The government has reportedly incurred a loss of M49 million, with potential for even more losses, after the Lesotho Electricity Company (LEC) allegedly engaged an underqualified contractor for the Ha Belo electrification project.
According to a confidential report by an engineer commissioned by the Ministry of Energy, the contractor lacked the necessary skills to execute the project. This has led to numerous incomplete tasks, including missing essential design reports.
The energy ministry awarded the contract to Phaks JV on 18 August 2021 for the construction of the Ha Belo 33/11kv substation and 33kv line LS-LEC-190007-CW, with an initial timeline of 18 months. Initially valued at M86.6 million, project costs have since escalated to M136 million. To date, LEC has processed payments for approximately 15 certificates submitted by the contractor.
The Ha Belo electrification project, part of the World Bank-funded Lesotho Renewable Energy and Energy Access Project (LREEAP), aims to increase electricity access in peri-urban and rural areas to drive economic development. LREEAP also seeks to establish a sustainable framework for rural electrification through mini-grids in remote regions.
Sources indicate that both Energy Minister Nqosa Mahao and Principal Secretary Tankiso Phapano are aware of the report, which has been discussed in high-level meetings.
The report highlights several issues with contract management and provisions, suggesting that misinterpretations and poor communication from the start set the project on a problematic trajectory. Notably, essential management tools, such as the implementation plan and work program, were either missing or outdated, while sporadic or non-existent site meetings without formal record-keeping impeded project oversight.
The report further indicates that additional funds will be required to complete the project, regardless of whether the current contractor or a new one takes over.
"It does not seem there was sufficient 'know how' from the contractor side, a lot of issues were not performed," part of the report states.
"It may be easy to think it was because the client also did not take full charge, but the contractor would have taken care of simple and given activities. Typical example is design reports that cannot be found anywhere for Mopeli to Belo line, Belo substation, and Belo to Hlotse line.
"Contractor was allowed to go to site prematurely on 24 August 2021, while he was supposed to mobilise and be given the site on 5 November 2021, earliest was 22 October 2021 when all effectiveness conditions were met.
"It does not look like any designs for the project were done, reports could not be found, that would indicate otherwise. When site activities were stopped, owing to environment and social impact assessment activities, at least contractor should have continued with design activities, that had no bearing on the environment or consent from land owners, as it were."
The engineer also points out that communication between LEC and Phaks JV was poorly structured, with inconsistent site meetings and unreferenced correspondence, which hampered project progress. The report suggests that the cost increase stems from the contractor's request for an extension, citing delays in the compensation process and finalisation of safeguard instruments.
On 17 February 2022, former LEC Managing Director Mohato Seleke requested a project handover, which was executed, leaving LEC to fully manage all Belo-related activities.
"On 24 February 2022, the contractor requested an extension of time for completion with cost attributable to the client for delay which supposedly led to the financial losses to him. The contractor claimed extension of time and submitted a claim of M14 314 672.39 for time, P&Gs and site staff. The Contract Amendment No1 was approved on 2 March 2023 by the LEC MD and the PCC 8 was modified to extend time Completion to 6 October 2023. However, without cost, contrary to what the contractor demanded.
"It is not clear from then on if the works continued on site, as there were series of letters exchanged, interventions from PS sought. The confusion continued for almost the entire year of 2022."
In April 2023, Phaks JV sought intervention from the then ministry's Principal Secretary, citing financial and contractual challenges, including difficulties in retaining skilled staff due to payment delays. The contractor recommended that the client cover equipment, staff time charges, and rising manufacturing costs due to inflation.
The project was still under the Natural Resources Ministry at the time as the Ministry of Energy was only constituted as a separate ministry after the October 2022 elections.
A May 2023 request indicated a 12-month delay attributable to the client, being LEC, with a claim amounting to M18 809 319.54.
"The contractor claims the delay in clearance of safeguards documents and payments to the contractor, all contributed to him failing to meet the contract obligations, leading to substantial financial difficulties. He thus failed to compensate key personnel for their 'services', eventually losing them. The other key element is he had to reduce staff compliment on site, to be able to manage the work output under these constraints.
"The Contractor recommended that the equipment, plant and staff standing time charges, penalties and other costs incurred because of project delays be charged on client's account, new manufacturing price hikes be charged on client's account and basic inflation labour costs be compensated by the client."
The current standoff between LEC and the contractor appears likely to persist unless significant intervention occurs. Additionally, the report states that pinpointing specific certificates to actual activities or equipment on-site is challenging, as some tasks are already exceeding their budgets, accumulating negative balances. Alarmingly, essential equipment for which payments have been made is not on site, with LEC reportedly unable to locate the assets, the engineer said.
The report recommends that LEC and the contractor hold a candid discussion about their capacity to complete the project successfully. It suggests that, if necessary, relevant subcontractors should be engaged to take over critical project components. Further, it stresses the importance of avoiding legal recourse to prevent LEC from being held liable as a defaulter, recommending that any resolution will likely require additional funding.
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Contacted for comment, World bank Senior External Affairs Officer, External and Corporate Relations, Lavinia Engelbrecht, referred this publication to the Ministry of Energy, saying the government was the custodian of the project. However, she said the World Bank takes allegations related to the project seriously.
"The World Bank's role is to support the government of Lesotho including through financing, policy advice, and technical assistance.
"The government of Lesotho owns the project and is responsible for its implementation and performance, through the Ministry of Energy and Meteorology. The Bank oversees its engagement with the government through agreed terms," Ms Engelbrecht said.
LEC spokesperson, Tšepang Ledia, also directed inquiries to the energy ministry whose spokesperson, Molisenyane Tau, indicated he would inquire from superiors and revert by Friday (tomorrow).
Minister Mahao claimed no knowledge of the report, declining to comment on delays or cost escalations. Efforts to reach Mr Phapano were unsuccessful as his mobile phone rang unanswered. However, LEC board members anonymously confirmed their awareness of the report, which they said had been discussed in high-level meetings.
