THE government has been urged to seriously consider reviewing its Shareholders’ and Management Agreements with Econet Telecom Lesotho (ETL) if it is to get dividends from the company.
The recommendation was made by the parliamentary Public Accounts Committee (PAC) in its report on the consolidated financial statements of the government for the 2013/14 to 2015/16 financial years, which was tabled before the National Assembly on Friday.
The PAC also recommended that Econet be given 12 months to update its loan repayment exercise. The report also said the company must present its audient financial statements before parliament within six months after the end of its financial year.
In the report, PAC says ETL is burdening the government with repaying the loans that the government took on its behalf, while falling to pay dividends to the government as a shareholder.
According to the PAC report, the government currently has an outstanding debt on behalf of ETL of more than M400 million.
The committee said it learned that some government parastatals and state owned enterprises including ETL, have not been paying their dividends to the government and some of them have not repaid their loans faithfully.
The committee said it was unconvinced that the enterprises were operating at losses as they claimed.
“Econet Telecom Lesotho is another company for whom the government borrowed money from a development partner on its behalf. The government signed a loan agreement with Exim Bank of China on 9th May 2008 and 14th December 2011 to finance Telecom National network Phase I and II respectively to increase network coverage and improve service.
“The principal loan disbursed to Econet for the Phase I project was M221, 194, 835, 10 and Econet has made a repayment of the principal loan to the tune of M14 373 161, 67. The accumulated arrears amounted to M66 731 611, 70 and the interest paid so far is M74 233, 39. The outstanding balance stands at M202 474 194, 15.
“On the other hand, the government keeps on paying this loan faithfully to the Exim Bank of China without any arrears though it still has an outstanding loan of M276 373 047, 34.
“Similarly, for the Phase II project, the principal loan given to Econet was M245 297 692, 05 of which it paid only M22 570 853, 05 to the government while the arrears stand at M34 933 333, 32. The outstanding loan is therefore M222 726 839.”
The PAC says what makes ETL’s laxity in repaying the loan to the government worrying is the fact that ETL is also struggling to pay dividends to the government.
“The committee found this scenario very disturbing because Econet is falling to pay the dividends and experienced sluggish repayment of the loans and the arrears. The company claims that it is not making profits but this hard to believe as the committee suspects transfer pricing practices.
“Again, the services have not improved as expected when the loan was secured for Econet. The committee was concerned that the government is shouldering the burden of paying the loans on behalf of Econet while it is not remitting anything to the government,” the report said.
The PAC has therefore made the following recommendations on ETL:
“Econet must be up to date with repayments of the loan as per their loan agreement and pay their arrears within 12 months.
“The audited financial statements reports of these companies must be presented before parliament within the six months after the end of their financial years in order to comply with Standing Order no.105 (c)…
“The government, as a shareholder, should seriously consider reviewing of the Shareholders’ and Management Agreements within 90 days,” the PAC report said.
Earlier this year, the government announced that it engaged the African Development Bank (AfDB) to help it to review all its shareholders agreements with private enterprises and parastatals to determine if the contracts were still relevant to the current financial status of the companies.
In February this year, the Principal Secretary in the Ministry of Finance, Motena Tšolo said the AfDB’s African Legal Support Facility is assisting the government to determine if all the shareholders agreements were still reflective of the entities’ current financial status.
The move came after Finance Minister Moeketsi Majoro last year registered the government’s increased exasperation over poor performance of entities in which the government has interests.
Dr Majoro indicated that some public enterprises have not been consistent in the declaration of both profits and dividends. These companies included Lesotho Flour Mills, Econet Telecom and Avani Lesotho among others.
Afterwards, the government dragged its feet after Lesotho Flour Mills applied for a contract extension.
The government eventually handed Seaboard Overseas and Trading, which operates the Lesotho Flour Mills, a short lifeline after it awarded the company a one-year contract extension with effect from 1 January 2019.
Seaboard’s previous contract ended in December last year.
Last year, the government also roped in United Kingdom-based consultancy firm Unicon Ltd, to spearhead its state-owned enterprise (SOE) reform initiative.
The initiative was said to be part of a wider five-year Public Financial Management Reforms project which is financially supported by the World Bank, European Union and African Development Bank (AfDB).
Set to run from 2014 to 2019, the project was aimed at reviewing the legal framework for various state-owned enterprises and also recommend the measures the government should take performing entities.
Some of the key objectives of the project is to improve SOE oversight and transparency through regular monitoring of financial and operational SOE performance and fiscal implications from transfers, taxes, dividends, royalties, subsidies, loans and guarantee.
The government said the project would also develop a national SOE policy and programme, outlining government objectives for state ownership and targets by sector or company.
The project was announced at a time when there was increased government displeasure over the poor performance and failure to declare dividends by some state-owned enterprises.
The government has interests in 30 enterprises consisting of 14 state-owned enterprises and 16 state-invested enterprises. Some of the state-owned enterprises include regulatory institutions, commercial and policy driving institutions.