ZESA Holdings reportedly flouted tender procedures by appointing a strategic expert for one of its subsidiaries in defiance of a State Procurement Board resolution. The SPB turned down the power utility's request to directly engage Rubiem Technologies, owned by Dr Denis Magaya, to implement the strategic and business plan without going to tender.
Dr Magaya drafted the US$30 million five-year plan, but the SPB argued his company could not take part in the implementation of the strategy to avoid conflict of interest.
By implementing the strategic plan, Zesa argues its subsidiary would generate millions of dollars through provision of data carrier, mobile Internet and connectivity services.
Information at hand reveals that hiring Rubiem Technologies Services would cost Zesa US$3,6 million between 2012 and 2014. It was not revealed how much Zesa would pay Dr Magaya after deciding to hire him personally over the same period.
Zesa Holdings chief executive officer Engineer Josh Chifamba wrote to the SPB on March 16, 2012 requesting permission to engage Dr Magaya's company as a strategic partner to support Powertel in the implementation of the strategy and five-year business plan.
"In order to reduce implementation risks, the Powertel Board has resolved that the Consultant (Dr Magaya) who drafted the strategy be engaged through his consultancy company to implement the strategy and business plan," wrote Eng Chifamba.
"State Procurement Board authority is hereby sought to appoint Rubiem as the partner for strategy implementation without going to tender to reduce implementation risk."
SPB Principal Officer Mr Cledwyn Nyanhete on June 26, 2012 told Zesa Holdings that his board had turned down the request.
"The Accounting Officer's request for direct engagement of Rubiem Technologies (Pvt) Ltd for five-year business implementation plan for Powertel (Pvt) Ltd, on performance based contract, be and is hereby rejected for lack of merit and conflict of interest," said Mr Nyanhete.
"The Accounting officer should float an open tender. Rubiem Technologies (Pvt) Ltd should not participate in the Open Tender as they were key players in the development of the Terms of Reference."
SPB board chairperson Mr Charles Kuwaza yesterday confirmed they had turned down Zesa Holdings' request.
He, however, said Eng Chifamba was yet to explain to his board on what transpired later.
"It is true that we turned down the initial proposal for lack of merit," said Mr Kuwaza in an e-mailed response.
"As a general rule, Formal Tenders which are adjudicated by the SPB start at U$300 000 for Goods and Services and U$1m for Construction.
"It is in the realm of possibility that the quotation for the service that you are querying is below this figure. If that is the case, the Accounting Officer (CEO) has power to award the tender without consulting the SPB, but he must follow proper Procurement procedures as laid out in the Procurement Act, Regulations and SPB policies enunciated from time to time," said Mr Kuwaza.
Powertel board chairman Mr Francis Chirumuuta said Powertel did not defy the SPB resolution because they did not engage Rubiem Technologies.
He said after the SPB turned down their request, they decided to engage Dr Magaya as an individual.
"We actually believe the tender board got it all wrong because there was no rationale in their decision. There is no conflict at all. We didn't see any conflict at all.
"We then decided as a board that the person in the forefront was Dr Magaya so we decided to have him as an employee on fixed term contract and not Rubiem as a company," said Mr Chirimuuta.
He said if they had engaged Rubiem Technologies, Dr Magaya would have come with other staff members.
Mr Chirimuuta said there was no need for them to go to the tender board because it was going to expose their strategy to competitors.
"In fact, we are very angry with the tender board because their thinking has no business mind. How do you put to tender a strategic plan? It is unheard of. It has never happened in the world.
"The tender board failed to see what we were seeing as Powertel. The board decided to engage Dr Magaya in his personal capacity. Legally, there is a clear distinction between an individual and a company," said Mr Chirimuuta.
However, this is contrary to one of the correspondences done by Dr Magaya last month when he used a Rubiem Technologies' letterhead on Powertel business.
This, Mr Chirimuuta said, was out of order because Powertel had no relationship with Rubiem Technologies, but said it could have been an oversight on the part of Dr Magaya.
He said he was going to take it up with management on why Dr Magaya was using his company's letterhead.
He said his board asked Dr Magaya to identify positions that needed to be filled with technical expertise that was not in the Powertel structure in the implementation of the strategy.
Mr Chirimuuta said they conducted interviews together with Dr Magaya where some people were recruited to fill about six positions on fixed performance-based contracts.
He said they did not reject the recruitment of Rubiem employees in their personal capacities, adding that there could be two former Rubiem Technologies employees.
Sources said it was not clear how these recruited employees, including Dr Magaya, were paid as they were not in the Powertel salary structures.
The sources said the recruitment of these employees had created a parallel structure with technical staff at Powertel not sure of their future.
"It is understood that these people are actually consulting for Powertel's competitors using Powertel resources. It is also not clear how much they are paid because they are not in the Powertel salary structures," said a source.
A procurement expert said Zesa Holdings was in breach of procurement regulations.
"There is breach of corporate governance because the board is now doing operational work that should be done by management. The board should be there for policy guidance while management should be in charge of operational matters.
"There is also an aspect of usurping powers of the SPB that made a decision on that particular issue.
"In terms of performance, there is now a management gap between the implementer and the management who are supposed to supervise them because the implementer is a creation of the board. This, in essence, gives the implementer power over management," said a source who requested anonymity.