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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