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Mildred Chiri

Abigail Mawonde Herald Correspondent
Harare City Council violated the Urban Councils Act when it borrowed $11 million from a financial institution to pay salaries and terminal benefits for its employees.

This was revealed by the Auditor-General, Mrs Mildred Chiri, in her December 31, 2016 report.

The loan was obtained from CABS. “Urban Councils Act [Chapter 29:15] Section 292 (Salaries of Permanent Employees to be met from revenue), prohibits council from borrowing funds for the payment of salaries and Section 290 (Borrowing Powers) Subsection 2(c) prohibits borrowing of funds for the payment of compensation unless authorised by the Minister of Local Government, Public Works and National Housing, ” observed Mrs Chiri

Mrs Chiri noted that a salaries loan worth $3 million was obtained from CABS on May 13, 2014; a Local Authorities Pension Fund worth $5 million was acquired from the same bank on November 18, 2014; and another salaries loan worth $3 million was obtained on December 24, 2014; amounting to $11 million borrowed.

Mrs Chiri said council failed to produce proof of borrowing powers. “Upon request for proof of borrowing powers from management, they represented that they did not obtain the necessary authorisation from the minister when the loans were acquired,” she said.

Mrs Chiri said there was risk of financial loss due to borrowing for consumption instead of capital expenditure.

In response, the city’s management defended the move. “The amount was borrowed in terms of Section 291 of the Urban Councils Act Chapter 29:15,” it said.

The AG responded: “Although Council considered Section 291 of the Urban Councils Act Chapter 29:15, Section 290 was also a requirement.”

As of January 2017, council owed its employees over $20 million in lieu of salaries – some of whom were in five months arrears.

Harare City Council has a workforce of around 9 000.