EcoCash probe delays Cassava financials

CASSAVA Smartech Zimbabwe Limited (CSZL) has announced a delay in publishing its financial results for the year ended February 29, 2020 due to investigations into its subsidiary, EcoCash (Private) Limited.

The investigations come as government has accused EcoCash, the largest mobile money transfer service provider in the country with over 10 million subscribers, of fuelling the parallel foreign currency market.

The authorities allege that during the period January 1 to June 30, 2020, EcoCash created ghost individual subscribers, merchant billers and agents, crediting them with huge amounts of money to be distributed to runners through trust accounts.

It is further alleged that this fictitious money was used to buy foreign currency on the parallel forex market.

“Cassava Smartech Zimbabwe Limited (the “company”) wishes to advise our shareholders and the investing public of an unavoidable delay in the publication of our audited financial statements for the financial year ended 29 February 2020,” CSZL said in a statement dated July 29, 2020.

“The delay has been caused by the ongoing regulatory review on the operations of EcoCash (Private) Limited, a key subsidiary of the company. Publication or any further updates will be made on or before September 30, 2020. The company regrets any inconvenience this may cause to our valued shareholders, the investing public and other stakeholders.”

Using the allegations of impropriety against EcoCash, the authorities sought to get hold of data of the over 11 million subscribers of Econet Wireless through a warrant of search and seizure of the firm’s premises.

However, Econet challenged the warrant at the High Court and was granted interim relief on July 23, 2020 for a stay of execution of the search and seizure until its “lawfulness” could be determined.

While investors will have to wait for CSZL’s financial results for the year ended February 29, 2020, in a trading update dated May 29, the company reported that it had negatively been affected by the COVID-19 restrictions.

“The lockdown severely affected our business partners across all industry sectors with the majority of industry having shut down during the initial lockdown period. The remaining businesses which were classified as essential services operated for reduced hours in compliance with the lockdown regulations,” CSZL said.

“This had an impact on our business which is largely reliant on our partners. To the extent that the partners were closed, our volumes and values were affected accordingly resulting in volumes decreasing by an average of 40% across the group during the lockdown period, subsequently recovering as the lockdown rules eased.”

The company said it would continue to align its business model to this changing trend.