Zambian parastatals’ financial performance unsatisfactory – PMRC

The Policy Monitoring and Research Centre (PMRC) has called on the Zambia Revenue Authority to put in place an effective routine mechanism that will ensure that all parastatals and statutory bodies remit their statutory contributions.

In the 2018 PMRC analysis of parastatal bodies and other statutory institutions for the financial years ended 2013, 2014, 2015 and 2016, it was noted that financial performance of Parastatals in Zambia still remains unsatisfactory.

According to a research by PMRC’s Leya Namonje and centre executive director Bernadette Deka. the Auditor General’s report for the four years under review, indicated that out of the 25 state-owned enterprises under the IDC portfolio, in which IDC holds 60.7 to 100 percent shareholding, only two declared dividends for the year 2016.

“Mulungushi Village Complex Limited declared K0.2 million and Indeni Petroleum Products Limited declared K7.4 million as dividends for the year 2016 in amounts totalling K7,600,000. In addition, out of the sevven institutions in which IDC had shareholding between 14.27 to 50%, only two institutions, Indo Zambia Bank Limited – K12.06 Million and Nanga Farms Limited K4.7 Million, declared dividends in amounts totalling K16.76 million. The Report highlighted the following issues as clear indicators of internal control lapses: Non preparation of financial statements, Failure to remit statutory contributions, Weaknesses in procurement procedures, Irregular payments and poor financial performance among other,” the document read.

But PMRC expressed worry, saying failure to provide financial statements defied the Public Finance Management Act and the Public Audit Act and that it also made it impossible for the office of the Auditor General to ascertain if the money used by each Statutory institution had been applied for its intended purpose.

“The non-production of audited financial statements is therefore, a contravention of the various enabling legislations governing the institutions and is contrary to good corporate governance. Corporate governance, accounting and accountability in the public management of parastatals and statutory bodies can not be over emphasized, and this is all because service provision and budget consolidation cannot be realized effectively and efficiently without good governance and management. Ineffective corporate governance has lead to the fall of many state owned and private owned enterprises around the world. It is for this reason that corporate governance principles should be embedded in the running of any institution be it public or private,” the document read.

“An effective routine mechanism should be put in place by ZRA and other regulating authorities to ensure that all parastatals and statutory bodies remit their statutory contributions. The principles of corporate governance such as maintaining a full board composition, ensuring accountability and transparency as well as the existence of a fully functioning audit committee must be embedded in the running of all parastatals and statutory bodies. To this effect, it would be important to have refresher corporate governance training offered to all parastatals and statutory institutions. Staff members of parastatals and statutory bodies that fail to produce financial statements, or record audit queries must in accordance with the Public Finance Management Act, be made to account for their failures.”

The centre recommended that there be a thorough assessment that should be undertaken to assess the status and performance of parastatals at a specified time.

“All parastatals and statutory bodies should implement the internal control integrated framework which is expected to help organizations design and implement internal controls in light of many changes in business and operating environment. There should be a thorough assessment that should be undertaken to assess the status and performance of parastatals. This would further assist the Industrial Development Corporation with planning for the parastatals on how they can be efficient in areas of concern,” read the document.

“There exists huge potential for the efficient administration of parastatals and Statutory Bodies in Zambia. The enactment of the Public Finance Management Act will tremendously improve transparency and accountability of public resources, which will lead to improved service delivery. Therefore, there is dire need for government to ensure that the Public Finance Management Act is effectively implemented and that there is total compliance by all officers managing public funds. It is envisaged that with the development of a code of corporate governance guidelines for the public sector, there will be effective monitoring of the performance of Boards of parastatals and statutory bodies, which will help lessen the queries incurred by various institutions.”

         

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