Zimbabwe's Auditor-General has flagged USD4.89 million worth of discrepancies in Air Zimbabwe's financial statement for 2020 - a period before the state-owned airline underwent restructuring and exited judicial administration in June 2021.
The airline was not immediately available to comment on the audit of its financial statements for 2020 and 2021, contained in the Auditor-General's report on state-owned enterprises and parastatals for the financial year ending December 31, 2023.
2020 Financial Year
Auditor-General Mildred Chiri issued an "adverse opinion" for 2020, noting the financial statements did not fairly present the financial position, performance and cash flows of Air Zimbabwe on December 31, 2020. The primary reason was a USD4.89 million discrepancy in the opening balance at the beginning of the 2020 financial year compared to the previous year's closing balance. Chiri said management failed to provide an explanation or resolution for these discrepancies. As a result, it was impossible to verify the accuracy of the opening balances or determine if adjustments were necessary for the financial statements to portray the company's financial position accurately, she said.
In the 2020 financial year, Air Zimbabwe reported a net loss of USD11.1 million, an improvement from USD15.3 million in 2019. The company had accumulated losses totalling USD417.4 million, and its liabilities at the time exceeded its total assets by USD358.2 million. Additionally, there was a contingent liability of about USD39 million relating to an ownership dispute of the A320-200, Z-WPN (msn 1973).
Air Zimbabwe recognised inventory totalling USD14.4 million in its 2020 financial statements, but no physical inventory count was conducted, meaning the Auditor-General could not ascertain whether adjustments were needed for both recorded and unrecorded inventories. This uncertainty prevented her from confirming the existence, completeness, and accurate valuation of the inventories reported in the financial statements.
2021 Financial Year
Chiri's opinion on the 2021 financial year was more positive, indicating the airline's financial statements fairly represented its financial position on December 31, 2021. Accumulated losses decreased to USD115.1 million, but liabilities continued to exceed total assets, albeit reduced to USD45.3 million. Still, the USD39 million liability regarding the A320 remained.
Governance issues
Governance issues highlighted for the financial years 2020/2021 included weak controls over inventories, misstatements of financial results, and no policy covering cash advances and duty travel allowances given to employees. The airline also lacked lease agreements for 16 properties, meaning some tenants were not paying rents, which were also below market rates.
Chiri said the airline had progressed in addressing issues raised in previous audits. This included filling seven key posts, and recruitments for other vital vacant posts commenced in March 2023.
Turnaround plan
In December 2021, the Zimbabwean government allocated ZWL1.5 billion old Zimbabwean dollars (then USD43.6million at RBZ rate) for the recapitalisation of Air Zimbabwe. Emerging from the restructuring process, the airline is currently in year three of a six-year turnaround plan, taking a "crawl, walk, run" approach, focusing on fully utilising its idle assets, fleet modernisation, growing its route network, passenger and cargo revenue growth, and generating ancillary revenue.
