Zinara committee audit report questioned

Published: 26 November 2018
The credibility of a report compiled by a committee appointed by former Transport and Infrastructural Development Minister Dr Joram Gumbo to study the findings of an audit by Grant Thornton on the operations of the Zimbabwe National Road Administration has been questioned after some investors implicated in it disputed its findings.

Others queried why Minister Gumbo appointed a separate committee to study the findings of an audit report which comes with recommendations that Zinara was merely supposed to implement.

They argued that the committee was constituted by people who lacked expertise and competence that could not be paralleled with what Grant Thornton recommended in the audit report. One of the companies implicated by the committee is Santanah Holdings, a South African firm that facilitated the US$206 million loan that financed the refurbishment of the Plumtree-Mutare Highway.

In its findings after studying the Grant Thornton audit report with regards to the Plumtree-Mutare Highway, the committee concluded that Santanah Holdings was paid a whopping US$198 000 raising fee for facilitating the US$206 million from the Development Bank of Southern Africa.

Further, the committee said: "Over and above these payments, the committee has since established that Zinara is also paying administration fees on an annual basis. For the period under review (2011 to 2016), a total of US$22 733 196 was paid to Santanah/Sela/Golden Road as administration fees.

"The committee further established that a total of US$33 281 196 was paid as administration and capital raising of US$24 241 719." Sources who spoke to The Herald clarified the details around the loan and its costing of the loan.

Said the source: "The pricing for the Plumtree-Mutare project was circa US$206,6 million capital costs without variances or any statutory increased costs on materials, labour and plant, approximately US$10,5 million Export Credit Insurance that was capitalised at the onset, as well as raising fees from both the bank and the investor's advisors, Santanah — both of which charges are globally acceptable practices."

The source said the political and commercial risk attributed to Zimbabwe at the time was inordinately high and: "In consequence the interest component that was charged by DBSA at inception amounted to some 8,25 percent above Libor and in addition the ECIC risk cover charged at 2,5 percent per annum.

"These are significant risk premiums, but at the time of borrowing Infralink was faced with a take it or leave it position by lenders. Facilitation and raising fees, advisory service and the like to borrowers for projects of this nature at the time stood at around seven to 10 percent of the capital cost payable on first drawdown.

"The facilitation at the time found that this would have been an added unnecessary burden on Infralink and opted to accept settlement of three percent on drawdown and the balance at the rate of 1,3 percent per annum for the tenure of the debt."

With regards to the alleged payment to Golden Road for the facilitation of the loan which the committee said was never disbursed to Zinara, the source said: "As regards the settlement of raising fees on a loan of US$147,47 million secured for the dualisation of the road sections between towns of Norton and Kadoma, this request and application, including feasibility studies and all other pertinent administrative processes necessary to achieve this, was done at the behest of Infralink.

"The DBSA confirmed its intent to extend this loan and in fact issued their indicative term sheet for signature to Infralink and at the time the latter opted to forego the finance available.

"Golden Road settled the raising fee as it had done the job requested and secured the funding required as requested by Infralink. The fact that Infralink chose to withdraw its