A case of missing donor funds at ZNFU

By Charles Mafa

Why isn't there more success to show for the billions of donor funds being poured into African countries? And why is it that all too often the aid doesn't get through to the very people it is supposed to help? There can be no better example of why, than the case of the embezzlement of K34 million at the Zambia National Farmers Union (ZNFU).

There are several such examples: More than US$2 million was stolen from the health ministry by top government officials in 2009, and another case involved the now defunct Zambia National Aids Network (ZNAN) who misused money from the Global Fund. 

The problem is not so much about the stolen donor funds but how the country’s criminal and justice system deals with those who commit the abhorrent acts, the majority of whom have gotten away with it. The response by the donors has always been to cut their support and in most cases, the burden is borne by the poor who have to survive with little or no government support.   

The uncovering of corruption does not only reflect badly on ZNFU alone but on the country as a whole. But typical of diplomats, the Finland Ambassador to Zambia was cautious when responding to a question from a journalist. “I wouldn’t say this will directly influence our (support to) other programmes… but it will certainly raise questions about the situation of governance… said Ambassador, Timo Olkkonen. “… there is a damage risk to the reputation of our cooperation, which unfortunately is unavoidable.” 

After the preliminary report was released in January this year, ZNFU top officials engaged in a deliberate attempt to mislead the public by dismissing the findings of the audit carried out by EMM Corporate Partners. But KPMG Finland, an accounting firm brought in to evaluate the disputed audit, found nothing “material to question” the report.

The decision by donors – Sweden, Finland and We Effect – to pull out funding from the union will affect more than 78,000 members – the majority of whom are small-scale farmers. Under the agreement, the donors had earmarked US 27.3 million for the period 2014 – 2017, and so far they have disbursed about K 78 million (US$ 7,800), of which US$ 900,000 came from the union’s own resources. 

The financial scandal adds another dimension to the union’s simmering internal strife over positions and money. The most recent such squabble being between the union and Livestock Services Cooperative Society (LSCS) concerning shares in the Zambia National Commercial Bank (ZANACO) bought from Rabo Financial Institution of the Netherlands. In 2008, government sold 49% shares to Rabo, who in turn offered 4% to ZNFU. The union which had no money at the time got a US$700,000 loan from LSCS. The two then entered into an agreement to form Lizara Investment to manage the shares. 

It was agreed at the time that ZNFU would settle the loan using dividends from the bank which have grown to more than US$ 9 million, over a ten-year period. But the loan plus interest was paid within the first five years. The union wants Lizara to close in order to have control the shares, a move which is at odds with LSCS. Rabo maintains it can only transfer the Zanaco shares from Lizara to ZNFU if there is common agreement by both parties. The matter is currently in court. 

The dust that was raised in the fog of the war between ZNFU and LSCS, tended to obscure the real issue at hand – embezzlement of donor funds. At the centre of the missing funds is Ndambo who is alleged to have embezzled millions of kwachas, despite being on a fat salary of $15,000 per month. He is accused of stealing from European aid agencies and the taxpayers they represent, and ultimately, robbing poor and marginalised farmers in Zambia who would have benefited from the funds. The theft revealed by the special audit requested by donors show numerous activities which border on fraud within the farmers’ organisation. The audit report revealed that ZNFU “paid out millions of Kwachas to Ndambo in avoidable contractual losses with him or parties related to him.” 

The audit further revealed over K22.8 million in “questionable” spending that “should be recovered or refunded… by ZNFU and its executive management, in particular, its ED [Ndambo]”. These figures are said to be much higher when other budgetary provisions are brought in.

Amongst the biggest audit queries are payments in excess of K2 million made to Jambo Vehicle Tracking Limited, a company owned by Ndambo and his wife. Not only were these costs not covered in the ZNFU budget, but also the auditors deemed them a conflict of interest between Ndambo and ZNFU as well as “an abuse of authority and donor funds, given that all ZNFU vehicles were already insured”.

Ndambo and other senior officers were found to be making financial withdrawals on donor funds for which there was no evidence of recovery. The audit report shows that unrecovered loan and advance awards and excess payments to Ndambo (due to the foreign currency denomination of his contract) were estimated at more than K6.9 million net in taxes alone. Payroll records show no deductions on Ndambo’s pay for almost all but one of the advances obtained during the period covered by the audit (January 2014 to August 2015.

The report found that Ndambo had accumulated in excess of K 7.7 million through unexplained leave pay, excessive and unrecovered advances, extreme billings on motor vehicle tracking costs, among other irregularities. The report also questioned how more than K 22.1 million of aid money was used by ZNFU. 

After the draft report was released in March 2016, Ndambo wrote a letter to David Wiking, the head of Development Cooperation at the Swedish Embassy, claiming the report is “reprehensive and the insinuations are odious”. In addition, he claimed the report still “contains inaccurate elements that were not substantiated with the appropriate personnel” which “illustrate a lack of objectivity”. He further claimed that the report was being used “as a tool to discredit the union and management.” 

However, at the request of the ZNFU Council, the Zambia Institute of Chartered Accountants (ZICA) reviewed the entire audit process and the findings of the preliminary audit report. ZICA completed the review on May 6, declaring that auditor “complied with all relevant standards and that there is no evidence of any professional misconduct or malpractice”. 

It is an outcome that did not please the union, which has tried to discredit the work of the auditors. ZNFU had previously accused EMM of being “totally ignorant of the joint financing agreement” between ZNFU and the donors. The whole circus throws into question the effectiveness of boards in Zambian institutions. The board chose to side with management, leaving the donors to pursue the matter on their own.   

Management verbally attacked the auditors in areas relating to their data collection, scrutiny and reporting. The union also threatened legal action against the audit, acts of intimidation that the audit “considered both reportable and at odds with Sections 30 and 38 of the Accountants’ Act 2008, given the statutory, protected and privileged nature of audit assignments”.  

But what has Lizara and its Zanaco shares got to do with the ZNFU audit report? Ndambo’s sympathisers claim he is paying the price for standing in the way of some powerful members of the union. It is alleged that the “dogfight” in ZNFU is a battle for control of shares in Zanaco rather than the stolen donor money. It is further claimed Guy Robinson, who was one of the directors in Lizara was forced to resign from the ZNFU board.  

Further claims are that former ZNFU accountant, Pride Mwelwa, was the “mole” that was used against Ndambo. It is a claim that could not be verified as Mwelwa’s mobile phone was constantly off. He, along with Mwaka Kayula is in court over theft of more than K 190,000 from the union meant for poor farmers in Luapula. They both pleaded not guilty.

Ndambo is not the only high profile official at ZNFU with his head in the trough. Others are Dr. Nguleka, who is said to have received excessive payments and undeclared Pay-As-You-Earn on her allowance of K387, 000. Former president, Jarvis Zimba, is another one. He has an outstanding unconstitutional loan of more than K 2.6 million. 

The audit further found instances of questionable involvement in the organisation, especially by the current board and board presidents. An example of which are Ndambo and presidents’ loans (which are not a constitutional benefit but were approved by the union president). Pre-contract costs for the vehicle tracker service provider were also approved by the former union president. Could the involvement of some of the board members be the reason why Dr. Nguleka and others did not act hastily when the matter first surfaced?

Other questions remain unanswered such as who broke-into the finance office ZNFU offices and got away with important documents in December last year. Workers were on a break for Christmas at the time, and while the matter was reported to the police. To this day no one has been arrested in connection with the break in or the missing documents or funds. 

After the conclusion of the protracted audit process, donors demanded action and a refund of their money. The move prompted the Drug Enforcement Commission (DEC) who have been investigating the matter to arrest two top officials – ZNFU president, Dr. Evelyn Nguleka and Executive Director, Ndambo Ndambo. They are jointly charged “for obtaining money by false pretences and money laundering contrary to the Laws of Zambia”. 

Dr. Nguleka paid the ultimate price by resigning her two positions in the union and at the World Farmers Organisation (where she was president) after she was named in the audit as having been one of the beneficiaries. For Ndambo, it had to take the board to suspend him from his position. He is not a small man. His job at ZNFU has brought him firm and influence evident in the 9-hole golf course and a tennis court he built on his property in Chongwe. He wields much power and authority over many people, including the police. Two Swedish journalists, Sophia Djiobaridis, Ake Wehrling and this writer tested his influence when they were arrested when they attempted to interview him at his flamboyant residence? They spent two nights at Lusaka Central police on trumped-up charges of criminal trespass for simply trying to interview Ndambo to give his side of the story outside his farm. The case was however, discontinued by the Director of Public Prosecution who entered a nolle prosequi.

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