US$1,6bn Command Agriculture bombshell
A DAMNING parliamentary report on Command Agriculture has exposed how former Finance minister Patrick Chinamasa (pictured) and the Reserve Bank of Zimbabwe superintended over a murky and illegal process through dubious approvals of Treasury Bills that have saddled the government with a debt of nearly US$1.6 billion.
According to Parliament’s Public Accounts Committee (PAC) report presented on Thursday following a two-year probe on how funds were used under the Special Maize Programme better known as Command Agriculture, Chinamasa and the central bank disregarded the law in discharging the programme. Members of Parliament are now calling on the Zimbabwe Anti-Corruption Commission (Zacc) to probe their actions, which bordered on criminality.
Parliamentarians have also called for a forensic audit to establish how much the country lost in the shady arrangement, done outside the tender process.
MPs under the committee chaired by Gweru Urban legislator Brian Dube said they also want the executive to take the findings of the report seriously and act.
Several companies including Sakunda Holdings owned by business tycoon Kudakwashe Tagwirei (pictured below), who is President Emmerson Mnangagwa’s adviser, are implicated in the report. Sakunda got millions of dollars without going through requisite tender processes.
Other companies which took part in the Command Agriculture programme are FSG, Quton, Pedstock, Cottco, Sable Chemicals, Valley Seeds, Seed Co, Windmill and ZFC.
The MPs said the report came about as a result of “normal routine” that looked into audited accounts for the years 2017 and 2018.
MPs said this quickly imploded into a major inquiry when the committee noted a huge “unallocated reserve” amounting to US$1 559 713 867 exposed by the 2017 report by the Auditor-General on the ministry of Agriculture that established the variance.
“According to a schedule received from the Auditor-General, the ministry of Agriculture was supposed to have received US$1 633 617 652 from Treasury. However, as at 10 May 2018, the ministry of Agriculture confirmed having received only US$73 903 785,” the report read in part.
A similar observation was made in 2018. The ministry was allocated through the budget the sum of US$497 381 000. However, there were no supporting documents for a sum of US$ 847 954 752 directly paid by the ministry of Finance and Economic Development to various service providers.
“Although the Auditor-General’s reports relate the figures to the ‘Unallocated Reserve’, the amounts referred to above were in fact unbudgeted for expenditure spent outside Parliament’s approved budget as shown in the figures in the Appropriation Account, the Budget and the Blue Book,” the report states.
The PAC said it was “gravely concerned” that these huge amounts were spent outside the Appropriation Act, in breach of the Constitution of Zimbabwe and the Public Finance Management Act.
In giving oral evidence, Agriculture ministry officials said they were supposed to be in charge of running the Command Agriculture programme but their powers were usurped, leaving the Finance ministry and the central bank in full control of the murky scheme.
“They explained that the ministry of Finance and Economic Development was in charge of Command Agriculture and dealt directly with contractors, suppliers and beneficiaries,” the report reads in part.
Officials from the Agriculture ministry told the committee that payment to parastatals was supposed to be done in two parts, including through the ministry which, in turn, pays the parastatals.
“They explained that in the case of the US$1 559 713 867, Treasury paid directly to the beneficiaries and nothing about the payment had been communicated to the ministry by 28 February by which date returns should have been submitted.”
In their evidence, the report said, the ministry of Agriculture repeatedly made the point that although theoretically they were being made to account for Command Agriculture, they had no knowledge of the scheme.
“In simple terms they disowned Command Agriculture,” the report states.
“A similar observation was made in 2018. The ministry was allocated through the budget the sum of US$ 497 381 000. However, there were no supporting documents for a sum of US$ 847 954 752 directly paid by the ministry of Finance and Economic Development to various service providers,” the report reads in part.
“Although the Auditor-General’s Reports relate the figures to the ‘Unallocated Reserve’, the amounts referred to above were in fact unbudgeted for expenditure spent outside Parliament’s approved budget as shown in the figures in the Appropriation Account, the Budget and the Blue Book.”
MPs said it was worrying that huge amounts were spent outside the Appropriation Act, in breach of the Constitution of Zimbabwe and the Public Finance Management Act.
But according to the report, the MPs accused the ministry of Agriculture of not being proactive, adding they should have played a meaningful role in their operations by interrogating their role in the whole maize production matrix.
Ministry of Finance officials, the report says, were candid in their acceptance that there had been unauthorised expenditure through Command Agriculture for the year 2017 and 2018 as captured in the Auditor-General’s statements.
“They also accepted that they acted outside the law in incurring excess expenditure without parliamentary approval and outside the budget. The ministry officials acknowledged that they erred in making direct payments to suppliers and contractors outside the line ministry, which is the ministry of Lands, Agriculture, Water and Rural Resettlement,” the report said.
Responding to the PAC on why they engaged companies, including Sakunda Holdings, without going to tender, the ministry said as a result of fiscal challenges, suppliers were appointed without due process and respect of the Public Procurement Act with those companies such as Sakunda who had indicated that they had their own foreign currency and thus were able to supply government on credit.
“When it was put to them that in fact all Command Agriculture suppliers had received huge amounts of foreign currency from the RBZ, contrary to their indication that they would source foreign currency on their own, the ministry officials had no satisfactory response.”
“The ministry officials acknowledged that they erred in making direct payments to suppliers and contractors outside the line ministry, which is the ministry of Agriculture,” the report noted.
In its recommendations, the committee says: “The ministry of Finance must desist from making direct payments to suppliers. All disbursements should be made to line ministries to avoid improper accounting of disbursements, with immediate effect.”
The central bank was also summoned to appear before the committee where they conceded that they had made direct payments to contractors and suppliers but only did so under instruction.
“Through the RBZ Governor and Dr. Khuphukile Mlambo, the RBZ agreed that it had made direct payments to contractors and suppliers involved in Command Agriculture but only did so at the special instance and request of the ministry of Finance and Economic Development,” the report says.
“As to why it dealt with companies such as Sakunda whose contracts had been awarded without going to tender, the RBZ testified that the issue of contracting was the sole responsibility of the ministry of Finance,” the report reads.
In response to inquiries as to why it effectively “ran a parallel government” through Treasury Bills that exceeded amounts approved in the budget, the central bank could only reply that it also operated on instruction.
“As far as the RBZ quasi-fiscal activities are concerned, the bank’s involvement in Command Agriculture and the issue of running a budget deficit outside Parliament, was according to the Governor the ministry of Finance and Economic Development’s problem,” the report stated.
Central bank governor John Mangundya, the report stated, also felt that the issues of compliance with the constitution and the law were not his problem but were the ministry of Finance’s problem.
“The following evidence from the governor portrayed a disturbing reflection of impunity and lack of respect for the country’s laws,” the report says.
The government has since acknowledged the blatant over-expenditure through the Financial Adjustment Bill [H.B. 19, 2019].
On payments made to suppliers for Command Agriculture and the Presidential Support Scheme through Treasury Bills in 2017 and 2018, the ministry of Finance provided the parliamentary committee with a schedule of payments made for Command Agriculture and the Presidential Input Scheme in 2017 and 2018 to suppliers.
In the schedule, in 2017, Sakunda Holdings was paid US$378 739 319.75, while in 2018 the company received US$235 954 143.85.
Total payments in 2017 and 2018 for tge Presidential Scheme were US$573 392 887.33 that was paid to FSG, Quton, Pedstock, Cottco, Sable Chemicals, Valley Seeds, Seed Co, Sakunda, Windmill and ZFC.
“…Both the minister of Finance and Economic Development and the RBZ breached the provisions of the PFMA (Public Finance Management Act) in purporting to issue Treasury Bills that were not in compliance with the law,” the report says.
“A careful perusal of all the correspondence dealing with Treasury Bills shows that it was the RBZ which asked the minister of Finance and Economic Development to approve its (RBZ) issuance of Treasury Bills.
“In other words, the party that was dominant and created demand was not the ministry of Finance but rather the RBZ. But this over-zealousness and exuberance to embark on what were clearly quasi-fiscal activities is not supported by the law, both the PFMA and RBZ Act,” the report noted.
“Thus, the RBZ usurped the powers of the minister of Finance and Economic Development defined in Part VI of the PFMA. As the committee pointed out to the governor during his testimony of 24 July 2019, once the minister of Finance and Economic Development has ‘approved’ a Treasury Bill the RBZ ought to write back to the same, requesting for a Treasury Bill note as is reflected in the Treasury Bill of Sakunda.”
The report says Chinamasa’s conduct raised eyebrows.
“The minister himself, a former Attorney-General, knew the law. After all, he had properly issued Treasury Bill notes in favour of Sakunda Holdings,” reads the report.
“He is accountable for manipulating the central bank. Another concern arises from the splitting of Treasury Bills as shown.
“A further concern is the approval provided for by Hon. Minister Chinamasa on the 10th August 2018 of a huge Treasury Bill in the sum of US$ 737 904 758. 00.
“The 2018 election was held on the 30th July 2018, therefore Hon. Minister Chinamasa’s term of office expired on the 29th July 2018. His position was that of a caretaker for emergency purposes only until the President was sworn in.
“The committee finds it totally remiss that an individual without power would create indebtedness to the state to the tune of almost a billion United States dollars. This was unacceptable conduct.”
The report also questioned the action of the RBZ governor in trying to clear the RBZ’s mess by asking an individual without power to approve huge amounts of payments for its own external indebtedness acquired without Parliament’s approval as required by section 327 of the constitution before a new minister comes in.
The report accuses the RBZ of rogue behaviour.
“Nothing can be more roguish than the bank asking for a powerless minister to approve an indebtedness of almost a billion dollars without Parliament’s approval,” the report says.
According to the committee’s observations, the central bank issued Treasury Bills unprocedurally in violation section 54 (3) of the Public Finance Management Act.
“The RBZ violated the RBZ Act by failing to play its advisory role to government. The RBZ split Treasury Bills between different suppliers. There were Treasury Bills issued without supporting documentation from the minister of Finance and Economic Development. Some TBs were undisclosed, had no amount, no tenure, no interest rate, no timing, purpose and features,” says the report.
“The ministry of Agriculture is the one which was supposed to generate demand for Treasury Bills, rather that RBZ and Treasury.”
The committee recommended that a forensic audit be conducted on Treasury Bills issued by the RBZ during 2017/18 for the Special Maize Programme/Command Agriculture, within 90 days.
In debating the motion, MPs called for the coming in of Zacc to probe with the matter that created a huge debt for the country.
“If you then check, you will realise that in 2017, for instance, we spent more than US$18 billion and we also spent a further US$12 billion in respect of the Command Agriculture. The challenge we then face is the manner in which most of the transactions are being done,” Dzivaresekwa MP Edwin Mushoriwa said.
“…this means that quite a number of beneficiaries during the 2017 and 2018 season did not do anything in terms of paying back the money that they had received through the various inputs. However, that is a red flag in terms of how we should conduct our business during Public Finance Management.
“The fourth issue is this question of having suppliers like Sakunda, FCG, all these companies — there was no tender. They were simply given huge tenders amounting to billions of US dollars and that is against the provisions of the Public Finance Management Act. It is also contrary to the provisions of the Public Procurement and Assets Disposal Act. Those things do not do us well as a nation.”
Whange Central MP Daniel Molokela-Tsiye said: “The first and most important observation is that as a country, it looks like we are fighting a losing war in the fight against corruption which is the biggest cancer that is affecting us as a country. This report is clearly indicating that there is still a lot that we need to do as Zimbabwe to win the fight against corruption.”
He said the report was only a tip of the iceberg as a lot could have happened.
“I want to encourage the National Assembly to summon the (RBZ) governor and also the minister, through this committee, to explain the situation. If we allow this report to sail through without further public scrutiny, then we are clearly not going to win the war against corruption,” the legislator said.
“I also wanted to comment about the fact that private companies were given tenders without any public notification, without any competitive processes. This is one of the worst forms of corruption you can have in any country. It is a sad indictment on Zimbabwe that we still, in this day and time, have this kind of basic corruption. If a tender involves a lot of money like millions and billions of dollars, there is no other option except to put it under public process and the most deserving contractor wins.
“I want to appeal to the Zimbabwe Anti-Corruption Commission to take this report seriously and ensure that there is further follow-up on this report. I heard a recommendation that there is going to be a forensic audit and I fully endorse it. If we are to win the fight against corruption in Zimbabwe, we need to show leadership with regards to the action in response to this Committee report. We need to show leadership in terms of making sure that there are consequences for those who are indicted or implicated in this report. I thank you Madam Speaker.”