Zimbabwe’s acting auditor-general has raised a going concern warning over technically insolvent Air Zimbabwe‘s USD407.8 million losses, in particular, flagging a contingent liability of USD39 million arising from a claim relating to an ongoing legal dispute over the ownership of an A320-200s.
In her report for the financial year ending December 31, 2022 (2019 for Air Zimbabwe), Rheah Kujinga warned the state-owned airline’s total liabilities exceeded its assets by USD380.2 million, with continued losses in 2019 of USD15.3 million following on USD84.8 million in 2018. “These conditions create uncertainties which cast significant doubt on the company’s ability to continue as a going concern,” she noted. ch-aviation has reached out to Air Zimbabwe for comment.
This comes amid reports the flag carrier has plans to resume intercontinental flights to London Gatwickafter clearing IATA payment arrears, as cited by Minister of Transport and Infrastructural Development Felix Monha. The airline intends to serve the UK gateway 4x weekly using B767-300 equipment effective January 2024, according to a request for proposals (RFP) issued by the airline.
Kujinga said the USD39 million claim was lodged by Isle of Man-based special purpose vehicle (SPV) SouthJet One over an ownership dispute with the Zimbabwean carrier over Z-WPN (msn 1973), which remains stored at Johannesburg O.R. Tambo, according to ch-aviation fleets advanced data. Its sister ship, Z-WPM (msn 630), owned by China Sonangol International (Hong Kong International), through SPV SouthJet Two Ltd, has been stranded in Johannesburg since January 2014. According to Kujinga, no parking fees debt has been accumulating because invoices for servicing the debt were not being received from South African Airways Technical. As a result, the parking fees debt related to Z-WPM has been left out of the 2019 financial statements.
The two aircraft were part of a 2012 lease agreement between the then-Mugabe regime and China Sonangol International, facilitated through the two SPVs. However, the Zimbabwean government later asserted the two A320s were donated to them in 2013, a claim disputed by SouthJet. ch-aviation has asked the SPV’s Zimbabwean legal counsel to comment.
Kujinga noted that during the period under review, aircraft amounting to USD30.9 million at cost were recognised in the financial statements. She said impairment testing was not carried out on recognised aircraft despite indications of impairment. “Consequently, I was unable to satisfy myself that the aircraft have been recognised at values that do not exceed their recoverable amounts,” she said.
The acting auditor general also noted Air Zimbabwe’s management could not account for a USD92.4 million discrepancy in the 2019 and 2018 balance sheets; therefore, she could not determine their accuracy. She also observed that the airline did not perform any tax calculations for both income tax and deferred tax in 2019. Quarterly income tax returns were not filed, making it impossible to determine if there was a tax liability or tax losses to be recognised. Additionally, the cost of sales for the reviewed period included USD1.8 million in expenses without supporting documents.