Dodgy deals inflated $507m

Source: Dodgy deals inflated $507m – The Zimbabwe Independent May 20, 2016

ZIMBABWE’s controversial power generation projects have been inflated by more than US$500 million raising suspicion that Zimbabwe Electricity Supply Authority (Zesa) managers and senior government officials could have corruptly benefitted through price escalations, the Zimbabwe Independent has learnt.

Elias Mambo/Herbert Moyo

Official sources say the price escalations and government’s inability or unwillingness to investigate the corrupt deals suggest ministers supervising the tenders and contracts, working with the State Procurement Board, are deeply involved in the attendant costly corruption.

Zesa is rocked by a massive tender scandals in which government has entrusted the country’s critical multi-billion-dollar energy projects to dodgy businessmen 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 this week the country initially planned to have one, 100MW project, which was won by CJC, but for unexplained reasons, Intratrek and ZTE, who 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 back this week revealed the projects costs were also heavily inflated.

Mangoma said the inflation of costs was clearly done to cater for bribery and kickbacks for corrupt officials.

The Gairezi Project was awarded to a consortium led by Chivhayo’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 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 in total amount to US$507 million.

Mangoma told Independent this week that the terms for the projects had also been altered, massively prejudicing Zesa.

“Kariba South was initially pegged at US$355 million of which Zimbabwe Power Company was supposed to fund between US$55 million to US$60 million and the balance was to be paid from a Chinese Exim bank loan,” Mangoma said. “The cost included a 10% contingency plan, so there is no way the cost could escalate to more than US$500 million within a three year period.

“I have no doubt that the escalation of the costs is meant to cater for the corrupt government officials because feasibility studies were done and there is absolutely no reason for the costs to soar.”

Mangoma added: “The Gairezi Hydro Power Station was initially pegged at US$90 million and now we hear the cost has risen to US$248 million. So basically it means the costs of the projects have ballooned to astronomical figures in the last three years”.

The costs for the solar projects were adjusted in 2014 when former Energy minister Dzikamai Mavhaire was at the helm of the ministry. The prices were escalated despite some experts in ZPC arguing it would make more economic sense to fund reputable alternatives, including the Hwange Thermal project which required US$400 million to produce an additional 300 megawatts.

The solar projects at current costs require US$720 million to generate 300MW, meaning ZPC could have saved US$320 million.

A Ministry of Energy official said: “Solar will require much more money to produce and there may well be a lot more unseen additional costs.

“Also important to note is the fact that the electricity will only be produced during daytime. There are fears that the scheme is simply being pushed through to create another feeding trough for politically-connected individuals to siphon more money from an already cash-strapped government.”

Former Finance minister Tendai Biti, who also took part in the negotiations for the projects, previously raised a red flag over the Kariba South project, citing the comparative costs of a similar project being done in Zambia.

“Zambia is expanding its power-generation capacity at Kariba Dam, which it shares with Zimbabwe, at a cost of US$278 million,” he said. Biti also said that although more work needed to be done on the Zimbabwean side of the dam than on the Zambian side, the cost should not have escalated that much.

“I went to China to negotiate … We want the project, but not corruption. There is no justification for the increased cost,” he said.

However, Energy minister Samuel Undenge said the costs were arrived at by the technical team which is responsible for assessing the projects.

“I have repeatedly said that ministers are given reports from those doing the technical issues in the ministry. We have engineers and financial directors who go through these things and submit to us. Our role is on policy implementation only,” he said.