Treasury rejects plan to take over CAAZ legacy debts

The Ministry of Finance has rejected a proposal by Parliament to assume legacy debts owed by the Civil Aviation Authority of Zimbabwe (CAAZ), arguing that the aviation regulator has adequate revenue streams to service its obligations.

Treasury warned that taking over the liabilities would strain the national budget and undermine funding for essential public services and development priorities.

According to the Public Accounts Committee (PAC), CAAZ's operations are under threat after it failed to service overdue long-term legacy loans amounting to ZWL18,59 billion and domestic loans totalling ZWL111 million for the year ended December 31, 2020. The committee noted that the authority's current liabilities exceed its current assets, signalling a working capital deficiency and difficulty in meeting short-term obligations.

PAC said CAAZ faces a going concern challenge due to legacy loans that were not transferred to the Airports Company of Zimbabwe (ACZ) following the unbundling of CAAZ into two entities — a regulatory body (CAAZ) and an airport operating company (ACZ). The committee added that efforts are underway to transfer US$48 million to government, which, if successful, would help resolve the going concern issue.

The committee also raised concern over what it described as a failure to properly transfer both assets and liabilities during the restructuring process, questioning the financial and accounting management of CAAZ's accounting officers.

In its report, PAC recommended that CAAZ engage its parent ministry for assistance in transferring the legacy loans to ACZ. It further suggested that the Ministry of Finance, Economic Development and Investment Promotion consider taking over the debts to ease the financial burden on the authority and ensure its long-term sustainability.

However, Finance Minister Mthuli Ncube dismissed the proposal, saying Treasury does not have the fiscal capacity to absorb or directly service CAAZ's debts.

"The principle of fiscal prudence requires that debt management remain aligned with established mechanisms rather than ad hoc transfers of liability," Ncube said.

Treasury explained that following the unbundling, mechanisms were put in place to ensure continuity in debt servicing. CAAZ retains responsibility for charging airspace fees, while ACZ collects landing fees and passenger tax components. In addition, CAAZ receives 32 percent of revenue collected from landing fees and passenger taxes by ACZ.

"These arrangements provide CAAZ with sufficient revenue streams to meet its debt obligations. The unbundling process was specifically designed to prevent the transfer of liabilities to Treasury while ensuring sustainable debt servicing by both CAAZ and ACZ," Ncube said.