Mystery over council's vanished US$4,5m loan deepens

A forensic audit has revealed that Harare City Council's US$4.5 million loan to Harare Quarry Private Limited was advanced without a formal agreement, raising concerns over governance and financial mismanagement. The council was also not listed as a shareholder in the quarry company, with records showing that two former council employees were registered as shareholders instead.

The special audit, conducted by Parker Randall Chartered Accountants, covered the period from December 1, 2017, to June 30, 2019. It found that when the loan was granted, Harare Quarry's listed shareholders were then Chamber Secretary Josephine Ncube and former Director of Works Philip Mabingo-PFukwa. Statutory documents filed with the Registrar of Companies in August 2016 confirmed their ownership, contradicting claims that the quarry was a fully owned subsidiary of the city council.

Further revelations showed that Harare Quarry had been operating in secrecy, failing to declare its revenue, profits, or dividends to the city since 2018. It was also discovered that for nearly a year, salaries totaling US$56,000 may have been paid to ghost workers. Millions of dollars in transactions lacked supporting documents such as payment vouchers, making it impossible to verify how the funds were used.

The audit noted that without a formal loan agreement, the city council exposed itself to legal risks. Agreements between separate entities, even those related to the council, should include repayment terms, interest rates, and other conditions. The absence of such an agreement leaves room for potential disputes and misappropriation of funds.

Legal experts have warned that Harare City Council risks losing control over its subsidiary companies, as evidence suggests that multiple entities, including Harare Quarry and Rufaro Marketing, are registered in the names of individuals rather than the council itself. The audit found that Ncube and Mabingo-PFukwa each took one share out of the company's authorized 20,000 shares.

The financial mismanagement extended beyond ownership concerns. The audit established that from December 2017 to October 2018, there were no payroll summaries, increasing the risk of payments being made to non-existent employees. Additionally, payments totaling US$4.56 million were made without any corresponding vouchers, raising further suspicions about possible corruption.

In response to these revelations, Harare residents have criticized the city council for failing to follow proper procedures. Some have questioned why no arrests have been made in connection with the case, despite the irregularities being known for years. An anonymous accountant suggested that the lack of documentation makes investigations difficult, as authorities must rely on alternative evidence such as witness statements and bank records.

Reuben Akili, the director of the Combined Harare Residents Association (CHRA), described the scandal as just the "tip of the iceberg" in terms of the looting of council resources. He pointed out that those responsible for reclaiming mismanaged council institutions are often the same individuals seeking personal gain.

Despite a 2021 recommendation to update Harare Quarry's records to reflect the city council as a shareholder, this has yet to be implemented. Checks with the Registrar of Companies last week confirmed that nearly four years later, the ownership structure remains unchanged.

Former Director of Works Mabingo-PFukwa has denied any current association with Harare Quarry, claiming that he relinquished his shares a year ago. However, no official proof of this transaction has been provided. Efforts to obtain a comment from Josephine Ncube were unsuccessful, as her phone went unanswered.

Harare Mayor Jacob Mafume has insisted that Harare Quarry remains under council ownership and that the individuals listed as shareholders were merely "nominal" figures. He described the statutory documents as "a mere piece of paper" that does not alter the reality of council ownership. According to him, the company listed under the two individuals has since become defunct, and the quarry remains under the city council's control.

Mayor Mafume also dismissed concerns over the absence of a loan agreement, arguing that since Harare Quarry is a subsidiary of the city council, drafting a formal agreement would have been unnecessary. However, the audit report indicated that the quarry's management attempted to obtain loan agreement documents from the council but was unsuccessful, leaving the funds unused for several months.

The mayor also revealed that the case has been reported to the police for investigation. National police spokesperson Commissioner Paul Nyathi could not confirm or deny this, stating that he needed to verify the matter with other departments.

Legal experts have cautioned that registering council subsidiaries in the names of individuals without clear legal safeguards creates potential risks. Mayor Mafume acknowledged that the process of correcting the shareholding structure is ongoing, with a resolution passed to address the matter.

Despite assurances that action is being taken, many residents remain skeptical, pointing to years of inaction and a lack of accountability in addressing financial mismanagement within Harare City Council.