How Audrin Mathe and the Swapo comrades bankrupted New Era
New Era Publication Corporation is insolvent and faces looming bankruptcy as a result of the increase in executive salaries and perks, as well as apparent financial mismanagement at the state-owned company, the Anti-Corruption Commission has warned.
Shortly after his appointment as the CEO of New Era Publications Corporation, Dr Audrin Mathe pledged that within three years NEPC would no longer need public funds. The evidence shows though that after five years with him at the head of the parastatal, NEPC is now in desperate need of yet another state bailout to stave off its creditors.
In August 2013, six months after his appointment, Mathe had boasted to the press that “NEPC could be a model that would end the government dependency syndrome of state-owned enterprises as the company will not need government subsidies by 2017.”
Latest update: Mathe fears arrest after New Era files fraud, theft charges
Yet, in his report tabled in parliament this week, Namibia’s Auditor General indicated in no uncertain terms that NEPC — which Mathe recently left when his five-year contract was not renewed — had accumulated losses of around N$42.5 million during his tenure and was in fact insolvent.
By March 2017 NEPC’s liabilities exceeded its assets by over N$21 million.
Auditor General Junius Kandjeke also reported this week that New Era’s financial records do not provide an accurate account of its true financial status. He therefore gave an adverse audit opinion, which means he found NEPC’s financial statements to misrepresent and misstate its true financial status and its transactions.
The AG identified a number of problems:
- Unexplained adjustments of N$13,886,570
- Bad debts of N$10,234,155 written off without approval
- Penalties paid were overstated by N$4,336,887
- Receiver of Revenue payables overstated by N$2,458,324
- Interest paid understated by N$1,521,902
- Difference of N$915,062 between asset register and general ledger
- Purchases understated in cash flow statement by N$121,244.
“Attention is drawn to the fact that at 31 March 2017, the corporation had accumulated losses of N$42,459,497 and that the corporation’s total liabilities exceed its assets by N$21,096,770,” the AG reported.
This means New Era is practically insolvent and on the verge of bankruptcy. Kandjeke noted that despite all evidence to the contrary, “NEPC’s annual financial statements have been prepared on the basis of accounting policies applicable to a going concern,” — in other words, as if NEPC was still solvent.
In view of NEPC’s mountain of debt, he advised that a “subordination agreement… will remain in force for so long as it takes to restore solvency of the corporation.” Such agreements rank a company’s collateralised debts in order of priority to repay creditors in the event of foreclosure or bankruptcy.
The AG said NEPC’s statement for the year ended March 2017 “presumes that funds will be available to finance future operations” and that it can meet its debt obligations in the ordinary course of business, but in his view that would depend on the ability of the directors to secure additional (state) funding.
The ACC takes an interest
ACC director general Paulus Noa has also confirmed that New Era’s highly paid finance managers had by December 2018 still not submitted financial statements for the fiscal year ended in March.
They have also repeatedly been found to be in breach of statutory tax reporting requirements, but there is no record of any disciplinary actions against the accountable managers.
Records reviewed by investigators point to a rise of over 50 percent in NEPC’s wage bill, as well as executive perks, a previously unexplained increase of more than 250 percent in directors’ remuneration, and the purchase of an expensive luxury vehicle for the CEO — among other questionable expenses.
Following a year-long investigation into the affairs of NEPC, Noa wrote to the chairman of the board of directors, Esau Mbako, on 5 December to draw his attention to their findings.
Noa noted that New Era’s “liabilities are significantly higher than the income (even if government subsidy is included) by about 56%. Despite this, in 2016 the board approved changes to the salary grading structure of NEPC staff and the executive remuneration, resulting in an increase of 56% in the wage bill, and an apparent increase of 253% in the remuneration of the director[s].”
Board minutes from 2015 and 2016 show that the decision to raise the salaries of top executives from N$600,000 to N$800,000 per year was done at a time when NEPC was already sustaining heavy losses and deep in debt.
The ACC report shows, for example, that in 2015 NEPC had an income of N$33.8 million while its expenses ran to N$66.6 million. By March 2017, NEPC had raised N$35.5 million, including state subsidy, but its expenses had ballooned to N$76.4 million.
By December 2018, the ACC also concluded that NEPC faces “looming insolvency”. Additionally, despite the high level of executive pay, bonuses and incentives and repeated promises to comply with the law, NEPC’s books were still in a mess.
‘Fraud not ruled out’
In a report entitled ‘Fraud not ruled out at NEPC’, New Era reported in July 2016 that the parliamentary standing committee on public standing accounts (SCOPA) wanted documentation to explain differences amounting to N$4.8 million in NEPC’s payroll system compared to the general ledger payroll.
The audit of bank transactions showed that bank reconciliations were not performed nor reviewed and that a difference of N$1,142,176 was noted for the Bank Windhoek current account. Also, “no bank reconciliation was provided for audit purposes.” SCOPA also wanted documentation for N$2 million that was allegedly paid to suppliers, as well as supporting documents for property, plant and equipment additions amounting to N$3.3 million.
NEPC managers in 2017, as before, promised that they would comply, but instead of providing answers asked parliament for more public funds to help trace the money they were previously allocated, but were apparently struggling to track.
When asked in July 2016 by SCOPA chairman Mike Kavekotora, in light of the poor situation that NEPC had fallen into on his watch, whether he would have done anything differently if it were his own company, Mathe famously said: “If it was my own institution I would not have let it slump to where it is now.”
He also told parliament that NEPC was “underfunded and understaffed”, yet around that time the board approved hefty salary increases for executives and the purchase of a luxury Range Rover for the CEO.
The Namibian reported in March 2016 on a statement released by the Presidency to the effect that the CEO of “loss-making New Era” earns as much as President Hage Geingob: N$1.7 million per year.
The report didn’t mention entertainment, fuel, housing, phone and travel allowances, bonuses, etc, but noted that in response Mathe had written on Facebook, “LOL. I wish that was true in my case. I would love that much.” The Namibian estimated Mathe’s basic salary at around N$1,1 million.
PG declines to prosecute Mathe
The ACC also investigated the decision of the NEPC board to purchase a top-of-the-line Range Rover for the CEO at a time when New Era was in serious financial difficulties.
According to NEPC minutes, the board chaired by Tarah Shaanika agreed that the CEO was entitled to a new luxury car every five years, and that the vehicle should be “transferred” to the CEO after three years.
Despite having no company vehicles for reporters, NEPC purchased the N$1.6 million car for its CEO but then declined to publish the details of a fatal car crash that occurred over the Easter weekend in April 2017, when Mathe, according to police reports, drove into a disabled woman, Monica Musova near Mururani on the way to Windhoek from Rundu.
Nampa reported that “Mpasi Monica Musova, 21, died instantly after she was hit by a Range Rover on the Rundu main road, some 70km east of Mururani at the Makena village on Monday at about 10h44.”
But in its weekend crime report, New Era declined to name the deceased woman, or the person in the vehicle that was involved in the crash, or that a homicide case had been opened involving the CEO. It said only that “other deaths occurred in Walvis Bay, Henties Bay, Rehoboth and Rundu.”
The ACC found that despite no inquest having taken place to determine the circumstances of Monica Musova’s death, the prosecutor general’s office opted not to prosecute Mathe, although the reasons are as yet unclear.
The ACC did not confirm whether routine accident investigation procedures were followed by the police officer/s who were at the scene of the crash, including the breathalyzer test and taking of blood samples from the driver.
Executive pay and perks
The ACC confirmed though that the board approved purchase of the SUV Range Rover for N$1.6 million through an FNB loan, but ACC investigators failed to verify whether lawful public procurement procedures were followed.
The decision was made at a time when the board also approved the raise in executive pay from N$600,000 to N$800,000 per year.
Over the same period, NEPC board directors’ allowances reportedly shot up from a total N$283,420 in 2015 to N$645,908 in 2016, the ACC noted, but it appears from the AG’s latest audit that this may have been a ‘misstatement’ as “an amount of N$369,064 should have been moved to travelling” — although it is not immediately clear who undertook such extensive travels on behalf of NEPC and for what purpose.
Board minutes of 4 March 2016 show that at the time, when these decisions were being made NEPC could not meet its debt obligations, nor pay its taxes. Moreover, the company was subject to penalties of N$2 million per month by the Receiver of Revenue due to tax non-compliance.
Yet, as if oblivious to the predicament the company was in, the board agreed with the company executives to hire Vision Consultant at a cost of N$474,830 to effect the raise in executive pay and benefits.
Public Enterprises Minister Leon Jooste this week threatened to lay criminal charges against board members who mismanage and are reckless with public funds, but we will have to wait and see if there is any bite to his bark.
Mathe, who until recently was the chairperson of the state-owned enterprises CEO Forum, last week declined to take questions when contacted by phone and referred all queries to the NEPC board. Unfortunately chairperson Mbako did not yet respond to an SMS request for comment.
* Disclosure: The author worked as copy editor at NEPC between May 2015 and December 2017 when he was charged with bringing the company into disrepute and sacked for a tweet calling on the editor to publish the AG’s 2017 report into the company’s financial records.