News / National
Probe unearths Zesa rot
02 Jun 2019 at 08:15hrs | Views
SHOCKING revelations of deep-seated rot and corporate malfeasance have been unearthed at the Zimbabwe Electricity Supply Authority (Zesa), where millions of United States dollars were siphoned through elaborate schemes of overpayments, purchase of obsolete equipment, luxury vehicles and accessories for the parastatal's executives.
The findings, which are contained in a voluminous 6000-page report dated January 22 2019, compiled by PricewaterhouseCoopers (PwC), have been described by the newly appointed Minister of Energy and Power Development, Advocate Fortune Chasi, as "horrendous" and "frightening".
The probe was ordered by the Ministry of Energy and Power Development and the Office of the Auditor-General, Mrs Mildred Chiri, in April 2018.
The new political administration has moved in to clear the rot which happened during the old dispensation.
According to investigations, Zesa Holdings and its subsidiaries — Zesa Enterprises (Zent), Powertel, Zimbabwe Power Company (ZPC) and Zimbabwe Electricity Transmission and Distribution Company (ZETDC) — haemorrhaged millions of dollars through rampant corruption and gross mismanagement.
Questionable procurement
Most notably, investigators unearthed a curious pattern through which the parastatals' management disregarded procurement regulations and invariably overpaid for critical materials needed by Zesa.
Red flags were mainly raised over the questionable relationship between the power utility and Indian firm PME Power Solutions, which was roped-in in 2010 to supply transformers for various suburbs in Harare.
Zesa, through Zent, signed four contracts with PME on November 26 2010 for materials for Glen Norah, Epworth, Mufakose and Greystone substations.
While Zent was supposed to make a down payment of US$6,2 million to PME, it reportedly overpaid by US$3,2 million, particularly at a time when the unit was experiencing cash flow problems.
PwC concluded that "by making the advance payment to PME in excess of the amount due by US$3 207 680 and taking into consideration that Zent had been experiencing cash flow problems in the period under review, this further worsened Zent's cash flow position."
It was also alleged that Zent paid PME US$11 million without purchase orders, in breach of Section 45 (c) of the Public Finance Management Act and the Technology Transfer Agreement (TTA) between the two entities, which states that materials were to be supplied after a written request.
However, Zent managers who were interviewed by the PwC blamed Zesa's group chief executive officer, Engineer Joshua Chifamba, for the anomaly.
He, however, denied the charges.
But auditors accuse Eng Chifamba for authorising the overpayment using a facility from the CBZ.
They also recommend disciplinary action against officials culpable of the anomaly.
But there seemed to have been a suspicious relationship between Zesa and the Indian firm, which bled the parastatal through inflating the cost of supplied materials. A comparative survey of materials supplied by PME and five other companies — Industrial Production Solutions, Zhengzhou LP Industry, Wilee (Transwire) South Africa, Dash Petroleum and Energy Services (India) — indicated that prices of PME's products were inflated by more than 47 percent.
When concern was raised on the extortionate prices, PME purportedly reviewed its prices by between 12 percent and 20 percent without objection.
Notwithstanding the price review, Zesa, however, still paid Value Added Tax (VAT) to the Zimbabwe Revenue Authority (Zimra) based on the high invoice values, prejudicing Zesa of more than US$450 000.
It is also believed that Zent could have wasted US$1,5 million from purchasing equipment such as transformer testers, regulators, transformers, alternators and capacity voltage dividers that were never used until some of the software became outdated.
Some of the materials were bought as far back as 1998 and 2011.
It was the same pattern for other subsidiaries such as ZETDC, which reportedly paid Pito Investment and Enleaver US$2,9 million for works and materials without advance guarantees that are meant to hedge the company against prejudice.
Some of ZETDC buyers even source quotations via the telephone in contravention of standing procurement regulations and company procedures.
Flashy lifestyles
Zesa Holdings' reportedly splurged US$600 000 between 2012 and 2017 on executive vehicles for Eng Chifamba.
He took delivery of a Mercedes Benz S350 worth US$209 202.93 on June 10, 2011 before buying a Toyota Landcruiser (ACO3070) valued at US$175 790 on March 23, 2012.
He topped up his top-of-the range fleet with a Mercedes Benz GL350D (ADY9279) worth US$126 785.22.
On July 12, 2017, Eng Chifamba also got a Toyota Fortuner, which set the parastatal back by US$65 789.55.
Eng Chifamba's contract did not put a cap on the value of the vehicle the CEO could buy, which effectively gave him a blank cheque.
Zesa's group financial controller Mr Eliab Chikwenhere also took part in the looting frenzy as he was allocated a Toyota Landcruiser worth US$156 087.47 in 2009, exceeding his contractual limit of US$130 000.
He was given another luxury car — a Mercedes Benz E300 (ACR 2230) — valued at US$119 465.27 in 2012 — three years after he got the Landcruiser.
It later turned out that Mr Chikwenhere was the only executive who was given luxury cars after three years while others got their allocations after five years.
Zesa also splashed US$116 861.80 on a Toyota Prado (ABL0185) for Zesa corporate accounting manager, a Mr J Mapillar, way above his contractual limit of US$110 000.
Atleast 17 Zent managers also got iPads worth US$20 000.
The subsidiary also did not heed the parastatal's procurement regulations (Section 2.1 of the Zesa Holdings Procurement Policy, Norms and Procedures Manual), which stipulate that purchase of goods above US$10 000 should go to tender.
Chivayo again
PwC also queried circumstances surrounding the award of a 100MW solar power plant development project to Intratreck Zimbabwe, which is fronted by flashy ex-convict Mr Wicknell Chivayo, even after the company came second to China Jiangxi during the adjudication process.
Apparently, Intratreck's quoted project cost of US$248 million was US$65 million more than the Chinese firm's fee.
But Intratreck later approached ZPC and requested to be considered for the project at a revised cost. The request was suspiciously acceded to.
The terms of the original tender were subsequently altered, which attracted a US$900 penalty for ZPC from the then State Procurement Board (SPB) for the variation.
It got worse.
ZPC decided to pay US$5 million to Intratreck for feasibility and other pre-commencement works.
PwC also discovered that while feasibility studies usually stretch for about six months or more, Intratreck completed its own exercise within one month.
"The feasibility study for the Gwanda Solar project carried out by a non-independent consultant, Shanghai Electric, who were selected by Intratrek Zimbabwe, the contractor. The selection of Shanghai Electric by Intratrek Zimbabwe brings into question the independence and objectivity of Shanghai Electric and hence the results of the feasibility study.
"The feasibility study was carried out in a space of one month when in practice, based on information obtained from various ZPC representatives, feasibility studies would take six months or more," read part of the damning report.
To date, no meaningful development has taken place at the project site.
Minister Fortune Chasi said Government would move heaven and earth to recover all the misappropriated funds.
"It shows you that all the boards that existed during the time when all these things were happening were not appropriate boards. There were no systems that could pick such misdeeds by the staff," said Minister Chasi.
Added Minister Chasi: "The onus is on the new board to implement the recommendations of the audit report, part of which is to ensure that everyone who is liable for any wrongdoing is actually brought to book and that the quantifiable damage or loss they caused the entity and the people of Zimbabwe is recovered from them.
"The report is evidence of serious lack of good corporate governance at Zesa and the important need of the parent ministry to take an active interest in what is happening and follow up on issues," he said.
Former Zesa bosses, including the ex-group CEO Eng Chifamba, ZETDC managing director Engineer Julian Chinembiri and his finance director Ms Thokozani Dhliwayo, are already facing criminal abuse of office charges.
These revelations come at a time when the power utility introduced a load-shedding schedule, which has seen residents and business enduring long hours without electricity.
The findings, which are contained in a voluminous 6000-page report dated January 22 2019, compiled by PricewaterhouseCoopers (PwC), have been described by the newly appointed Minister of Energy and Power Development, Advocate Fortune Chasi, as "horrendous" and "frightening".
The probe was ordered by the Ministry of Energy and Power Development and the Office of the Auditor-General, Mrs Mildred Chiri, in April 2018.
The new political administration has moved in to clear the rot which happened during the old dispensation.
According to investigations, Zesa Holdings and its subsidiaries — Zesa Enterprises (Zent), Powertel, Zimbabwe Power Company (ZPC) and Zimbabwe Electricity Transmission and Distribution Company (ZETDC) — haemorrhaged millions of dollars through rampant corruption and gross mismanagement.
Questionable procurement
Most notably, investigators unearthed a curious pattern through which the parastatals' management disregarded procurement regulations and invariably overpaid for critical materials needed by Zesa.
Red flags were mainly raised over the questionable relationship between the power utility and Indian firm PME Power Solutions, which was roped-in in 2010 to supply transformers for various suburbs in Harare.
Zesa, through Zent, signed four contracts with PME on November 26 2010 for materials for Glen Norah, Epworth, Mufakose and Greystone substations.
While Zent was supposed to make a down payment of US$6,2 million to PME, it reportedly overpaid by US$3,2 million, particularly at a time when the unit was experiencing cash flow problems.
PwC concluded that "by making the advance payment to PME in excess of the amount due by US$3 207 680 and taking into consideration that Zent had been experiencing cash flow problems in the period under review, this further worsened Zent's cash flow position."
It was also alleged that Zent paid PME US$11 million without purchase orders, in breach of Section 45 (c) of the Public Finance Management Act and the Technology Transfer Agreement (TTA) between the two entities, which states that materials were to be supplied after a written request.
However, Zent managers who were interviewed by the PwC blamed Zesa's group chief executive officer, Engineer Joshua Chifamba, for the anomaly.
He, however, denied the charges.
But auditors accuse Eng Chifamba for authorising the overpayment using a facility from the CBZ.
They also recommend disciplinary action against officials culpable of the anomaly.
But there seemed to have been a suspicious relationship between Zesa and the Indian firm, which bled the parastatal through inflating the cost of supplied materials. A comparative survey of materials supplied by PME and five other companies — Industrial Production Solutions, Zhengzhou LP Industry, Wilee (Transwire) South Africa, Dash Petroleum and Energy Services (India) — indicated that prices of PME's products were inflated by more than 47 percent.
When concern was raised on the extortionate prices, PME purportedly reviewed its prices by between 12 percent and 20 percent without objection.
Notwithstanding the price review, Zesa, however, still paid Value Added Tax (VAT) to the Zimbabwe Revenue Authority (Zimra) based on the high invoice values, prejudicing Zesa of more than US$450 000.
It is also believed that Zent could have wasted US$1,5 million from purchasing equipment such as transformer testers, regulators, transformers, alternators and capacity voltage dividers that were never used until some of the software became outdated.
Some of the materials were bought as far back as 1998 and 2011.
It was the same pattern for other subsidiaries such as ZETDC, which reportedly paid Pito Investment and Enleaver US$2,9 million for works and materials without advance guarantees that are meant to hedge the company against prejudice.
Some of ZETDC buyers even source quotations via the telephone in contravention of standing procurement regulations and company procedures.
Flashy lifestyles
Zesa Holdings' reportedly splurged US$600 000 between 2012 and 2017 on executive vehicles for Eng Chifamba.
He took delivery of a Mercedes Benz S350 worth US$209 202.93 on June 10, 2011 before buying a Toyota Landcruiser (ACO3070) valued at US$175 790 on March 23, 2012.
On July 12, 2017, Eng Chifamba also got a Toyota Fortuner, which set the parastatal back by US$65 789.55.
Eng Chifamba's contract did not put a cap on the value of the vehicle the CEO could buy, which effectively gave him a blank cheque.
Zesa's group financial controller Mr Eliab Chikwenhere also took part in the looting frenzy as he was allocated a Toyota Landcruiser worth US$156 087.47 in 2009, exceeding his contractual limit of US$130 000.
He was given another luxury car — a Mercedes Benz E300 (ACR 2230) — valued at US$119 465.27 in 2012 — three years after he got the Landcruiser.
It later turned out that Mr Chikwenhere was the only executive who was given luxury cars after three years while others got their allocations after five years.
Zesa also splashed US$116 861.80 on a Toyota Prado (ABL0185) for Zesa corporate accounting manager, a Mr J Mapillar, way above his contractual limit of US$110 000.
Atleast 17 Zent managers also got iPads worth US$20 000.
The subsidiary also did not heed the parastatal's procurement regulations (Section 2.1 of the Zesa Holdings Procurement Policy, Norms and Procedures Manual), which stipulate that purchase of goods above US$10 000 should go to tender.
Chivayo again
PwC also queried circumstances surrounding the award of a 100MW solar power plant development project to Intratreck Zimbabwe, which is fronted by flashy ex-convict Mr Wicknell Chivayo, even after the company came second to China Jiangxi during the adjudication process.
Apparently, Intratreck's quoted project cost of US$248 million was US$65 million more than the Chinese firm's fee.
But Intratreck later approached ZPC and requested to be considered for the project at a revised cost. The request was suspiciously acceded to.
The terms of the original tender were subsequently altered, which attracted a US$900 penalty for ZPC from the then State Procurement Board (SPB) for the variation.
It got worse.
ZPC decided to pay US$5 million to Intratreck for feasibility and other pre-commencement works.
PwC also discovered that while feasibility studies usually stretch for about six months or more, Intratreck completed its own exercise within one month.
"The feasibility study for the Gwanda Solar project carried out by a non-independent consultant, Shanghai Electric, who were selected by Intratrek Zimbabwe, the contractor. The selection of Shanghai Electric by Intratrek Zimbabwe brings into question the independence and objectivity of Shanghai Electric and hence the results of the feasibility study.
"The feasibility study was carried out in a space of one month when in practice, based on information obtained from various ZPC representatives, feasibility studies would take six months or more," read part of the damning report.
To date, no meaningful development has taken place at the project site.
Minister Fortune Chasi said Government would move heaven and earth to recover all the misappropriated funds.
"It shows you that all the boards that existed during the time when all these things were happening were not appropriate boards. There were no systems that could pick such misdeeds by the staff," said Minister Chasi.
Added Minister Chasi: "The onus is on the new board to implement the recommendations of the audit report, part of which is to ensure that everyone who is liable for any wrongdoing is actually brought to book and that the quantifiable damage or loss they caused the entity and the people of Zimbabwe is recovered from them.
"The report is evidence of serious lack of good corporate governance at Zesa and the important need of the parent ministry to take an active interest in what is happening and follow up on issues," he said.
Former Zesa bosses, including the ex-group CEO Eng Chifamba, ZETDC managing director Engineer Julian Chinembiri and his finance director Ms Thokozani Dhliwayo, are already facing criminal abuse of office charges.
These revelations come at a time when the power utility introduced a load-shedding schedule, which has seen residents and business enduring long hours without electricity.
Source - sundaymail
