Performance, compliance: A case of AirZim

Air Zimbabwe does not have a mechanism to evaluate its own performance.

ACCORDING to the Institute of African Affairs, state enterprises and parastatals owe the Zimbabwe Revenue Authority (Zimra) over US$491 million, a clear and evident indicator of non-compliance as far as paying taxes is concerned. The Auditor-General’s Report 2018 identified challenges with Air Zimbabwe and several other parastatals albeit this article will narrow its focus on Air Zimbabwe.

Prevalent non-compliance issues entailed appointments and board failures, lack of an effective whistle-blowing mechanism, the role of human resource management and the restructuring of state owned enterprises.

A case of Air Zimbabwe

Zhou (2012) noted that Air Zimbabwe was poorly constituted in terms of autonomy, membership and capitalisation. It was also observed that there was lack of commitment and common vision within the leadership.

The ultimate result saw Air Zimbabwe operating under untenable operational frameworks of dilapidated infrastructure and equipment, huge debts, undercapitalisation and skills deficits. According to Muli (2012), despite massive budgetary allocations to Air Zimbabwe by the central bank through the Parastatal Financial Support programme, the airline continues to lose market share to competitor airlines, such as South African airlines which has four flights daily into Zimbabwe.

Emirates, Ethiopian and British airways are some of the airlines plying viable routes into Zimbabwe. 

Board performance evaluation

Air Zimbabwe does not have a mechanism to evaluate its own performance. Such a mechanism is critical in that the board will be able to see if it is really performing to its expectations and to appreciate the areas where there are gaps in its performance. Performance measurement enhances the effectiveness of the directors and thus further reduces the risk to the organisation. The obligation to have an annual formal evaluation ensures that the board takes time to evaluate its own performance. The primary purpose is to enhance not only the performance, effectiveness and contribution of each director, but also to improve the effectiveness of the board as a whole in fulfilling its role.

Publication of quarterly reports

According to a journal published at the University of international and business economics, Air Zimbabwe does not report meaningful  quarterly reports and this presents a challenge on disclosure and transparency.

The quarterly reports are the principal ways in which the directors are accountable to the shareholders. These aid in financial decisions by the shareholders, as they would be aware of the financial position of the company. This, therefore, brought about the need for the quarterly reports to be meaningful so that they are understandable to the shareholders, as they would want to make sense out of them.

A meaningful quarterly report in line with the would enhance confidence in the shareholders and prospective investors and hence the company would attract new investments.

Quarterly reports are an important tool for enhancing corporate governance. The publishing of quarterly reports is also a step towards achieving accountability and transparency.

According to the state and parastatals report published in 2017 through the ministry of finance, the following were findings regarding Air Zimbabwe.

Lease Agreements

The company leased three MA60 aircraft from the Government of Zimbabwe and no signed lease agreements were in place.

The lease arrangement was also not accounted for in the books of the company. Accordingly there could not be any ascertaining whether the aircraft were correctly accounted for as required by International Accounting Standard 17, Leases.

Valuation of property

The company’s property, aircraft and equipment was carried at US$41 191 875 in the statement of financial position. Management did not assess the company’s property, aircraft and equipment for impairment in accordance with the relevant International Accounting Standard 36, Impairment of Assets.

The airline was facing financial challenges characterised by losses and negative working capital position, which indicates potential impairment. Since impairment loss affects the determination of financial performance and the company financial position, it was difficult to determine whether adjustments might have been necessary in the financial statements.

Nyatanga holds a Bachelor’s degree in Banking and Investment Management. — +263 784 909 184 or [email protected].

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