Zimbabwe: Made Botches U.S$100 Million Deal

A CHINESE telecommunications company, ZTE Corporation, has been awarded a US$100 million contract to supply mechanisation and irrigation equipment without going to tender, the Financial Gazette can reveal. The development has courted the ire of several potential bidders and is likely to anger a restive population whose government had pledged to clampdown on corruption and take the country out of its current economic quagmire.

Documents seen by this newspaper show that the Ministry of Agriculture, Mechanisation and Irrigation Development headed by Joseph Made, appointed ZTE Corporation, which is at the centre of at least two controversial deals with the country's power utility, to supply equipment worth US$82,442 million, provide services for the project and training at a cost of US$16,623 million and US$934 200 respectively, without the involvement of government's designated procurement agency, the State Procurement Board (SPB).

This is against the country's procurement laws which stipulate that any contract worth US$300 000 or more entered into by any government linked entity and other parties should be authorised by the SPB. Government insiders are heaping the blame on Made, saying he should have ensured that proper procedures were followed. Made could not be reached for comment by the time of going to print.

While Made did not append his signature on the deal himself, his permanent secretary, Ringson Chitsiko; Reston Muzamhindo, the principal director and the director in charge of finance and administration Kudakwashe Zata, signed along with the Chinese company's representatives. Under this multi-million dollar deal signed on November 15, 2013 but yet to be executed as government is still battling to access funding, the Chinese firm is to supply hydraulic excavators, tractors, dozers, motor graders, dump trucks, trailers, concrete mixers, generator sets, air compressors, pneumatic tools and survey equipment.

What makes it strange is that ZTE Corporation, a Chinese government-backed company which is listed on the Shenzhen and Hong Kong stock markets, is well-known as a telecommunication product vendor. Market watchers have therefore raised concerns on the ability of the company to deliver. Interestingly also is the fact that equipment to be supplied under this contract is for construction instead of agriculture.

The Financial Gazette understands that the equipment would only be delivered after the cash-strapped government has paid 15 percent of the total value of the contract into ZTE Corporation's account held by the Export-Import Bank of China, ShenZhen branch. Part of the contract says "the total contract shall be US$100 000 000 (one hundred million United States Dollars only) as specified in the agreed priced BOQ".

The contract further states: "The prices do not include any kind of customs duties charges to be levied outside of the People's Republic of China. The supplier (ZTE) shall start to make shipment of the equipment after 120 days of the date of receipt of the advance payment... ."

"The title to all imported equipment under this contract shall be transferred to the purchaser (Agriculture, Mechanisation and Irrigation Development) against the full payment of this contract and if the purchaser fails to pay the full contract price or fails to perform other obligations under the terms and conditions of this contract, the title or ownership to contracted equipment shall belong to the supplier."

"The supplier shall be entitled to subcontract all or any part of this contract to competent sub-contractor(s) provided that the supplier guarantees the purchaser that the sub-contractor(s) will perform its obligations in a manner as the supplier will do in accordance with this contract. However, the supplier shall be responsible for the satisfactory performance of the whole contract."

However, without revealing much detail, Chitsiko said when contacted for comment that the deal was on hold due to lack of funding. "It's on hold," said Chitsiko.

"We are looking for money from the Export-Import Bank of China (EIM) but that money comes with a Chinese company and this is why we chose ZTE."

It has, however, emerged that on April 30, 2014, Willard Manungo, the permanent secretary in the Ministry Finance and Economic Development, wrote to the Ambassador of the People's Republic of China to Zimbabwe-Lin Lin, in support of the project. "As you are aware, government under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), identified development of irrigation infrastructure as critical in increasing agricultural production and productivity.

"Your excellence, I want to reiterate that the Solar Pumping System Project to support irrigation development in the eight provinces of Zimbabwe being spearheaded by ZTE is one of our priority projects under Zim-Asset.

"If implemented, this project will go a long way in improving household food and nutrition security, and improve agricultural output in Zimbabwe. Please, Your Excellency, accept the assurances of my highest consideration," said Manungo in the letter.

Procurement experts say government should have invited other Chinese vendors to go for a public tender. Last year, a tender to install a 100 megawatt (MW) solar power station to alleviate the crippling power supply shortage crippling the economy was floated. China Jiangxi Corporation was the winner but through political interference ZTE, which had lost the bid, was controversially awarded the tender without having to re-advertise as required by the procurement laws of the country.

The company was also involved in the supply of prepaid meters to power utility ZESA but the contract was cancelled after it was found to be unreliable by supplying poor quality prepaid meters. Last year, the Zambian government terminated a multi-million deal with ZTE following allegations of corruption. The deal involved the scandalous supply of Close Circuit Television (CCTV) equipment to the Zambian government at an inflated price of US$210 million instead of US$13 million.

The CCTV project was initiated to assist with crime prevention, traffic management and general monitoring of streets of the capital, Lusaka. In 2007, the Philippine President cancelled a controversial US$330 million deal that would have seen ZTE Corporation supply equipment to the government's planned broadband network. The Chinese company was reported to have paid a bribe of about US$4,42 million to Philippine government officials for it to land the deal.

The telecoms company was also banned from tendering for state contracts in Algeria for two years after it was involved in a bribery scandal between 2003 and 2006; it had allegedly bribed executives at the State-owned telecoms network, Algerie Telecoms.

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