A potential conflict of interest has been brought to the fore at the country’s third largest mobile network operator after it emerged two companies linked to influential Telecel Zimbabwe shareholders are providing security services to the company, Business Times has established.
As corporate governance deficiency writ large at the mobile network operator which is struggling to stay afloat due to a weak balance sheet, low capitalisation and high staff turnover, information gathered by this paper shows that it is engaged in interparty transactions which are against best practice. The company has also become a training ground for rivals due to poor remuneration. The mobile network operator has not declared a dividend since inception more than two decades ago.
Business Times can reveal that Ginsec Security Pvt Limited and Cloberdale Security—some of the companies securing Telecel’s offices and base stations—are linked to board chairman James Makamba and board member Jane Mutasa respectively.
The two represent Empowerment Corporation (EC), a coalition of various groupings and has 40 percent shareholding in Telecel. Government, through ZARNet owns 60 percent in the mobile network operator.
Cloberdale’s file at the Registrar of Companies could not be located this week. According to information obtained from a file submitted at the Registrar of Companies, Ginsec was incorporated on July 6 2012.
On July 9 2012, Ginsec appointed Modester Musunzambwa as a director and principal officers. On January 9 2013, Ginsec appointed Irene Makamba and Tawanda Munyaradzi Makamba as directors. On July 22, 2013, Ginsec appointed Tamuka Maziriri as a director. Tawanda, Irene and Maziriri address is 161 Josiah Chinamano where Makamba’s Kestrel offices are.
According to the company’s articles of association, Ginsec was established to carry on the trade or business of security guards, agents and consultants, private investigators, security system and alarm manufacturers, suppliers and maintenance contractors.
It was also established to carry the business of market gardeners, horticulturalists and tree planters. It carries the business of IT, tele consultancy, phone shops, communication representatives, public relations, promotion, advertising publishing, project development, secretarial and employment services among others.
Internal Telecel documents seen by Business Times show that as at July, Ginsec provided security services to 16 Telecel Zimbabwe’s sites and offices while Cloberdale provided services to nine sites and offices.
Of the $211 868 paid to companies that provided security services, the two companies were paid a combined $23 698. This constitutes 11 percent.
Ginsec was paid $16 548 while Cloberdale was paid $7 150. For security services contracts that were expiring, Cloberdale was earmarked to take over on the strength of being cheaper.
Sites such as Chemakunguwo, Cloudlands Chimanimani, Esigodini, Hambakwe, Mhishi, Musika and Ruwa were earmarked to given to Cloberdale with effect from September as the companies that provided security services contracts expired on August 31, internal documents show.
“The security service providers offer slightly differing prices depending mainly on their registrations with the Security Association of Zimbabwe. Professional companies like Safeguard, Trust Me and Fawcett offer the pricing as recommended by the association, the rest of the companies offer somewhat lower charges,” the document said.
“Thus for our shops, and those very vulnerable sites, we prefer to use the professional companies. From time to time we review our security requirements at sites. Where we find the risk of loss to be lower, we deploy Rapid Response systems or community guarding services, which are cheaper.”
Makamba had not responded to questions sent on his email. Business Times did not get responses to questions sent to Telecel last week. Mutasa said she was in a meeting when this paper called. Subsequent calls were not answered.
Two weeks ago, this paper reported of several anomalies and breaches of protocol in the procurement process. As a result of that there were amounts paid in advance for the supply of goods and services which were never recovered. Telecel lost $104 000 after a supplier failed to deliver two VW cars. It also lost $50 000 after a company was hired to do power connections but failed to do so
despite being paid.
A board member was overpaid board fees for 2009 by more than $40 000. The company could not act when an alert employee picked the anomaly.
“There is reconciliation in place to show the amount overpaid and proof that an email was sent to the FD for him to act on the matter,” the document said.
Telecel also overpaid by $25 103,20 for the supply of goods to a company controlled by a board member. The company had supplied marketing materials and due to undue pressure for release of funds on the finance department, the amounts paid for the supply of goods and services was in total higher than the value and sum of goods provisioned, the internal document said.
The document said the purchase orders for the supply of these goods were also not subject to the tendering process in violation of the procurement policy.
The corporate governance deficit comes at a time the company has been widening its loss which hit $18,2 million in the nine months to September 30. In the seven months to July, Telecel posted a loss of $13,8 million.
It has a weak balance and needs restructuring. Telecel’s current assets cannot meet its current liabilities. Current assets are $11,37 million against current liabilities of $141,8 million. This gives negative working capital of $130,43 million.
The company has also suffered from a high staff turnover with at least five employees leaving every month.