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US$28m in taxpayers' funds misappropriated in corrupt deal
22 Nov 2021 at 06:16hrs | Views
THE Parliamentary Portfolio Committee on Lands has recommended that the police and Zimbabwe Anti-Corruption Commission investigate the Grain Millers' Association of Zimbabwe (GMAZ) and its president Tafadzwa Musarara (pictured) for failing to account for US$28.2 million availed by the Reserve Bank of Zimbabwe (RBZ) for the importation of wheat between 2017 and 2019.
In a Press statement, GMAZ denied wrongdoing and said it was "deeply saddened" by the parliamentary report.
In their first report of the fourth session of the ninth Parliament presented by committee chairperson Justice Mayor Wadyajena on 4 November, the legislators also called for an investigation into circumstances that led to Drotsky (Private) Limited, a company owned by Musarara, being the vehicle used to import wheat on behalf of wheat millers despite GMAZ processing telegraphic transfers from its own accounts.
GMAZ had initially said it had imported the wheat, but later said the commodity was imported through Drotsky. This was after the Zimbabwe Revenue Authority (Zimra) revealed it had no records of any wheat imports by GMAZ. The matter was further complicated by the fact that Drotsky had its own import licence, raising questions as to whether funds from the central bank were used at all.
The money in question was released after the government developed a dedicated facility under the ministry of Finance and Economic Development, administered by the Reserve Bank of Zimbabwe (RBZ) to allocate foreign currency at a rate of US$1:ZW$1 to GMAZ for the importation of wheat following successive droughts.
"This facility was meant to allow the importation of crucial commodities using the controlled bank rate, making products like bread affordable to the majority of the citizenry, particularly the economically disadvantaged, while guaranteeing stability in the bread industry. In spite of this government intervention, the country went on to experience shortages of bread. This is one of the factors that motivated the necessity for this inquiry," the committee said.
"Other factors included the lack of clarity of the exact nature and extent of GMAZ participation in this facility. Specifically, the question of whether GMAZ held a clear mandate in the administration and allocation of the US$28.2 million. Thirdly, disturbing reports of unfair and murky distribution of wheat allocations to a selected few millers and, finally, the persistent well-publicised demands by GMAZ, which bordered on threats, for more forex allocations brought to bear the question of the nexus between GMAZ and the government."
The committee reported that Musarara demonstrated he was unwilling to assist in its investigations and was also found to be obfuscating and outrightly refusing to submit documentation pertinent to the inquiry.
"Musarara notified the committee that GMAZ had imported wheat valued at US$26.2 million yet RBZ advised and availed documents to the committee that the accessed funds totalled US$28.2 million. Zimra wrote to the committee and clearly stated that for a period between January 2018 and May 2020, GMAZ did not import any wheat into Zimbabwe ‘. . . Please be advised there are no wheat imports for GMAZ in our records for the mentioned period of January 2018 to August 2019 . . .' (direct quote from Zimra letter)," the report reads.
"After being provided with confirmation letters from Zimra, Mr Tafadzwa Musarara later conceded to the committee that, in actual fact, GMAZ never imported any wheat but that it was a private company that he owns in his personal capacity called Drotsky (Private) Limited that imported the wheat instead. His previous statements which were given under oath were then revealed to be perjurious, which itself is contempt of Parliament.
"Zimra further advised the committee that for a period between January 2018 and May 2020, Drotsky imported wheat totalling US$24.2 million into the country but it must be highlighted that Mr Tafadzwa Musarara had advised the committee that his private entity, Drotsky, was in the business of importing its own wheat like other millers and when asked to provide evidence in any form that the US$24.2 million belonged to GMAZ's RBZ funds, he failed to provide the evidence and also failed to provide evidence of the authority by regulatory authorities to use third parties."
The report says RBZ provided the committee with proof that GMAZ authorised its local bankers Metbank and Ecobank to transfer US$28.2 million as advance payment to Holbud of the United Kingdom for wheat purchase, but there are no acquittals for any portion of those funds.
"This makes whole amount of US$28.2 million unaccounted for," the committee said.
"The Reserve Bank of Zimbabwe further submitted acquittals totalling US$24.2 million. The acquittals listed Drotsky as the consignee on the Bills of Entry, not GMAZ whom they had given the funds to. There was no resolution of GMAZ authorising Mr Musarara to use his company Drostky as a vehicle to import wheat on behalf of Wheat Millers and additionally, the Committee noted invoices from Holbud clearly indicated GMAZ as the customer, not Drotsky.
"The Committee noted that Mr Tafadzwa Musarara drafted and wrote letters on behalf of all millers, as evidenced by the letters which confirmed millers received their wheat allocations in full. When committee inquired why all letters from the various companies bore an uncanny resemblance, the representatives advised the committee that GMAZ called and simply gave them written letters for their signatures and letterheads. The committee was left bewildered as to how GMAZ could successfully complete all international telegraphic transfers of US$28.2 million to Holbud, but then fail to receive the goods in their name."
The report indicates that the committee asked National Foods and other millers what they benefited in using Drotsky (a competitor) instead of their own name, but failed to get clear answers from all millers.
None of the companies confirmed that they mandated Musarara to use his personal company.
Parliament also fears that there could have been violation of tax laws (tax evasion, tax returns, income tax, value-added tax returns from January 2018-March 2020) given the inconsistencies in the account of the US$28.2 million.
"Despite changing his story and now insisting Drotsky imported wheat for US$24.2 million on behalf of GMAZ, Mr Tafadzwa Musarara failed to provide the proof of a ministerial waiver or instrument authorising such transaction so it was not considered a sale to other millers," the committee said.
"Asked to explain the difference in numbers, Mr Tafadzwa Musarara attempted to claim part of the money was for previous debt yet RBZ released funds for advance payments and bank transfers completed by GMAZ clearly indicated the funds were advance payments against current invoices."
The committee said the use of Drotsky (Private) Limited to transact GMAZ business indicates a serious lack of corporate governance.
"It appears, Mr. Musarara might have abused his position of chair of the same to use his company without the relevant consent by all stakeholders. No resolutions were availed to prove otherwise," the committee said.
The Wadyajena-led committee also took a swipe at the ministry of Finance for failing to bring GMAZ and its chairperson to account.
"Why has it taken Parliament to unravel the misappropriation of funds yet they had all the information before them to take appropriate action against GMAZ? There is a real possibility of externalisation of foreign currency here by the GMAZ chairperson," the report further reads.
The committee further recommended that Zimra investigate the tax affairs of Drotsky and GMAZ, including instituting a lifestyle audit on Musarara for a period between January 2018 and March 2020 zeroing on the US$28.2 million availed by the RBZ. The authority was told to report to the committee within 60 days.
"The ZRP must investigate, take appropriate action where there are anomalies and issue a statement within 30 days of this directive on progress regarding the externalisation of funds meant for wheat purchases by GMAZ," the committee said.
Musarara was interviewed on 19 March 2019 with other GMAZ stakeholders.
The committee received written submissions from the RBZ governor, Commissioner-General of the Zimbabwe Revenue Authority, Metbank, Ecobank, Drotsky (Private) Limited, GMAZ, Wintertons Legal Practitioners and Rubaya and Chatambudza Legal Practioners.
During oral submissions, Musarara had informed the committee that GMAZ was a fully constituted body, availed its constitution and further stated that GMAZ received from RBZ an amount of US$26.2 million
Musarara informed the committee GMAZ had brought proof of how the funds were utilised and submitted what he termed "acquittal documents" for the US$26.2 million allocated to the organisation by the RBZ.
However, he said his secretariat was in South Africa attending a food fortification conference and could not avail some of the requested documentation to the committee on time, prompting the committee to reschedule the meeting to 2 April 2019 to allow GMAZ the opportunity to compile and submit all requested information.
The committee however said: "Parliament went on an unscheduled recess and GMAZ was accordingly notified of the postponement of the meeting to a later date which was to be announced. It must, however, be noted that despite prior warning of the postponement, GMAZ turned up on the 2nd of April without invitation and held a Press conference addressed by Mr. Tafadzwa Musarara and their attorney, Advocate T. Magwaliba, on the precinct of Parliament, just outside the Senate Chamber. Several questions arose as to how they were able to access parliamentary premises without requisite security clearances."
Although Musarara revealed he did not know Wadyajena at personal level and that the legislator had never sought a bribe from him, GMAZ later requested that the parliamentary committee chairperson recuse himself from the hearing and that his membership to the committee be terminated.
The committee said it spent almost a year in back-and-forth communication, with GMAZ showing and expressing its unwillingness to appear before the committee.
In its Press statement jointly signed by the association's first vice-president and second vice-president, GMAZ dismissed the accusations levelled against the association and its chairperson Musarara.
"The decision to import wheat as a collective was proper and no participating miller was prejudiced. All millers who participated received their wheat stocks in full."
GMAZ explained how the wheat facility operated.
"Millers populated their local currency deposits into a GMAZ bank account and procured their foreign currency to pay supplier. We accounted for all allocated forex to millers for the period between 1 January 2015 to 11 March 2019 as requested in the letter written to GMAZ by the Clerk of Parliament dated 13 March 2019. This amounts to circa US$26 million.
"However, we continued to procure and pay (beyond these above-mentioned dates) for imported wheat in order to ensure adequate bread supplies in the country," GMAZ said.
The association says the wheat was procured via an unsecured loan facility arranged by Musarara and the supplier made his company, Drotsky, a consignee.
GMAZ claimed that Drotsky "also participated in the facility like any other miller".
"Wheat imports were then delivered to a bonded warehouse and released after payments were made to the supplier."
GMAZ said the association, a voluntary business organisation, is not a public procurement entity in terms of the Public Procurement and Disposal of Assets Act and should therefore not be subjected to parliamentary oversight.
The grain millers are also demanding the removal of Wadyajena as chairperson of the Parliamentary Portfolio Committee, accusing him of bias.
In a Press statement, GMAZ denied wrongdoing and said it was "deeply saddened" by the parliamentary report.
In their first report of the fourth session of the ninth Parliament presented by committee chairperson Justice Mayor Wadyajena on 4 November, the legislators also called for an investigation into circumstances that led to Drotsky (Private) Limited, a company owned by Musarara, being the vehicle used to import wheat on behalf of wheat millers despite GMAZ processing telegraphic transfers from its own accounts.
GMAZ had initially said it had imported the wheat, but later said the commodity was imported through Drotsky. This was after the Zimbabwe Revenue Authority (Zimra) revealed it had no records of any wheat imports by GMAZ. The matter was further complicated by the fact that Drotsky had its own import licence, raising questions as to whether funds from the central bank were used at all.
The money in question was released after the government developed a dedicated facility under the ministry of Finance and Economic Development, administered by the Reserve Bank of Zimbabwe (RBZ) to allocate foreign currency at a rate of US$1:ZW$1 to GMAZ for the importation of wheat following successive droughts.
"This facility was meant to allow the importation of crucial commodities using the controlled bank rate, making products like bread affordable to the majority of the citizenry, particularly the economically disadvantaged, while guaranteeing stability in the bread industry. In spite of this government intervention, the country went on to experience shortages of bread. This is one of the factors that motivated the necessity for this inquiry," the committee said.
"Other factors included the lack of clarity of the exact nature and extent of GMAZ participation in this facility. Specifically, the question of whether GMAZ held a clear mandate in the administration and allocation of the US$28.2 million. Thirdly, disturbing reports of unfair and murky distribution of wheat allocations to a selected few millers and, finally, the persistent well-publicised demands by GMAZ, which bordered on threats, for more forex allocations brought to bear the question of the nexus between GMAZ and the government."
The committee reported that Musarara demonstrated he was unwilling to assist in its investigations and was also found to be obfuscating and outrightly refusing to submit documentation pertinent to the inquiry.
"Musarara notified the committee that GMAZ had imported wheat valued at US$26.2 million yet RBZ advised and availed documents to the committee that the accessed funds totalled US$28.2 million. Zimra wrote to the committee and clearly stated that for a period between January 2018 and May 2020, GMAZ did not import any wheat into Zimbabwe ‘. . . Please be advised there are no wheat imports for GMAZ in our records for the mentioned period of January 2018 to August 2019 . . .' (direct quote from Zimra letter)," the report reads.
"After being provided with confirmation letters from Zimra, Mr Tafadzwa Musarara later conceded to the committee that, in actual fact, GMAZ never imported any wheat but that it was a private company that he owns in his personal capacity called Drotsky (Private) Limited that imported the wheat instead. His previous statements which were given under oath were then revealed to be perjurious, which itself is contempt of Parliament.
"Zimra further advised the committee that for a period between January 2018 and May 2020, Drotsky imported wheat totalling US$24.2 million into the country but it must be highlighted that Mr Tafadzwa Musarara had advised the committee that his private entity, Drotsky, was in the business of importing its own wheat like other millers and when asked to provide evidence in any form that the US$24.2 million belonged to GMAZ's RBZ funds, he failed to provide the evidence and also failed to provide evidence of the authority by regulatory authorities to use third parties."
The report says RBZ provided the committee with proof that GMAZ authorised its local bankers Metbank and Ecobank to transfer US$28.2 million as advance payment to Holbud of the United Kingdom for wheat purchase, but there are no acquittals for any portion of those funds.
"This makes whole amount of US$28.2 million unaccounted for," the committee said.
"The Reserve Bank of Zimbabwe further submitted acquittals totalling US$24.2 million. The acquittals listed Drotsky as the consignee on the Bills of Entry, not GMAZ whom they had given the funds to. There was no resolution of GMAZ authorising Mr Musarara to use his company Drostky as a vehicle to import wheat on behalf of Wheat Millers and additionally, the Committee noted invoices from Holbud clearly indicated GMAZ as the customer, not Drotsky.
"The Committee noted that Mr Tafadzwa Musarara drafted and wrote letters on behalf of all millers, as evidenced by the letters which confirmed millers received their wheat allocations in full. When committee inquired why all letters from the various companies bore an uncanny resemblance, the representatives advised the committee that GMAZ called and simply gave them written letters for their signatures and letterheads. The committee was left bewildered as to how GMAZ could successfully complete all international telegraphic transfers of US$28.2 million to Holbud, but then fail to receive the goods in their name."
The report indicates that the committee asked National Foods and other millers what they benefited in using Drotsky (a competitor) instead of their own name, but failed to get clear answers from all millers.
None of the companies confirmed that they mandated Musarara to use his personal company.
Parliament also fears that there could have been violation of tax laws (tax evasion, tax returns, income tax, value-added tax returns from January 2018-March 2020) given the inconsistencies in the account of the US$28.2 million.
"Despite changing his story and now insisting Drotsky imported wheat for US$24.2 million on behalf of GMAZ, Mr Tafadzwa Musarara failed to provide the proof of a ministerial waiver or instrument authorising such transaction so it was not considered a sale to other millers," the committee said.
"Asked to explain the difference in numbers, Mr Tafadzwa Musarara attempted to claim part of the money was for previous debt yet RBZ released funds for advance payments and bank transfers completed by GMAZ clearly indicated the funds were advance payments against current invoices."
The committee said the use of Drotsky (Private) Limited to transact GMAZ business indicates a serious lack of corporate governance.
"It appears, Mr. Musarara might have abused his position of chair of the same to use his company without the relevant consent by all stakeholders. No resolutions were availed to prove otherwise," the committee said.
The Wadyajena-led committee also took a swipe at the ministry of Finance for failing to bring GMAZ and its chairperson to account.
"Why has it taken Parliament to unravel the misappropriation of funds yet they had all the information before them to take appropriate action against GMAZ? There is a real possibility of externalisation of foreign currency here by the GMAZ chairperson," the report further reads.
The committee further recommended that Zimra investigate the tax affairs of Drotsky and GMAZ, including instituting a lifestyle audit on Musarara for a period between January 2018 and March 2020 zeroing on the US$28.2 million availed by the RBZ. The authority was told to report to the committee within 60 days.
"The ZRP must investigate, take appropriate action where there are anomalies and issue a statement within 30 days of this directive on progress regarding the externalisation of funds meant for wheat purchases by GMAZ," the committee said.
Musarara was interviewed on 19 March 2019 with other GMAZ stakeholders.
The committee received written submissions from the RBZ governor, Commissioner-General of the Zimbabwe Revenue Authority, Metbank, Ecobank, Drotsky (Private) Limited, GMAZ, Wintertons Legal Practitioners and Rubaya and Chatambudza Legal Practioners.
During oral submissions, Musarara had informed the committee that GMAZ was a fully constituted body, availed its constitution and further stated that GMAZ received from RBZ an amount of US$26.2 million
Musarara informed the committee GMAZ had brought proof of how the funds were utilised and submitted what he termed "acquittal documents" for the US$26.2 million allocated to the organisation by the RBZ.
However, he said his secretariat was in South Africa attending a food fortification conference and could not avail some of the requested documentation to the committee on time, prompting the committee to reschedule the meeting to 2 April 2019 to allow GMAZ the opportunity to compile and submit all requested information.
The committee however said: "Parliament went on an unscheduled recess and GMAZ was accordingly notified of the postponement of the meeting to a later date which was to be announced. It must, however, be noted that despite prior warning of the postponement, GMAZ turned up on the 2nd of April without invitation and held a Press conference addressed by Mr. Tafadzwa Musarara and their attorney, Advocate T. Magwaliba, on the precinct of Parliament, just outside the Senate Chamber. Several questions arose as to how they were able to access parliamentary premises without requisite security clearances."
Although Musarara revealed he did not know Wadyajena at personal level and that the legislator had never sought a bribe from him, GMAZ later requested that the parliamentary committee chairperson recuse himself from the hearing and that his membership to the committee be terminated.
The committee said it spent almost a year in back-and-forth communication, with GMAZ showing and expressing its unwillingness to appear before the committee.
In its Press statement jointly signed by the association's first vice-president and second vice-president, GMAZ dismissed the accusations levelled against the association and its chairperson Musarara.
"The decision to import wheat as a collective was proper and no participating miller was prejudiced. All millers who participated received their wheat stocks in full."
GMAZ explained how the wheat facility operated.
"Millers populated their local currency deposits into a GMAZ bank account and procured their foreign currency to pay supplier. We accounted for all allocated forex to millers for the period between 1 January 2015 to 11 March 2019 as requested in the letter written to GMAZ by the Clerk of Parliament dated 13 March 2019. This amounts to circa US$26 million.
"However, we continued to procure and pay (beyond these above-mentioned dates) for imported wheat in order to ensure adequate bread supplies in the country," GMAZ said.
The association says the wheat was procured via an unsecured loan facility arranged by Musarara and the supplier made his company, Drotsky, a consignee.
GMAZ claimed that Drotsky "also participated in the facility like any other miller".
"Wheat imports were then delivered to a bonded warehouse and released after payments were made to the supplier."
GMAZ said the association, a voluntary business organisation, is not a public procurement entity in terms of the Public Procurement and Disposal of Assets Act and should therefore not be subjected to parliamentary oversight.
The grain millers are also demanding the removal of Wadyajena as chairperson of the Parliamentary Portfolio Committee, accusing him of bias.
Source - newshawks
