Source: Zesa top officials face chop – The Zimbabwe Independent February 2, 2018
GOVERNMENT has ordered a forensic audit into managerial, financial and labour matters at the debt-ridden Zimbabwe Electricity Power Supply Holdings (Zesa), including controversial energy tenders which were inflated by over US$500 million as exposed by the Zimbabwe Independent.
Tinashe Kairiza/Elias Mambo
Officials at the parastatal revealed that heads are likely to roll at top levels after the audit, given the high number of shady deals, financial impropriety and issues pertaining to conflict of interest which have been rampant at the state-owned enterprise.
Energy minister Simon Khaya Moyo confirmed the audit this week, saying it will be comprehensive, as it will probe “all aspects” of the parastatal and involve all subsidiaries.
The forensic audit, Moyo said, would comb through the parastatal’s administrative, labour and financial records, after which “corrective” action would be taken.
“I can confirm the audit but I cannot say much at the moment. I think by now the Auditor-General (AG) has identified the company which will carry out the forensic audit,” Moyo said.
“We are looking at administrative, financial and labour issues among other matters…We want to know everything that has been happening. As you know, Zesa has many subsidiaries. The audit will cover all the subsidiaries. It will also look at the energy deals and everything else that has been going on there. Once it is done, we will take corrective action where action needs to be taken.”
Subsidiaries under Zesa include the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), Zimbabwe Power Company (ZPC), Powertell Communications and Zesa Enterprises.
Auditor-General Mildred Chiri was not available for comment. Her secretary said she was away and would be in the office on Monday.
However, sources who spoke to the Independent on condition of anonymity, said Chiri will select a suitable company to undertake the forensic audit from five short-listed firms.
“These are KPMG, PricewaterhouseCoopers (PwC), AMG Global Chartered Accountants Zimbabwe, PNA Chartered Accountants and Baker Tilly,” an official said.
Moyo said he had read a lot about the scandals at Zesa, but cannot take action without concrete information.
“I always want to start on a new slate, that’s why I have called for an audit. But, of course, we have read so much about what has been going on there, so we want an audit which will give us an accurate picture before taking corrective action,” he said.
The Independent has over the years revealed that the country’s controversial power generation projects have been inflated by more than US$500 million, raising suspicion that Zesa managers and senior government officials could have corruptly benefitted through price escalations.
Zesa is rocked by massive tender scandals, in which government has entrusted the country’s critical multi-billion-dollar energy projects to dodgy businesspeople who have criminal records, ranging from fraud to drug trafficking. Zimbabwe is planning to construct three solar plants, each generating 100 megawatts.
The initial cost, as of 2014, was US$183 million for each of the projects, bringing the total cost to US$549 million.
The solar tenders were won by China Jiangxi Corporation (CJC), ZTE Corporation and Intratrek Zimbabwe (Pvt) Ltd owned by Harare businessman Wicknell Chivayo.
Soon after winning the tenders, the companies demanded price escalations, resulting in the projects being pegged at US$240 million each, bringing the total costs to US$720 million. This meant a variation of US$171 million from the initial costs.
Government officials told the Independent in 2016 the country initially planned to have one 100-megawatt project, which was won by CJC but, for unexplained reasons, Intratrek and ZTE, which had lost in the initial bids, were also awarded tenders.
Zimbabwe is also working on the Kariba South Power Expansion project and the Gairezi Hydro Project. Former Energy minister Elton Mangoma, who negotiated the deals a few years ago, revealed the projects’ costs were also heavily inflated.
The Gairezi Project was awarded to a consortium led by Chivayo’s Intratek. Mangoma said the Gairezi project cost had shot up to US$248 million, up from the initial US$90 million. This created a variance of US$158 million.
The Kariba South Power Extension project, which was officially commissioned by former president Robert Mugabe in September 2014, was initially pegged at US$355 million, but shot up to US$533 million. The cost escalation was US$178 million.
The inflated costs totalled US$507 million.
The prices were escalated despite some experts in ZPC arguing it would make better economic sense to fund reputable alternatives, including the Hwange Thermal project which required US$400 million to produce an additional 300MW. The solar projects, at current cost, require US$720 million to generate 300MW, meaning ZPC could have saved US$320 million.
Last week, the Independent revealed that ZPC chairperson Stanley Kazhanje allegedly prepared the tender documents for Chivayo’s company without disclosing conflict of interest to the board through his firm, Terminal Engineers.
Chivayo’s company, Intratek was later awarded the US$200 million tender by the ZPC for the Gwanda Solar Power Project.
Chivayo, who was paid US$5 million upfront in murky circumstances and without a bank guarantee before commencement of the project, has not done any meaningful work on the project despite being paid in advance.
Apart from being engulfed in tender scandals surrounding the controversial energy deals, Zesa is also hamstrung by a giant debt overhang estimated at US$1 billion in arrears owed to international and domestic suppliers.
South African power utility Eskom has persistently threatened to switch off its northern neighbour for non-payment of electricity imports through Zesa.
In 2017, the state enterprise paid US$12 million to Eskom to avoid being switched off after breaching terms of payment agreed to in July.
The 2016 Zesa annual report shows that the parastatal had 3 liabilities amounting to US$130,9 million.