News / National
NSSA forensic audit report: Who is who?
08 Aug 2019 at 07:51hrs | Views
Adam Molai, Environment, Tourism and Hospitality Industry minister Priscah Mupfumira, Robin Vela and Ozias Bvute are the individuals heavily implicated in the National Social Security Authority (NSSA) forensic report.
The NSSA forensic report notes that US$175,25 million was prejudiced from the State pension fund. Of that amount, US$167,71 million was recorded as the potential loss, while US$7,53 million was the actual financial prejudice.
BDO Zimbabwe Chartered Accountants, at the behest of the Auditor-General's office, conducted the NSSA forensic report. BDO is a member of BDO International Limited, a Belgium-based international network of public accounting, tax, consulting and business advisory firms which perform professional services under the name of BDO.
BDO Zimbabwe conducted the forensic report over the period January 1, 2015 to February 28, 2018.
In this analysis, NewDay Business looks at how Molai and Mupfumira are implicated in the report.
Molai
Molai is a businessman and is the chairman of Savanna Tobacco, a producer and seller of cigarettes.
Molai was mentioned in the report due to him being the board chairman of the Housing Corporation Zimbabwe (HCZ), a special purpose vehicle that was created to
provide 8 000 units in Caledonia as a NSSA initiative to reduce the country's housing backlog.
Molai represented HCZ in the interactions with NSSA.
During the period under investigation, HCZ was one of four housing contractors awarded a contract to build low-cost housing units in what the then board chairperson, Vela, stated was to meet government's delivery of low cost housing units.
"HCZ/HAC was introduced to NSSA officials by the then board chairperson (Vela). The chairman put pressure for the contract to be awarded within a short period of time. The contract, which was awarded to HCZ, had four-roomed houses with a unit cost to NSSA of US$38 000. NBS had delivered four-roomed houses at a unit cost to the Dzivarasekwa project (housing project)," part of the NSSA forensic report read.
"The design and building materials used/being used on the two projects are different. However, considering that the thrust of NSSA was to deliver low-cost houses, there was no justification engaging a contractors who were US$13 000/unit more expensive than the NBS price. This exposes NSSA to a total financial prejudice of US$104 million on the HCZ/HAC contract by choosing a more expensive contractor."
Despite this, HCZ has only delivered 50 housing units to date.
Once HCZ was formally engaged in July 2017, NSSA paid a deposit of $16 million against an advance payment guarantee from Zimnat Lion Assurance.
However, "when NSSA sought to exercise its rights on the guarantee, alleging the contractor had failed to meet terms of the agreement, HCZ took legal action and won an interdict against NSSA," Alex Magaisa, a United Kingdom-based law lecturer, said.
This is what HCZ used to justify them not delivering the planned 8 000 housing units.
"The Caledonia Housing Project was compromised — not because of any action or inaction by HCZ and not because alleged procurement processes were not followed — but because of NSSA's own failure and inability to manage the project. It was NSSA's repeated material breaches of the off-take agreement which entitled HCZ, to legally terminate the agreement and claim damages. In arbitration, these repudiatory breaches by NSSA justified an award to HCZ as an entitlement to damages suffered," HCZ said in a statement addressing the forensic report.
Addressing other findings of the forensic report, HCZ said: "NSSA did not suffer any price prejudice as claimed in the report. In this regard, NSSA have in their possession an independent expert assessment from ABACUS Construction Cost Consultants (Pty) Ltd, which affirmed the appropriateness of the price charged per unit. BDO failed to appreciate the variance in specifications and project scope that totalled the costs per unit when comparing against other housing projects.
"Due to the restrictive indigenous laws that were applicable at the time, as evidenced by the NSSA board resolutions, Housing African Corporation (HAC) as a Mauritian entity was required to incorporate a local entity, in this regard, a special purpose vehicle (SPV) through which the project would be managed and delivered.
"Thus, HCZ was set up as an SPV with licensed franchise rights obtained from HAC, as owner of the intellectual property of systems and methodology for the construction of large-scale housing projects and having extensive experience in delivering housing developments across the globe."
Mupfumira
Mupfumira served as the Public Service, Labour and Social Welfare Minister between 2014 and 2017 and was the minister responsible for NSSA.
In the forensic report, Mupfumira is accused on several instances of exerting undue influence which prejudiced the State, particularly concerning the business relationship between NSSA and Metbank.
According to the forensic report, Mupfumira's influence to deal with Metbank left NSSA with a net exposure of US$62 million.
"NSSA entered into a number of transactions withMetbank during the period under investigation. Most of the transactions did not make economic sense from NSSA's viewpoint. This resulted in huge exposures to NSSA which stood at US$62 003 796 as at the date of this report. It is pertinent to note that the NSSA management had assessed Metbank as a high-risk client, which could not be granted new facilities," part of the forensic report read.
What happened was that NSSA gave Metbank Treasury Bills (TBs) worth US$62,25 million in a custodial arrangement. Metbank then proceeded to pledge NSSA TBs with a face value of US$37,35 million without getting authority from NSSA.
"When NSSA discovered that its TBs worth US$37,35 million had been used by Metbank without getting appropriate authority, they took the matter to court. The other TBs, with a face value of US$24,9 million, which had not been used by Metbank, were returned into NSSA's custody," part of the NSSA forensic report read.
"However, because of pressure from the then Public Service, Labour and Social Welfare minister, Metbank ended up with facilities which were not merited."
As such, the inability to recover the TBs left NSSA severely exposed.
In another instance of alleged pressure from Mupfumira, another US$4,65 million was lost to MetBank in June 2017 for a housing scheme under its real estate subsidiary, Metro Realty, through loan advances made for the project.
Mupfumira is alleged to have given the directive to NSSA to distribute the loans and demanded that the deal be signed within 48 hours.
The NSSA forensic report also found that out of the 27 properties that NSSA controls, where title is not registered by name, Mupfumira is a trustee in 13 of them.
According to Mupfumira's charge sheet, she is also alleged to have "siphoned over US$500 000 from NSSA for personal use; after she verbally instructed then permanent secretary, Ngoni Masoka, to get a loan advance of US$90 000 for the purchase of her ministerial vehicle (Toyota Land Cruiser ADX-0878). NSSA does not have that provision; and ordered NSSA to inflate its budget to US$350 000 before claiming US$303 520 for personal and political interests in her constituency".
Magaisa said if it is established that there was, indeed, undue pressure, that would amount to abuse of power, which is unlawful.
"These matters can only be sufficiently exhausted through further investigation and hearings that establish the facts. That is precisely why the NSSA forensic report should not be the end of the matter. It does, however, establish on the face of it, a case that warrants deeper investigation and either civil action or criminal prosecution. This is more so because it involves a significant loss of public funds," he said.
Currently, Mupfumira is in jail serving out a 21-day detainment order from the Zimbabwe Anti-Corruption Commission based on the NSSA forensic report.
Tomorrow, we will examine Vela and Bvute's dealings as highlighted in the forensic report.
The NSSA forensic report notes that US$175,25 million was prejudiced from the State pension fund. Of that amount, US$167,71 million was recorded as the potential loss, while US$7,53 million was the actual financial prejudice.
BDO Zimbabwe Chartered Accountants, at the behest of the Auditor-General's office, conducted the NSSA forensic report. BDO is a member of BDO International Limited, a Belgium-based international network of public accounting, tax, consulting and business advisory firms which perform professional services under the name of BDO.
BDO Zimbabwe conducted the forensic report over the period January 1, 2015 to February 28, 2018.
In this analysis, NewDay Business looks at how Molai and Mupfumira are implicated in the report.
Molai
Molai is a businessman and is the chairman of Savanna Tobacco, a producer and seller of cigarettes.
Molai was mentioned in the report due to him being the board chairman of the Housing Corporation Zimbabwe (HCZ), a special purpose vehicle that was created to
provide 8 000 units in Caledonia as a NSSA initiative to reduce the country's housing backlog.
Molai represented HCZ in the interactions with NSSA.
During the period under investigation, HCZ was one of four housing contractors awarded a contract to build low-cost housing units in what the then board chairperson, Vela, stated was to meet government's delivery of low cost housing units.
"HCZ/HAC was introduced to NSSA officials by the then board chairperson (Vela). The chairman put pressure for the contract to be awarded within a short period of time. The contract, which was awarded to HCZ, had four-roomed houses with a unit cost to NSSA of US$38 000. NBS had delivered four-roomed houses at a unit cost to the Dzivarasekwa project (housing project)," part of the NSSA forensic report read.
"The design and building materials used/being used on the two projects are different. However, considering that the thrust of NSSA was to deliver low-cost houses, there was no justification engaging a contractors who were US$13 000/unit more expensive than the NBS price. This exposes NSSA to a total financial prejudice of US$104 million on the HCZ/HAC contract by choosing a more expensive contractor."
Despite this, HCZ has only delivered 50 housing units to date.
Once HCZ was formally engaged in July 2017, NSSA paid a deposit of $16 million against an advance payment guarantee from Zimnat Lion Assurance.
However, "when NSSA sought to exercise its rights on the guarantee, alleging the contractor had failed to meet terms of the agreement, HCZ took legal action and won an interdict against NSSA," Alex Magaisa, a United Kingdom-based law lecturer, said.
This is what HCZ used to justify them not delivering the planned 8 000 housing units.
"The Caledonia Housing Project was compromised — not because of any action or inaction by HCZ and not because alleged procurement processes were not followed — but because of NSSA's own failure and inability to manage the project. It was NSSA's repeated material breaches of the off-take agreement which entitled HCZ, to legally terminate the agreement and claim damages. In arbitration, these repudiatory breaches by NSSA justified an award to HCZ as an entitlement to damages suffered," HCZ said in a statement addressing the forensic report.
Addressing other findings of the forensic report, HCZ said: "NSSA did not suffer any price prejudice as claimed in the report. In this regard, NSSA have in their possession an independent expert assessment from ABACUS Construction Cost Consultants (Pty) Ltd, which affirmed the appropriateness of the price charged per unit. BDO failed to appreciate the variance in specifications and project scope that totalled the costs per unit when comparing against other housing projects.
"Due to the restrictive indigenous laws that were applicable at the time, as evidenced by the NSSA board resolutions, Housing African Corporation (HAC) as a Mauritian entity was required to incorporate a local entity, in this regard, a special purpose vehicle (SPV) through which the project would be managed and delivered.
"Thus, HCZ was set up as an SPV with licensed franchise rights obtained from HAC, as owner of the intellectual property of systems and methodology for the construction of large-scale housing projects and having extensive experience in delivering housing developments across the globe."
Mupfumira
Mupfumira served as the Public Service, Labour and Social Welfare Minister between 2014 and 2017 and was the minister responsible for NSSA.
In the forensic report, Mupfumira is accused on several instances of exerting undue influence which prejudiced the State, particularly concerning the business relationship between NSSA and Metbank.
According to the forensic report, Mupfumira's influence to deal with Metbank left NSSA with a net exposure of US$62 million.
"NSSA entered into a number of transactions withMetbank during the period under investigation. Most of the transactions did not make economic sense from NSSA's viewpoint. This resulted in huge exposures to NSSA which stood at US$62 003 796 as at the date of this report. It is pertinent to note that the NSSA management had assessed Metbank as a high-risk client, which could not be granted new facilities," part of the forensic report read.
What happened was that NSSA gave Metbank Treasury Bills (TBs) worth US$62,25 million in a custodial arrangement. Metbank then proceeded to pledge NSSA TBs with a face value of US$37,35 million without getting authority from NSSA.
"When NSSA discovered that its TBs worth US$37,35 million had been used by Metbank without getting appropriate authority, they took the matter to court. The other TBs, with a face value of US$24,9 million, which had not been used by Metbank, were returned into NSSA's custody," part of the NSSA forensic report read.
"However, because of pressure from the then Public Service, Labour and Social Welfare minister, Metbank ended up with facilities which were not merited."
As such, the inability to recover the TBs left NSSA severely exposed.
In another instance of alleged pressure from Mupfumira, another US$4,65 million was lost to MetBank in June 2017 for a housing scheme under its real estate subsidiary, Metro Realty, through loan advances made for the project.
Mupfumira is alleged to have given the directive to NSSA to distribute the loans and demanded that the deal be signed within 48 hours.
The NSSA forensic report also found that out of the 27 properties that NSSA controls, where title is not registered by name, Mupfumira is a trustee in 13 of them.
According to Mupfumira's charge sheet, she is also alleged to have "siphoned over US$500 000 from NSSA for personal use; after she verbally instructed then permanent secretary, Ngoni Masoka, to get a loan advance of US$90 000 for the purchase of her ministerial vehicle (Toyota Land Cruiser ADX-0878). NSSA does not have that provision; and ordered NSSA to inflate its budget to US$350 000 before claiming US$303 520 for personal and political interests in her constituency".
Magaisa said if it is established that there was, indeed, undue pressure, that would amount to abuse of power, which is unlawful.
"These matters can only be sufficiently exhausted through further investigation and hearings that establish the facts. That is precisely why the NSSA forensic report should not be the end of the matter. It does, however, establish on the face of it, a case that warrants deeper investigation and either civil action or criminal prosecution. This is more so because it involves a significant loss of public funds," he said.
Currently, Mupfumira is in jail serving out a 21-day detainment order from the Zimbabwe Anti-Corruption Commission based on the NSSA forensic report.
Tomorrow, we will examine Vela and Bvute's dealings as highlighted in the forensic report.
Source - newsday
