individuals owning land and have or possess title deeds. A review of the title deeds in respect of Zamtel properties revealed that 38 properties valued at K6,026,275 whose title deeds expired during the period from 1990 to 2007, had not been renewed as at 31st December, 2019,” disclosed the Report.
“On 30th December, 2011, Zamtel entered into a lease agreement with Amazon Security Service Limited for the lease of Kitwe Motor Workshop. The lease agreement was for a period of one year at a monthly rental charge of US $1,500. The following observations were made: Although the tenant was still occupying the premises, the lease agreement availed for audit was for the period from 1st February, 2012, to 31st January, 2013. There was no evidence that the lease had been renewed. As at 31st December, 2019, Zamtel had not collected rentals in amounts totalling K176,396 (US $16,500) for the period from February to December, 2018.”