Zesa unit in fraud storm

ZIMBABWE Power Company (ZPC) has flown into the eye of a storm amid revelations a senior executive of the State- owned power utility allegedly awarded a multi-million dollar contract without going to tender.

ZPC has since instituted investigations into suspected irregular conduct by company secretary Ms Norah Tsomondo over the awarding of a contract to a local private law firm owned by one Sheila Magugu.

The tender entailed registration of the security cession agreement for Hwange Power Station units 7 and 8 extension, which will transfer rights of obligation and liability to a new firm Hwange Electricity Supply Company (HESCO).

Sources said the State Power Utility was first quoted an amount of $19,5 million for the registration of the security cession agreement, Ms Tsomondo allegedly negotiated for a downward review and the contract price was reduced to $4,5 million which was later queried by other executives.

The $19,5 million initial contract price quotation represented 2 percent of the Security Cession Agreement valued $998 million ($997 723 224,20). The extreme variation in the reduction, about $16 million, has raised eyebrows at how that was possible and why the initial quotation had been pegged as high as $19,5 million.

Further, this was done allegedly in breach of State procurement regulations, which require tenders valued more than $100 000 to be advertised or be approved by the Procurement Regulatory Authority of Zimbabwe (PRAZ). The cession registration was a pre-requisite for the drawdown of the $1,1 billion the power utility secured from China Eximbank for expansion of the 920 megawatts Hwange Power Station to add 600MW.

The alleged irregularities in the cession agreement registration come as President Mnangagwa warned Zesa officials, during the ground breaking for Hwange units 7 and 8 expansion, against corruption and to adopt highest financial discipline in the implementation of the project to ensure its success.

Asked to comment on the irregularity, ZPC acting manager Patrick Chivaura declined to discuss the issue in detail, but confirmed that an investigation was underway.

"We have not finished the investigation; we are still working on it. That is what I can say for now, I cannot say anything else," Engineer Chivaura said.

Reached for comment, Ms Sheila Magugu whose law firm undertook the cession agreement registration was non-committal saying she was bound by professional code of conduct not to reveal client-customer confidentiality issues.

"I would rather you talk to my client for whom I did work. As lawyers we are bound by professional code of conduct. Go and talk to the people I did work for. I will not confirm nor deny. Seek further particulars from people who gave you the information," Ms Magugu said.

On her part Ms Tsomondo told The Herald Business that nothing irregular had transpired regarding registration of the cession agreement. She said ZPC was not yet done with the process of registering the agreement.

"It is not irregular, what happens (not to go to tender) is that when we deal with lawyers we do not advertise (tenders) and since we had been working with the lawyers since 2016, we gave them that work to do," she said.

"We still need to go with a figure to PRAZ (for direct award permission). As such, we have engaged the law firm to negotiate for a price reduction because we were told by the Law Society of Zimbabwe that there were no rates for such high value contracts," she said.

Unconfirmed reports alleged that Ms Tsomondo once worked with some senior official of the company that did the cession agreement registration for ZPC.

Efforts to get a comment from Zesa Holdings, the parent company of ZPC were not successful yesterday. However, The Herald Business understands that China Eximbank entered into a preferential buyer credit loan agreement with Government which required the cession agreement to disburse funding. But when Ms Tsomondo enquired from Ms Magugu how much it would cost to register the cession agreement, she was advised that the fees would be in terms of part 11, item 2,6 of the Law Society General Tariff for legal practitioners, which stipulated the fees at 2 percent value involved.

Ms Tsomondo allegedly proceeded to negotiate the final fees with Ms Magugu's firm, allegedly without informing the chief executive of the new company (HESCO) or the acting managing director of ZPC, Mr Chivaura.

The fees finally agreed with the law firm did not have ZPC's board approval. Ms Magugu said there was no board approval since the firm has no board.

Ms Magugu's firm proceeded to register security cession agreement on May 24, 2017.

It is alleged that when the ZPC company secretary was asked on how much this would cost, she cited a figure of $100 000. However, all hell broke loose when Ms Magugu submitted an invoice for $4,5 million, which was then queried by ZPC's supply chain manager and its MD. The ZPC company secretary has reportedly been trying to persuade Ms Magugu's law firm to reduce its price to about $100 000.