ippo Valley Estates Limited’s new strategic thrust is to strengthen corporate governance, financial controls and oversight at all levels within the organisation including subsidiaries, chairman Dan Marokane told the company’s annual general meeting yesterday.
Mr Marokane’s remarks come at a time the company is smarting from a financial reporting scandal that resulted in the suspension of its shares from trading on the Zimbabwe Stock Exchange and those of its parent company Tongaat Hulett on the Johannesburg Stock Exchange.
The scandal, which implicated former Hippo executives John Chibwe and Sydney Mutsambiwa, leading to their separation with the company was first unearthed after a forensic audit at parent company Tongaat Hulett.
Results of the six-month forensic probe into Tongaat’s finances carried out by auditors PricewaterhouseCoopers (PwC), found that profits and assets had been overstated in earnings reports including those of Hippo Valley.
The PwC Investigation identified that certain agreements in Zimbabwe which, in substance, were financing arrangements, were structured as sales of significant sugar stocks, and accounted for as sales every six months, at financial half year and year-end. Furthermore, even though at least part of the sugar stocks comprised raw sugar, these ‘sales’ were accounted for as sales of refined sugar, and priced accordingly. As a result, revenue pertaining to sugar sales was overstated.
Mr Marokane, however, told shareholders that going forward plans are being put in place not only to clean the company of past irregularities but also to change the company’s accounting policies and practices.
“The new strategic thrust, the board together with the management team is progressing well in developing a robust remedial plan in response to the forensic report,” he said.
Mr Marokane said the new measures being put in place are “directed at strengthening corporate governance, financial controls and oversight at all levels within the organisation including subsidiaries”.
This will also include nominating new members to the board to address the balance between independent executive and non-executive members.
The process will also involve putting in place the relevant board committees in line with ZSE’s new listing requirements.
Mr Marokane said management had conducted a comprehensive internal review process covering the appropriateness of the selected accounting policies, the application thereof and an assessment of the key assumptions used to prepare the financial statements. This resulted in the reinstatement of the 2018 financial statements,” said Mr Marokane.
On the suspension of trading on the ZSE, Mr Marokane said the decision was made because the forensic audit was taking too long and given the uncertainties as to how the findings from the review might impact on the Company’s financials, the board deemed it appropriate to complete this investigation before publishing the financial results.
“It was therefore considered to be in the best interest of shareholders and investing public to temporarily suspend the trading of the company’s shares on the ZSE until after the completion of the investigations.” Hippo’s suspension from trading on the ZSE has since been lifted after publication of the delayed 2019 financial statements.
“The internal review process was performed in consultation with the company’s external auditors and has necessitated a number of amendments to the major accounting policies and practices,” the Hippo chairman said.
He added that in exercises the appropriate level of governance and oversight the audit committee of the board approved these accounting policies as being in accordance to the International Financial Reporting Standards and in line with industry practices.
Meanwhile, shareholders voted in favour of all resolutions which included the approval of financial statements, election of directors and fixing the remuneration of auditors among others. Despite auditors Deloitte and Touché having been auditors of the questioned financial statements, the Hippo board resolved to keep them “until the conclusion of the next annual general meeting” to make sure the next set of results are not delayed as well.
A member of the board Simon Harvey said moving away from Deloitte at the moment might mean the share will have to be suspended again “as we go through the process and that’s something the board is not comfortable about”.
“We need to make sure we have everything in place to have these results published on time,” he said.