Zimbabwe’s Auditor General’s report on government companies was released recently. It’s a 2023 report covering the 2022 period. These reports give us some insight into the state of government owned technology companies like the NetOne and TelOne.
This article will focus on NetOne. The auditor found that NetOne made a loss of about about US $40 million in 2022. The previous year, 2021, the company lost $160 million. Here’s what the report says:
I draw your attention to the fact that the Company incurred a loss of ZWL $40 billion (2021: ZWL$31 billion) during the year ended December 31, 2022…
The value of money over time in Zimbabwe can be very confusing, even for us Zimbabweans. To know the value of these ZWL figures you have to know what each figure was worth in US (or China’s CNY) at the time. But even that presents a further problem – government insists on its own “official” rate, which is usually way lower than the general market rate.
On 31 December 2021, the official rate was US $1: ZWL $109, so the ZWL $31 billion loss for that year works out to US $280 million. One year later, at the end of 2022, the official rate had shot to 671, which means the ZWL $40 billion for that year was worth US $60 million. This is a total US $340 million lost, at least according to the government’s own rate.
The problem with this rate-on-31-December is that the business transactions that happened throughout the year did not use the 31 December rate. We are not accountants, so we’ll end the estimation where it is.
The parallel market rates for the same dates were: 195 in December 2021, and 1,000 in December 2022, giving us the USD value of $160 million and $40 million respectively. This is where the US $200 million in the title is coming from.
So what exactly is the loss?
It is difficult to know. Even the auditor general acknowledged this problem in the audit report:
The Company used foreign currency exchange rates that were not considered to be appropriate spot rates for translation of foreign currency denominated transactions and balances, as required [by standards]…
Because NetOne is owned by the government, what these numbers say means is government had US $200 million belonging to Zimbabweans, and they lost it.
How?
Unfortunately the report doesn’t go into much detail on the financials. There’s the issue of post-paid subscription contracts that are not terminated despite non-payment of bills.
There’s also the issue of fraud which continues to haunt the company. In January 2023 it was revealed through a court case that NetOne had lost about ZWL $565 million to fraud.
In addition, the country’s political exchange rate means sometimes telecoms companies are forced to sell airtime at a loss simply because the regulator won’t allow an increase in tariffs for fear it will look bad on the politicians.
An article we wrote in 2022, after the NetOne AGM sheds some light.
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25 comments
That explains why their services are very low simply the CEO doesn’t know how to run the business profitability. They should change the CEO.
Unfortunately “they” prefer a puppet CEO on the driver’s seat and chase away the competent ones. If you still remember period yaLazurus Mchenje, that guy was onto something….OneMoney yangayambove paMap aiipusher zvekudaro, he even personally declared whoever was being abused report to him directly…he started plugging cash “leak” holes ….coupled with other strategic decisions he made, Netone was on a growth trajectory but then in zim its not secret that “integrity” doesn’t please “them”. Out of nowhere conspiracy theories against him emerged and the rest is history…
Yeah his resume is impressive.I actually looked up some of the issues that you are labelling as conspiracies and l don’t that those are mere conspiracies.The current gaffer seems like a man of integrity. We have been receiving timely updates on glitches and improvements. That counts for something.
I agree with this one….that’s the truth, netone now they don’t really know how to earn profits…they removed they dealers from the streets but they were the ones pushing their sales…
They cant afford a decent CEO! Simple
Personally l think the leadership is doing it’s best to tackle the issue of digital divide and digital participation. I can testify to this because l have seen a change in behavior among my peers in Bulilima. I booster lasivusa lathi. Lakho ukubona inkokheli ye netone isiza esigodlweni sethu Kuhle. Kwezinye izikhathi ubona amatende abo besiza Abantwana ezikholo. Ndaboka 👏. As a professional it made me take a keen interest on telecoms reports and l noticed that they have had a 94% growth in data traffic and l think this underlines the company’s ability to the demands of the market. Considering the change that l have seen in Nswazi village. Seeing this infrastructure sharing become a reality in this are shows that the leadership has been able to bring about a balance and mutual respect in the telecommunications industry. This impressive stand signposts the potential for further expansion in the marginalized areas. #Abameli basemakhaya
It’s quite apparent that Net One being wholly government owned has an obligation to bridge the digital divide by providing base stations in the remote areas. Accordingly these recorded losses could be mitigated by POTRAZ who levy all communications players for such purposes. Also, exchange rate losses are attributable to the hypersonic inflation that the country experienced and there a need to cater for such changes on the accounting standards.
Changing the CEO is like treating the symptom, not the disease.
Privatise the damn thing. Or better still sell it off to the highest bidder, assets loss book and all.
Sink or swim.
Its government approved loss, no wonder no arrests were made…
1. Leadership challenges
2. Debt legacy
I wonder why Lazarus Muchenje was fired, when he made Netone profitable..!
I think you are zombifying the people who really made the decision to terminate his contract. Institution’s like that value integrity because they deal with confidential information on a daily. All l am saying is that it also goes beyond profits. Ngumbomo wami lami njengesgijmi Sabantu.
its sanctions kkkkk
I have witnessed the extremes that this leadership is willing to go.I believe they are participating in corporate social projects that focus on health and empowerment, to name a few. Of particular note, it is collaborating with other companies to assist people living with albinism. It recently launched a statewide e-health programme. Personally, I believe it speaks much about leadership.
I stumbled upon a potraz report and it seemed like the current leadership has managed to steady the ship in terms of data every during power cuts.
Is this really about Net-1 or it’s something else? Say what you may but atleast they have managed to keep their network steady even during power cuts & peak hours.
The leadership of that company have been doing very well though. Their commitment to connect the whole of Zimbabwe is nothing short of impressive. I have been deep in rural Zimbabwe in the Matebeleland and you will never see a Econet base station there but you can see two or so for Netone. I think that’s quite impressive. Lets not forget that.
Personally, I evaluate leadership based on the support system around them. When I visited their ZITF exhibit, the CEO treated me as if I were a valuable customer. He even took the time to explain past issues and how they were resolved. I was impressed by the management’ demographics and enthusiasm for digital solutions.
Say what you may, Net 1 isn’t and shouldn’t be a social philanthropic or PR Unit. It is a BUSINESS.
Business is judged by the bottom line. Not by fanciful infrastructure, certainly not by the charisma of the CEO.
If Net1 as a business, no matter how much how steady its network signal is, and no matter how much personal charm the top guy is, if the management superintendents over a US$200 million loss and sits on a mountain top of a technically insolvent corporation, that management is a failure.
No matter how much lipgloss you apply, and no matter how much makeup you apply will alter the fact.
The product also matters. The product matters. Yes there is a bottom line but the product is also part of it. The leadership has tackled one issue, now it has to tackle another. As of now, they are doing well, gradually they will get there. It just takes time.
Since Mushanawani took over the reigns, I’ve noticed that the same structures have boosted their dealers. They are following the terms of their binding dealership contracts. I was truly astounded by the security protocols that they now follow in comparison to a previous age.
Netone has consistently shown revenue growth over the years. With a 3% revenue growth, the company’s efforts to expand its services and improve its network have paid off, resulting in increased revenue. This is a testament to Netone’s resilience and commitment to providing quality services to its customers. Kudos to Mushanawani for leading decision making in this tough and volatile tech environment.
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They have money to pay for fake comments praising their CEO, you see where their priorities lie…
That’s what I am also seeing. How can we have everyone glossing over the CEO’s charisma but ignoring the glaring $200 million loss? That money is ours. It is different from money lost at Econet which is investors’ money. A mismanagement or loss at NetOne affects all of us directly because we will be forced to cover it. What are they trying to portray by covering mismanagement? These comments are a rented comments.