Saturday, October 24, 2020

Six big parastatals bankrupt

At least six of Botswana’s biggest parastatals are technically bankrupt and do not have the money to continue operating unless government bails them out. The situation is so serious that  an audit trail by a number of auditors has revealed that some of the parastatals are either not able to pay salaries, are defaulting on paying tax or have been writing out cheques to creditors when they do not have money in their bank accounts to honour the cheques.
 
Air Botswana, Botswana Meat Commission, Botswana Power Corporation, Water Utilities Corporation, Botswana Examination Council and the Botswana National Sports Council cannot meet the legal obligation to balance their books unless government injects money to keep them afloat.
 
The six state owned enterprises have together accumulated a deficit of about P4 billion.
 
The Air Botswana financial statements for the year ended 31 March 2015 were audited by PricewaterhouseCoopers who came to the conclusion that, “the airline has not complied with all the financial provisions of the Air Botswana Act,  which require its revenues to be sufficient to produce a reasonable rate of return.”
 
The auditors further observed that “the airline had been incurring losses over the past years which had accumulated to P485.32 million as at 31st March 2015. This picture is expected to persist in the foreseeable future. The airline’s ability to continue as a going concern is dependent on the government’s continual support in future.”
 
The Water Utilities Corporation which recently could not raise money to pay staff salaries seems to be in a worse condition. An audit by Delloitte & Touch├® revealed that “the working capital position of the Corporation as at 31stMarch 2015 showed current assets of P271.50 million and current liabilities of P493.01 million, resulting in a net current position of P221.51 million. The audit report states that “the corporation had not complied with Section 19 of the Water Utilities Corporation Act which requires the corporation to conduct its affairs on sound commercial lines and to produce a net operating income by which a reasonable return can be measured.” 
This is auditors officialise for ÔÇô the Water Utilities Corporation is bankrupt.
 
Despite earlier optimism that the Botswana Meat Commission CEO Dr Akolang Tombale had turned the loss making parastatal around, an audit by Deloitte & Touch├® for the financial year ended 31 December 2014 shows that the BMC is broke and cannot meet its obligations.
The BMC has been taking corrective action the Sunday Standard has however raised information that the commission may have gone way down the slope beyond the point of no return. The audit by Deloitte & Touch├® turned up information that “the working capital of the Group as at 31 December 2014 showed total current assets of P435.56 million and total current liabilities of P648.92 million, giving a net current liabilities position of P213.36 million while that of the Commission showed current assets of P430.36 million and current liabilities of P702.56 million, resulting in a net current liabilities position of P272.20 million.”
The audit stated that, “the ability of the group and the commission to continue as a going concern is dependent on continued government support.”
 
The Botswana Power Corporation is the hardest hit, with a deficit of P2, 70 billion making up more than half of the cumulative deficit of all six bankrupt parastatals. An audit by Deloitte &Touch├® has revealed that, “the corporation’s current liabilities exceeded its current assets by P2.70 billion.”
The BPC position is further aggravated by its contingent liabilities. The Auditors have revealed that “the corporation was exposed to a number of quantified and unquantified claims by a contractor in relation to implementation of Morupule B, which the board and management believed were less than the counter claims against the contractor.”
The Botswana National Sports Council which is funded mainly through government grants is drowning in red ink and the situation is so bad that the council has been writing out cheques when it did not have money in the bank to honour the cheques.
 
Auditors Grant Thornton observed that, “the adverse liquidity position of the council, which is a continuation of the past years, is a cause for concern and its going concern status is dependent on the government providing financial support.”
The auditors turned up information that cheques amounting to P667 016 had been drawn as at year-end and had not been sent to or collected by creditors by April 2015, ostensibly because of lack of funds. This was in contravention of the provisions of the Finance and Procedures manual which stipulates that the council should ensure that there are enough funds in the bank account to clear the cheques when paying creditors.”
 
The audit further revealed that the PAYE remittances to the Botswana Unified Revenue Services (BURS) for some months had not been done on time, with a delay of up to 8 weeks. The PAYE for November 2014 and December 2014 amounting to P448 292 had not been paid to BURS at the time of audit. “This may lead to the council being liable to fines and penalties for non-compliance with the Income Tax Act”, noted the auditors.
 
The audit further revealed that the expenditure under affiliate’s item had exceeded the budget amount and that the excess had not been authorised by a senior officer. The council did not have policies and procedures in place to address these issues.
 
 The Botswana Examinations Council which has been crippled by a cash flow crisis has had to inform the BURS of its situation and that it would not be able to remit taxes on time. And audit by KPMG noted that, “PAYE returns for December 2014 and March 2015 amounting to P3.90 million and P5.83 million respectively, were not paid which was not in line with the requirements of the Income Tax Act. The Council may incur penalties and interest imposed by the Botswana Unified revenue Services for non-compliance with the Income Tax Act.”
 

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