5 February 2014

Zimbabwe: City Officials Loot U.S $100 Million

Farirai Machivenyika — Harare City Council officials could have pocketed more than US$100 million through inflating prices of equipment for the US$144,4 million loan agreement obtained from China whose contract to refurbish water and sewage treatment plants was awarded to a Chinese company.

The loan, that was guaranteed by the Government, was signed by Town Clerk Dr Tendai Mahachi, former mayor Muchadeyi Masunda and China National Machinery and Equipment Import and Export Corporation general manager Yang Yinan in 2010.

The anomaly in the actual prices of the equipment ordered and those tendered in the contract was discovered following an assessment of the deal by consulting engineer Peter Morris in December last year.

Mr Morris noted that prices of equipment charged by CMEC were at times five times more than those prevailing on the market.

The city entered into the US$144,4 million loan agreement with the Export and Import Bank of China, with the contract for the refurbishment being awarded to the Chinese company.

The loan agreement is for the refurbishment of Morton Jaffray and Prince Edward water treatment plants and Firle and Crowborough sewage treatment plants.

Mr Morris was hired under the Zimbabwe Multi-Donor Trust Fund administered by the African Development Bank's Urgent Water Supply and Sewerage Rehabilitation Project to assess the loan deal.

Zimfund has also assisted in the rehabilitation of Harare's water and sewage treatment plants.

"An examination of rates where it has been possible to compare against other contracts (including Zimfund UWSSRP Phase I) suggests that prices are inflated in many cases by factors of 2, 3 or even 5 times," Mr Morris said in the report.

He cited as an example the cost of two boats pegged at US$91 393 each yet a local firm could supply a similar boat at US$20 000.

"There is a provision for two boats with 150HP motors to access the intake tower at a cost of US$91 393," said Mr Morris. "A local firm is making a slightly smaller boat with a 150HP motor and trailer for US$20 000.

"Further, it is not necessary to have such powerful boats for this function - a displacement hull with a 20HP motor would be more than adequate."

Some of the discrepancies noted in the report showed that 14 DN300 gate valves with extension spindle cost US$90 241 including installation cost, although similar valves were bought at R10 910 (around US$1 000) each in a contract with the Gweru City Council.

This means the 14 valves could have been bought at around US$14 000 instead of the US$90 241.

The report also showed that two 5,5kW Alum transfer pumps were bought for US$113 562 under the CMEC contract, although the same quantity could have been bought for US$7 548.

Two Alum 1,5kW dosing pumps were valued at US$63 678, when under the UWSSRP contract one such pump was pegged at US$2 218.

The city council was also charged US$1 227 734 for powdered activated carbon dosing system for Units 1, 2 and 3 although the same work could have been done for US$84 888.

The report also showed that four 40kg/h chlorinators were valued at US$264 627 under the CMEC contract when the same components were pegged at around US$99 788 under the UWSSRP initiative.

Mr Morris questioned how over US$500 000 could be spent on electrical cables, pipes and fittings without justification with the price being exorbitant.

A breakdown of the US$144,4 million loan shows that US$55,4 million will go towards purchasing of equipment, US$7,02 million for accessories, US$12,4 million for freight and insurance, a whopping US$45,9 million for construction, US$10,6 million for technical service, design and management and US$8,4 million for local taxes or charges.

Another US$3,7 million will go towards fees or charges in clearing and handling and US$718 537 for construction and erection insurance.

A source familiar with engineering and construction fields questioned the quantum of some of the charges.

"It is astonishing that the total value of equipment and accessories is just over US$62 million, yet the construction fee is US$45 million, but the company is essentially refurbishing an already existing plant instead of building a new one altogether," said the source.

"It is also surprising that over US$8 million is being paid for fees in handling and clearing when the project has been accorded national priority status, which means all the equipment is coming in duty free."

The source said it was important that the deal be revisited to protect Government's interests and those of the ratepayers.

The rehabilitation of the plants began towards the end of 2013 and is expected to be completed by the end of April.

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