Bulawayo City Council lost a substantial amount of money it invested in a local bank that was shut down by the central bank two years ago amid calls by Parliament to scrutinise the nature of the deal.
According to a recently released report by Parliament’s public accounts committee on the council’s audited accounts for 2019 and 2020 in the 2023 Auditor General’s Report for Local Authorities Report, Bulawayo will only recover a tiny fraction of the money it invested into Tetrad Investment Bank.
Tetrad’s banking license was cancelled by the Reserve Bank of Zimbabwe on August 30, 2023 after it failed to resume operations at the end of its provisional judicial management period.
Council had bought shares worth US$500 000 with an interest of US$26 220 in the bank, which went into liquidation before the maturity of the investment.
The liquidation process gave birth to shares, which were at 10 cents for each share and yielded an investment of 5 262 200 shares. Parliament observed that no due diligence had been done before public money was invested in a troubled bank.
“The value of the shares was now too small compared to the initial investment, which was worth US$500,000 and an interest of US$26 220,” the committee said in its report.
“The committee observed that due diligence was not done by the management and councillors of Bulawayo City Council in approving equity investment in Tetrad Investment Bank.
“Whereas section 302 of the Urban Councils Act provides the guidelines for equity investment of urban local authorities, the committee notes that all such intentions for private equity investment should be aptly scrutinised by the minister of Local Government and Public Works before any approval is made in terms of section 302 (2f). ii.”
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Parliamentarians felt that the equity investment into Tetrad needed further scrutiny through interrogation of paperwork, council resolutions, and all relevant documentation.
They recommended that before any public funds are committed to equity investment by local authorities, the Local Government and Public Works minister must “exercise expert scrutiny on all intention to do so, to guard against financial losses of public funds.”
Meanwhile, the parliamentary committee observed that the valuation of council’s investments in the City of Kings Business Ventures had taken too long after the Auditor General raised concerns about its lack of compliance with the Public Finance Management Act.
Parliamentarians also said the council’s business entity did not have a balanced board in terms of good corporate governance ethics.
“The committee observed that the evaluation of capital investments in City of Kings Capital ventures had taken too long to be implemented in order to address the observations made by the Auditor General,” the report added.
“City of Kings Business Ventures does not have a balanced board of directors in terms of good corporate governance ethics.
“The oversight by a management committee over business affairs of City of Kings Business Ventures can create conflict of interest and undermine effective checks and balances.”
It recommended that in order to be fully compliant with section 49(2c) of the Public Finance Management Act, Bulawayo City Council should complete the revaluation of its capital investment in City of Kings Business Ventures by July 31, 2025.
City of Kings Business Ventures was set up through a charter to run non-core council operations.
These operations include Mzilikazi Pottery, Mzilikazi School of Arts, Parks Nursery, Caravan Park and later the sewerage farm known as Aisebly Farm.
The committee was informed that the Bulawayo City Council was seeking the services of an independent evaluator for its capital investment in the City of Kings Business Ventures.
Council indicated that the valuation of the capital investment will be undertaken during the first quarter in 2025.
Despite the concerns, the committee said it was optimistic that the issues raised by the Auditor General on Bulawayo City Council’s audited accounts for 2019 and 2020 would be addressed.
“In this regard the committee implores all the tasked stakeholders to take the recommendations made by the committee seriously so as to ensure financial prudence, restore sanity, transparency and efficiency in the use and management of public funds by Bulawayo City Council,” the report added.
