The Chronicle

Companies’ financial reports condemned

Prosper Ndlovu Business Editor
THE Securities Exchange Commission of Zimbabwe (SECZ) roasted listed companies over poor presentation of financial reports saying this was stifling investment as potential funders would not be given adequate information.
In a presentation on the going concern during a KPMG business conference in Bulawayo on Friday, SECZ representative Gerald Dzangare said a majority of financial reports by companies in the country were not up to standard.

“There’s growing concern over late publication of financial reports. Those with financial year ending December are expected to publish results by March but you find them going beyond April.

“There’s now a rise in unaudited financial statements. That’s not good for financial business markets,” said Dzangare.
“Often the chairman’s statement and that of the accountant do not talk to each other. The two must talk to each other for investors to have confidence.

“Financials are the only tool that investors use to make investment decisions hence our reporting must be thorough. The integrity of our financial markets is enhanced through those reports.”

Some companies are yet to issue financial reports for half year ending June while some issued them three or four months later.
The financial markets watchdog urged businesses to be prudent in their reports and reported that at least nine firms were delisted from the Zimbabwe Stock Exchange between 2012 and 2013 due to related concerns.

The latest casualty was Interfin Bank, which was delisted a few weeks ago for failing to satisfy listing requirements.
Dzangare said the commission has observed most firms were suffering from “excessive unsustainable” borrowings yet chairpersons often become bullish about turnaround strategies despite evident losses.

He said critical financial disclosures were not being captured in most reports, leaving investors with more questions than answers.
“There’s a high level of borrowing but investors are left wondering why and what was the funding used for? It causes confusion because these would not be explained,” said Dzangare.

“There’s lack of a culture of profit warnings, which should be a classic example of integrity and honesty in the market. The media seems to be beating accountants in warnings of companies.”

He challenged company boards and executives to tighten their surveillance in the crafting of reports to enhance business confidence and attract investors.

Dzangare said the prevailing scenario left investors vulnerable to making poor decisions based on faulty reports.
He also said inadequate reports put auditors and accountants’ reputation at risk while forcing investors and analysts to look for other sources of information to corroborate given financial statements.

“The economic environment is bad but we must not compromise our reputation and creditability.
“It breaks our heart when companies fail because we regulate financial markets. If problems are there, state them.

“We shouldn’t lie to cover up. Lying isn’t sustainable because it’ill come out and then there’ll be panic in the market,” said Dzangare.
Governments across the globe cannot drive the economy without investors and honest reporting is one way of attracting investors, he added.

“Our reporting impacts directly on market activity, which affects investors. People sacrifice to invest hence our reporting should be in accordance with our stewardship role,” said Dzangare.

Participants drawn from different sectors of the economy, academics, captains of industry, regulators such as Zimra and professionals, attended the meeting.

They discussed among other issues, the taxation issues, new accounting technology, investment opportunities in the city, challenges and strategies of turning around businesses.