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Wednesday, May 29, 2024

Government plugs financial sector loopholes

Story by Owen Mandovha, Business Reporter

A review of the Value for Money Exercise introduced by the Treasury to avoid overpricing of goods and services in the public procurement systems shows that companies have been defrauding Government of hundreds of billions of dollars in unethical business practices, while also destabilising the value of the local currency.

A systematic pattern of fraud by unscrupulous contracting companies was rife in the public procurement system whereby these would either invoice government for goods and services not delivered or use extortionate exchange rates when invoicing the government for work done or services offered.

In turn, payments received from the government would ordinarily be channelled towards the black market, thereby unsettling the foreign exchange market and triggering a wave of price increases. 

Over the past couple of years, Treasury either flagged or blacklisted several contractors which culminated in the setting up of a Value for Money Unit to streamline pricing at par with obtaining market conditions while plugging loopholes in the public procurement system.

In a statement released by Treasury this Friday, the government has saved a whopping ZW$500 billion since the establishment of the Value for Money Unit from mainstreaming due diligence processes across all Government departments, agencies and Parastatals.

In a recent interview following the launch of the Financial Reporting Manual, Permanent Secretary in the Ministry of Finance and Economic Development, Mr George Guvamatanga shed light on how these companies have for long been not only sabotaging the economy but also fermenting the illegal parallel market activities responsible for price instability.

“There is a malpractice called air supply, whereby companies are paid but there won’t be any delivery of goods or services. In some instances, goods and services are priced way above the obtaining market prices and this is what has been driving illegal foreign currency activities. As Treasury, we have come with measures to deal with these unscrupulous businesses which are stealing from Government and causing economic mayhem,” he said.

Of late, the country has witnessed a spate of unwarranted price increases due to the runaway exchange rate on the parallel market by shadowy economic agents hell-bent on destabilising the economy.

Government has in turn come up with various measures to contain these market practices including the suspension of duty on a list of 12 basic commodities to neutralise the price hikes by big businesses which have been complicit in causing the mayhem in the economy.

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