ZIMBABWE’S Mines ministry has failed to recover a US$14 million loan extended to financially-beleaguered Hwange Colliery Company Limited (HCCL) after the government guaranteed the coal miner in securing funds from an Indian financial institution, a new report by the Auditor-General has revealed.
BERNARD MPOFU
Already, the HCCL’s external auditors, Grant Thornton, have raised concern over the company’s failure to confirm a significant loan of ZW$12.9 billion (US$18.9 million), with the auditors citing that the miner was hiding crucial information.
Rheah Kujinga, the acting Auditor-General, warned that recoveries of the loan may become challenging in future.
In case of non-repayment of loans due beyond a certain period of time, banks initiate the process to claim them back through certain recovery measures, commonly known as loan recovery process.
“I noted that as at December 31, 2022, there were no recoveries made by the Ministry from Hwange Colliery Company towards the loan assumed on behalf of Hwange Colliery for Export-Import Bank of India amounting to US$14 560 697 (2021: US$9 776 780 000),” reads the AG’s report on Appropriation Accounts, Finance and Revenue Statements and Fund Accounts for the year ended 31 December 2022.
“There was no evidence submitted for audit indicating the recovery plan. Recoveries of the loan may become challenging in the foreseeable future.
“The Ministry should liaise with the Ministry of Finance and Economic Development on how the recoveries from Hwange Colliery Company can be made.”
Responding to the AG’s report, the Mines ministry said a follow-up is being made with Hwange Colliery and ministry of Finance and Economic Development.
An audit report for the financial year ended 31 December 2022 shows that the company failed to honour requests by auditors to disclose the balance of the United States dollar-denominated loan.
“As disclosed in note 23.2, to these financial statements, included in borrowings is an amount in respect of a long outstanding United States dollar denominated loan.
Responses to requests for confirmation of the loan balance were not received,” the report reads in part.
“We were unable to confirm the completeness of the loan balance by alternative means. Consequently, we were unable to determine whether any adjustments to the borrowings were necessary and to determine the effect that this will have on the financial statements.”
In 2014, HCCL secured a loan of US$13 million from the Export-Import Bank of India (EXIM) to purchase coal-mining equipment.
The loan was guaranteed by the Reserve Bank of Zimbabwe, with interest being charged at London interbank offered rate of + 3.5 % per annum.
“In terms of an arrangement between Export-Import bank of India (EXIM) and the Government of Zimbabwe, in February 2019, the Government of Zimbabwe took over the responsibility of settlement of the loan to Export-Import Bank of India, with the company indebtedness in respect of this USD denominated loan now being to the Government of Zimbabwe,” the report states.
As part of the ongoing restructuring plan, the government, through the Ministry of Finance and Economic Development, issued Treasury Bills (TBs) of US$41 million and US$18,216 million in settlement of the Mota Engil and RBZ/PTA Bank loan, respectively.
The government has agreed that its support be treated as a loan payable over 15 years with 7% interest per annum, according to the auditors.
The auditors added that an additional US$52.3 million worth of TBs were issued towards the scheme of arrangement, bringing the total support from the government to US$111.5 million worth of TBs, as approved by the ministry of Finance and Economic Development.
