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Published On: Fri, Sep 23rd, 2016

NetOne in US$32m dodgy deals

A FORENSIC audit into the affairs of state-owned mobile phone operator NetOne has unearthed new evidence of mismanagement and corruption. Latest details show the company made shady payments totalling US$32 million to several firms without documentation, it has been established.

By Bernard Mpofu

NetOne’s board of directors ordered a forensic audit into the country’s second largest telecoms firm after it emerged several scandals were rocking the company.

Chief executive officer Reward Kangai and several other executives were sent on forced leave in March to pave way for the audit.

It is understood the audit, conducted by PriceWaterhouseCoopers (PwC), has now been completed and the report was submitted to the Auditor-General’s Office last month.

Sources close to the developments said payments totalling US$32 124 987,65 were made to 10 contractors without paperwork in a glaring abuse of public funds.

The companies, sources said, include Essar Tubes and Towers which received US$6 168 854,59; Gemalto (US$3 064 374,11); Huawei (US$1 586 248,79); Masimba Holdings (US$3 528 714,03); Bopela Group (US$913 174,24); Sectional Poles (US$987 822); Technotree (US$50 000); Intervoice Convergys (US$7 122 029,99); Redan (US$1 693 086,13) and Nokia Siemens (US$7 010 684,77), bringing the total to US$32 million.

“The probe revealed that NetOne operated 35 bank accounts with 13 banks which increases the risk of complicit and fraudulent activities by management as it may be difficult to efficiently keep track of transactions in the different accounts,” a source said.

“What was also suspicious was that management had different signatories for the different accounts and, on average, bank reconciliations were done 10 days after the transactions.”

The final report, sources said, also revealed Kangai made changes to the employment contracts of key managerial personnel without board approval and further allowed them to receive cash in lieu of holiday allowances.

“This resulted in NetOne paying a total of US$274 418,11 to senior management for the holiday allowances during the period under review (last five years). Some of those who benefitted from the payment include: Kangai US$135 701,94; the late finance director Matavire Dzimbanhete who received US$23 589,93; sales and marketing director Spiwe Ndoro who pocketed US$55 264,15; finance director Godfrey Tarupuwa who was paid US$41 726,01 as well as chief technical officer Darlington Gutu who received US$18 136,06,” the source said. “The encashment of holiday allowances by NetOne directors contravenes established best and common practice. It is best and common practice that such allowances as the holiday one have a ceiling. “The forensic audit also revealed that management paid themselves, without board approval, a total of US$211 102,20 in special incentives for excellent work done.”

NetOne financial results show that the company incurred a loss of US$3 million in the full year to 2015 despite a 20% growth in revenue to US$120 million.

On the contentious matter of base stations, sources said NetOne had been operating without any formal policies or procedures governing the acquisition of base stations. Controversial sites where Kangai presided over the installation of base stations include Avondale Christian Church, and Number 103 Good Hope, which is owned by Joyce Kangai.

The latest scandal comes after preliminary results of the audit revealed that NetOne engaged a local contractor, Bopela Group, to undertake a base station installation project without a contract amid disclosures that the contractor erected a base station at his wife’s house in the capital without the company’s approval. The audit, sources said, shows that in the period under review, Bopela was contracted by NetOne to construct base station foundations and to rig towers despite not having a contract to undertake the project.

“The audit revealed how on several occasions, the CEO directed the installation of base stations without necessary technical surveys of the stability of the chosen site or at sites that were not authorised for development,” a source said. “The audit also returned that management would wantonly approve the development of over 80 sites without seeking approval from respective local authorities. The cost of the company’s regularisation fines of US$1 050 per site is costing in excess of US$80 000 as a consequence of incompetent planning yet the normal cost of obtaining site approval is US$230 per site.”

In July, the Zimbabwe Independent reported that Kangai allegedly aided local contractor Bopela Group — which was engaged by the telecoms firm to work on a US$3,7 million base stations installation project — to evade tax after the company was hit by a garnish order for failing to pay taxes.

This was first revealed in the first draft of an audit report on NetOne titled “Provision of Comprehensive Forensic Investigation Services to NetOne Cellular Services” compiled by PriceWaterhouseCoopers on behalf of the Auditor-General.

The draft audit showed that following a garnish order on Bopela by the Zimbabwe Revenue Authority (Zimra), the company’s managing director Agrippa Masiyakurima approached Kangai seeking approval to sub-contract the installation of 70 base stations to a firm, which was part of the Bopela Group. This apparent conflict of interest was meant to bypass Zimra from freezing the company’s funds.

It also highlighted that Huawei then advised Masiyakurima to amend his tripartite agreement and appoint one of his sub-contractors as the recipient of the outstanding fees.

Macharawanda Group, a unit of the Bopela Group, was selected as the sub-contractor and a new agreement was entered into.

The Bopela project, which involved installing base stations for NetOne, is part of the multi-million-dollar equipment deal with the Chinese technology firm, Huawei.

PwC also revealed that Huawei country manager Xiaohui Bao informed the auditors that the Bopela tripartite agreement was amended and Macharawanda was roped in because Bopela could not meet the construction deadline.

In 2012, government partnered Huawei in rolling out NetOne’s national mobile broadband project as competition in the telecoms sector intensified on the back of massive growth in data and overlay services.