Minister infuriates Indians over deal

via Minister infuriates Indians over deal – The Zimbabwe Independent April 1, 2016

A ROW has erupted between Harare and New Dehli after Mines minister Walter Chidhakwa stunned Indian diplomats, state-owned company officials from the vast South Asian economic powerhouse as well as Hwange Colliery Company Limited (HCCL) executives when he claimed last month the US$12 million mining equipment deal between the two countries was corrupt.

By Bernard Mpofu

Business executives who attended a meeting on February 15 between representatives of India’s Bharat Earth Movers Limited, now BEML Limited, a public sector enterprise run by that country’s Ministry of Defence, Indian diplomats and Mines ministry officials at Chidhakwa’s offices in Harare said the minister rocked the boat when he accused those involved in the deal of demanding and taking bribes.

Executives told the Zimbabwe Independent this week BEML and Indian officials were shocked and angered by the minister’s claims of corruption when in fact HCCL has defaulted in payments to India’s Exim Bank which financed the deal.

Chidhakwa, executives said, told the meeting US$5 million had been paid in bribes, although he did not produce evidence to back his serious allegations.

“The minister said the deal was plagued by corruption. He said at least US$5 million was paid in kickbacks and bribes,” one executive who attended the meeting said this week.

“The Indians were shocked that a minister could make such serious allegations of corruption without evidence. They are now asking ‘if the claims are true, what has he done about them then?’. They were also alarmed the minister seemed to be buying into excuses by HCCL management who are now blaming the Indian equipment for their failures to deliver,” the executive said.

“On HCCL managers blaming the equipment for failing to increase production, meet their targets and rescue the company, BEML and Indian diplomats think this is a classic case of a bad workman blaming his tools.”

Chidhakwa could not be reached for comment as his phone went unanswered. Questions emailed to BEML and a follow up sent yesterday were not responded to. HCCL managing director Thomas Makore could also not be reached for comment.

Last June HCCL commissioned the equipment worth US$31 million that was acquired from Belarus firm, BELAZ and BEML under vendor-financed facilities. PTA funded the US$18,2 million purchase of equipment from BELAZ. India’s Exim Bank financed the balance for the purchase of equipment from BEML, a multi-technology company offering products for diverse economic sectors, including mining, steel production, energy, irrigation, aviation, construction and defence.

The Zimbabwe government, which controls HCCL’s 37% shareholding, then committed to grant more mining concessions to the company and acceded to its proposed US$88 million rights issue to help the coal-miner clean its balance sheet for its turnaround.

Since the equipment was delivered, there have numerous been media reports and denials that it was faulty. This has led to clashes between BEML and HCCL officials, a dispute which has sucked in Indian diplomats and Chidhakwa.

After the February 15 meeting, there was a visit to Hwange to check whether or not the controversial equipment was working following claims by HCCL managers that it was having problems. HCCL has of late been voicing protests despite initial announcements through a joint statement with BEML disputing media reports the equipment was faulty.
This visit was also prompted by HCCL officials and deputy Mines minister Fred Moyo’s approach to the Indian embassy in Harare in January, expressing concerns over the quality of the equipment.

BEML, which has supplied equipment elsewhere in Africa, including to Tunisia and Malawi, insists the equipment works well and has provided spares in cases where there have been breakdowns even if HCCL has failed to take delivery on time.

On March 4, BEML wrote Chidhakwa a letter, copied to Moyo, Mines permanent secretary Francis Gudyanga, HCCL interim chairman Jemister Chininga, Makore, Indian ambassador to Zimbabwe Surinder K Dutta, Exim Bank of India general manager Harsha Bangari, Export Credit Guarantee Corporation (ECGC) of India general manager Sunil Joshi and Zimbabwean ambassador to India Maxwell Ranga, in the context of the February 15 meeting to dismiss his corruption allegations and clarify issues.

“BEML, being a state-run organisation, has absolute ethical practices for business,” the letter, written by BEML executive director AK Halder, says. “The local media statements stating that the value of the equipment is lower is absolutely baseless and far from the truth. We strongly refute such charges.

“In fact, BEML, as a gesture of goodwill and also considering the challenges of HCCL to pay advance payment to Exim Bank and to bear Exim Bank and ECGC charges, proactively requested Exim Bank waive off the advance payment and to fund HCCL for 100% of the contract value. BEML paid Exim Bank and ECGC charges on behalf of HCCL to support HCCL in this contract.”

Halder said in the letter negotiations for the equipment were concluded after serious deliberations involving two countries’ ministries of finance, hence thorough consultations and due diligence.

BEML said contrary to claims by HCCL the equipment had affected the company’s operations, there were problems at Hwange which include poor site conditions, especially underfoot conditions, gradient in the mines and inadequate manpower to attend day-to-day maintenance issues.

“Sir, we would like to reiterate that BEML has never fallen back in performing its contractual obligations … Sir, as explained to you during our discussions, BEML is committed to support HCCL in its efforts to improve the coal production. It is observed that equipment were available for operations at an average 80% of the time, HCCL could not utilise the available hours fully on account of shortage of fuel, explosives, lubricants and hydraulic oils,” Halder said.

“Thus the loss of production faced by Hwange Colliery is purely on account of non-utilisation of available equipment for production due to HCCL’s internal problems and definitely not due to malfunction of equipment.

“During the interaction, it was informed that HCCL has defaulted in payment to Exim Bank and has expressed concern about local media reports regarding performance of BEML equipment.”

Halder said apart from poor site conditions and mines gradient, HCCL is failing to use the equipment properly because of bad diesel handling methods, shortages of fuel, wrong application of the machines, lack of maintenance and inordinate delays in clearing spare parts air-freighted from India.

HCCL has been struggling due to poor management and a US$160 million legacy debt, apart from the bad operating local environment and other issues.