Zesa Holdings loses millions

ZESA-megawatt-houseZvamaida Murwira Senior Reporter
Zesa Enterprises is losing millions of dollars in storage and insurance costs after it took delivery of transformers worth US$16 million it had not ordered from an Indian supplier. Zent, which is Zesa Holdings’ investment arm, has also spent over US$100 000 on travel and hotel costs for officials from PME (India) who came to Zimbabwe uninvited.

The revelations are contained in the 2012 report by the Comptroller and Auditor-General Ms Mildred Chiri, which is now before Parliament’s Public Accounts Portfolio Committee for examination.

There are fears that there could be connivance between officials from the two firms who could be benefiting from the multi-million US dollar “bungling”.

Zent entered a technological transfer agreement with PME for an exclusive right to manufacture, repair, use and sell power and distribution transformers.

The initial technology transfer agreement was for a period of five years, effective from January 1, 2006 to December 31, 2010.

As this agreement was about to expire, another one was signed on November 30, 2010 for a further five years, running from January 1, 2011 to December 31, 2015.

Ms Chiri said there were a number of challenges in the Zent and PME deal that included delivery of raw materials in excess of items on the Zent order.

“These extra goods are for projects which have not commenced and not on order. This has resulted in the creation of a consignment warehouse at the Ardbennie location to cater for these items,” she said.

“As at December 31 2011 the company had items worth US$11 million in consignment stock, of which Zent was responsible for storage and insurance charges,” she said.

It was also observed that goods worth US$4,2 million were delivered to the Manica container depot in Harare without Zent orders, and the power utility lost US$34 000 in demurrage costs.

“PME is sending officials without receiving invitation from Zent.

“This means Zent will meet travel and lodging costs which are unnecessary and the total cost incurred by Zent amounted to US$112 338,” she said.

Ms Chiri recommended that the two companies discuss the pricing of raw materials, transfer of risks, lead time between placing an order and date of delivery and responsibility of insurance, storage and demurrage costs.

“Management should engage PME regarding excess raw materials currently held as consignment stock to offset demurrage and insurance costs incurred against amount balance to PME. Management should ensure that trips from India to Zimbabwe made by PME staff are planned and agreed upon in advance,” she said.

In its response, Zent acknowledged its failings.

“The comments are valid. Management has raised these issues to the Zesa Enterprises board. A separate agreement will have the advantages of spelling out detail. Current efforts to bring this practice to a halt have been formally communicated to PME to supply as per order and state that all risks and rewards of ownership will rest with PME for affected material,” read the response.

Zent oversees Zesa Holdings’ investments in land development, manufacture of electricity end-use equipment and development of IT products and regional markets.

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