For the past few months, we have been seeing headlines to the effect that some parastatals are declaring dividends to the Ministry of Finance, amounting to millions of kwacha. This is great news for our country because it shows that our ever hardworking government leaders are implementing sound economic policies which are yielding evident results and pouring the much-needed revenue into the Treasury.
But before we celebrate this feat, let us all as citizens look into the development with inquisitive eyes. Today, Zesco will declare millions in dividends; tomorrow when the bosses at ZCCM-IH hear economists warn that dividends may decline owing to the 2019 mining tax policy, they will also go and flaunt a cheque; then the next day the Industrial Development Corporation will be at the Ministry of Finance to register their overall profits too; but at what cost? What is government’s net expenditure on these investments before we count the profit?
Our starting point will be the governance structure at the mother body of State Owned Enterprises – the Industrial Development Corporation. Last Friday, government-funded and State-controlled media ran headlines about the Industrial Development Corporation (IDC) declaring dividends to the Ministry of Finance worth about K9 million.
We have no argument about this resultant declaration, but we have problems with the procedural accountability in the expenditure. This is a classic example of what we have been talking about with regards the governance of the parastatal mother body. To start with, these dividends were declared to the Secretary to the Treasury, Mr Fredson Yamba, and his Minister madam Margaret Mwanakatwe, as shareholder of IDC. But Mr Yamba and madam Mwanakatwe are both members of the IDC board at the same time.
In a proper governance system, an independent board of a parastatal presents dividends to independent shareholders, who then can provide accountability oversight on the board and examine its flaws. But in our case, it’s like Mr Yamba and madam Mwanakatwe as a board members of IDC were declaring dividends to themselves as shareholder of IDC. In which world can that be called good governance? What accountability can Mr Yamba and madam Mwanakatwe enforce since they are part of the board and its decisions? What is worse is that the Republican President cannot enforce accountability because he is actually the board chairman of the IDC. So it is also logically correct to look at this confusion from the point of view that the Head of State was presenting dividends to his Minister of Finance. This is the scandal that we have been singing about.
The next issue is the real value of the K39 million profit declared by the IDC board and the IDC assets estimated to be worth K15 billion. Our understanding is that for a business to record profit, there must be expenditure and revenue thereof. We have noted that when making these declarations of profits, the expenses and revenues are never brought out. We want to know the whole quantum of revenues recouped from the investments so that we can appreciate the dividends that our parastatals are declaring to government. Knowing the amount of profit is not enough.
One can also argue that a company that has K15 billion worth of assets declaring a profit of K39 million, and giving dividends to the Zambian people worth K9 million (which is even less than a million dollars) is not only a loss but a scam. People already know that IDC for example is spending amounts like US$16 million cash in one investment transaction, so it will be disturbing for citizens to receive paltry dividends without an explanation of what expenditure the profit was calculated against.
Further, when we understand the revenue that IDC is collecting, we will be able to evaluate that against the investments that it’s making on behalf of Zambians. This is very critical because we don’t want the IDC to borrow money for investments which are loss making. If IDC is recording profits of K39 million, where are the millions of dollars coming from which they are using to purchase struggling milling companies, loss-making banks and unprofitable palm plantations? As a matter of fact, some of these companies which are declaring dividends to the Ministry of Finance, are going back the following morning to ask for funding, so who are they fooling?
If the IDC and the ministry officials held an extraordinary meeting where these profit figures were produced, there must have been audited accounts from the institution. This is what the people holding IDC shares on behalf of Zambians should be interested in, to see how the company performed during the period under review. As stakeholders, we want to see audited accounts published in the newspapers the way other companies publish their accounts. Give us the full computation of figures so that we stop speculating.
Actually, we want to go further than that. Since IDC has declared that these are the assets and this is the profit; let the Auditor General’s office step in to verify the records and affirm that indeed the profit makes business sense, given what was spent. Are IDC assets truly worth K15 billion? Are the profits and dividends being declared without passing through a massage parlour? We don’t want doctored information, and only an independent auditor can tell us the truth, not the IDC board declaring to itself.
This is the reason why we argue that the IDC is not achieving the purpose for which it was created. This is because the multi-million dollar institution is making political decisions in places where economic decisions are needed. This is the point where we must ask the question; what is the IDC doing, which individual ministries and parastatals would not have achieved on their own? Which State Owned Enterprise has the IDC turned around to double or triple its earnings? In our view, there is none. Money which would have gone directly to the Treasury from parastatals, is now passing through IDC, where it is massaged before being passed on to the Zambian stakeholders. It’s more like a spending agency hiding under an umbrella of imaginary profit.
Despite the expectation that was envisioned during the formation of the IDC, that State Owned Enterprises would be turned around towards profitability, the new structure has reduced government revenue and ended up being parasitic on the little dividends paid by few State Owned Enterprises.
Our point is that there is no transparency in this whole operation and Zambians must demand that declarations are made with full audited information. In the absence of that complete picture, let’s stop clapping for the IDC and its parastatals which are queuing up to paint a smiling image when the actual picture is gloomy.