$11m ZIMRA penalties weigh down TelOne

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TELONE’S profitability in 2018 was inhibited by unpaid government invoices after the Zimbabwe Revenue Authority (ZIMRA) charged the company penalties and interest amounting to $11 million for unpaid taxes, which related to the outstanding bills.
Chipo Mtasa, TelOne’s managing director, told the Parliamentary Portfolio Committee on ICT in December last year that the company was forecasted to incur a loss of $17 million for 2018.
“Without ZIMRA penalties of $11 million and legacy loan interest and exchange differences of $9 million, the company would be trading profitably for the year with a profit of $3 million,” she told the committee during a tour of the company’s infrastructure in Harare and Mazowe.
“TelOne continues to call on the government to address this and to avert ZIMRA penalties and interest especially as government owes TelOne more,” she added.
She said government and parastatals owe the company $101 million.
“Government settlements via the set off arrangements need to be finalised to allow the company to settle local creditors,” Mtasa implored the committee.
Charlton Hwende, the chairperson Parliamentary Portfolio Committee on ICT, said the committee was engaged in discussions with ZIMRA on the matter.
“They have insisted that TelOne should pay, so we are now looking into the issue of a settlement arrangement,” he said.
Although the company’s revenues for the year were forecasted at $128 million up from $118 million in 2017, Mtasa said this performance was negatively impacted by missed revenue opportunities due to ‘foreign currency shortages to allow procurement of materials required to meet customer orders.
“Network vandalism has also continued to disrupt service delivery. Legacy loans and ZIMRA penalties cumulatively amounting to $20 million continue to weigh down performance,” she said.
She said the company’s balance sheet is in a technical insolvency position due to the legacy loans of $383 million.
Mtasa said the loans, which were transferred to TelOne in 2000 when the Posts and Telecommunications Corporation was unbundled, now include a principal balance of $178 million as well as interest arrears and charges of $206 million.
“The legacy loans have made it difficult for the business to source funds for further investment.
“A debt assumption will make it possible for TelOne to enter into meaningful privatisation discussions with potential investors,” she said.
TelOne is one of the five public entities that have been earmarked by government for privatisation in 2019.
Hwende said the committee would continue to push for the debt assumption even though it has already engaged Finance minister Mthuli Ncube on the matter without any success.
“He said it is bad business to remove debt when you are selling,” Hwende told the TelOne management that accompanied the committee on its tour.