HomeBusinessSmedco bosses salt away US$1,1 million

Smedco bosses salt away US$1,1 million

AN audit into the operations of the Small and Medium Enterprises Development Corporation (Smedco) has uncovered explosive details of fraud and financial mismanagement in which the financial institution lost US$1,1 million within five years.


A string of Smedco bosses at its Harare head office and across the country were ringleaders in the looting that took place between 2011 and 2015, when Zimbabwe was still a fully dollarised economy, according to a report by auditor-general Mildred Chiri released recently.

But some of the looters had not been brought to book by June last year, when Chiri submitted her report to the Finance and Economic Development ministry.

The US$1,1 million was enough to fund 230 small to medium-scale enterprises (SMEs) and bolster economic growth in a country that looks up to its vibrant informal sector to provide jobs and incomes following extensive de-industrialisation and capital flight.

The SMEs sector contributes about 60% of Zimbabwe’s gross domestic product, providing a source of income to over 5,5 million people.

This number is way ahead of about two million formally employed Zimbabweans.

In the comprehensive audit that exposes laxity in implementing government policies targeted at developing SMEs, Chiri expressed misgivings over elaborate incapacity to preserve loss of value by a string of state departments including the police, to crack down on vice and protect state assets.

It is easy to see that Smedco has drifted out of its mandate to operate a professionally run development finance institution, into a near-informal money lending business with endemic weaknesses to manage public finances and monitor funded projects.

Smedco has become the worst affected victim of those entrusted to assume stewardship of strategic national institutions, which bear immense responsibility over the scale and pace of economic recovery.

The report shows that fraud took place everywhere from the head office to regional branches while deserving projects struggled to access funding.

But when confronted by state auditors to explain how the money was salted away, the fund’s management were quick to shift the blame elsewhere.

“Smedco lost a total of $1,1 million to internal fraud in the years 2011, 2012, 2013 and 2015,” Chiri said in the value for money audit.

“Some of the cases had taken too long to be finalised,” she said.

The report chronicles how US$195 000 vanished at the Smedco head office in Harare in 2011, but the ringleaders had not been arrested by 2018.

A furthermore US$10 298 and US$157 656 were also stolen in Harare and Bulawayo during the period.

In Gweru, Smedco looters took off with US$311 829 in 2012 and 2013.

The Harare and Masvingo branches lost US$448 377 and US$14 413 at various intervals between 2012 and 2015, the report revealed.

“If the US$1,1 million lost through fraud could have been loaned to MSMEs at an average of US$5 000 each, 228 MSMEs could have benefited,” Chiri said.

In response, Smedco management said: “The observation was noted.

“However, some of the cases were committed by fraudsters and not Smedco employees.

“The corporation is now working closely with the investigating officers and monitoring the progress and providing assistance when called upon as well as to ensure that the suspects on remand are prosecuted.

“The corporation has also started disciplinary action against members who failed to discharge their duties diligently.”

Chiri’s report also revealed that the parastatal failed to recover loans amounting to US$2 132 168.

“Smedco failed to recover loans amounting to $2 132 168 issued during the period 2010 to 2012,” she said.

“The unrecovered loans were subsequently written off in 2013 ($1 765 225) and in 2014 ($366 943).

“As at August 31, 2018, there were 129 out of 166 financed MSMEs who were failing to repay their loans on time.

“This was an indication that Smedco was struggling to collect some of the outstanding loans on a monthly basis.”

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