Zesa audit opens can of worms….. millions lost in dodgy contracts

In what demonstrates the depth of rot and corporate malfeasance at Zesa Holdings, one of the power utility’s subsidiaries traded with a supplier for over 10 years without a valid contract after an earlier agreement had expired, audit findings show.

The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) paid over US$1,4 million for trenching services provided by the company, Zebra Contracting, without a contract.

It is, however, feared the power utility could have suffered significantly more financial prejudice after revelations investigators could not obtain all documents outlining financial transactions between the parties, especially for the six-year period to 2011.

The expose is part of forensic audit findings by PricewaterhouseCoopers (PwC), which was commissioned by the Ministry of Energy and Power Development and Auditor-General’s Office (AGO) in 2018.

The malpractices and plunder were also identified across other Zesa subsidiaries.

The irregular conduct at Zesa happened at a time executives led ostentatious lifestyles characterised by regular purchase of top-of-the-range vehicles and obscene allowances while the State power utility struggled to keep the lights on.

Other irregularities at the State enterprise included gross violation of multimillion-dollar tenders, which included the Dema diesel power project, prepaid electricity vending contract, transformer making deal with India’s PME Solutions, as well as abuse of Zesa’s vehicle policy and remuneration systems.

It is feared the malpractices may have cost Zesa millions of US dollars.

Anomaly

The Auditor-General’s Office reportedly raised the red flag over transactions relating to copper harvesting between ZETDC and a company called Zebra Contracting.

It emerged that Zebra did not have a copper harvesting contract but was actually awarded a year-long trenching services contract in 2016.

The contract was subject to renewal in line with procurement regulations.

“However, when we inspected the list of transactions entered into by ZETDC with Zebra, we noted that there were transactions dating back to the year 2013,” PwC said.

A contract adjudication report indicated that the scope of work given to Zebra Contracting was “for the annual excavation of cable trenches” and was signed by the company’s tender adjudication committee on September 26 2003.

The AGO’s also provided forensic auditors PwC with a Memorandum of Agreement signed on March 12 2004 for a period of 12 months.

At the end of the 12 months, auditors could not find evidence that ZETDC went back to tender in order to renew the contract.

Documents provided showed correspondence with Zebra after the expiry of the initial contract, where the contractor requested adjustment of rates, which was approved by ZETDC, indicating an ongoing relationship between the two entities.

“We then queried this with Mrs Mutimutema, the finance manager of the Harare regional office, and she confirmed ZETDC indeed continued to trade with Zebra Contracting from April 2005 to September 2016 without a valid contract,” PwC said.

Mrs Mutimutema further explained that there was no approval received from the then State Procurement Board (SPB) — now Procurement Regulatory Authority of Zimbabwe (PRAZ) — to exceed the annual contract and this was corroborated by one Mrs Dhliwayo.”

According to the audit findings, in terms of the repealed Procurement Act, responsibility for ensuring that procurement procedures are followed was vested in the accounting officer — suspended ZETDC managing director, Engineer Julian Chinembiri.

Asked if there had been disciplinary action against any of the ZETDC employees for failing to follow procurement procedures, Eng Chinembiri indicated that nothing had been done in that respect.

The audit says senior staffers — a Mrs Dhliwayo, Mrs Mutimutema, Eng Chinembiri, Ernest Muchayi and Mr Killiana Mutamba, who were the general managers for the ZETDC regional office over the period April 2005 to September 2016 — contravened the Public Finance Management Act by failing to avoid the irregular expenditure.

Further, the said individuals also contravened Section 32 of the now repealed Procurement Act by allowing transactions with Zebra Contracting without following procurement procedures.

“The transactions, which were entered into without following tender procedures, may have prejudiced ZETDC. However, in the absence of comparative bids, we could not quantify such prejudice — if any,” PwC said it its report.

It also emerged from the investigations by PwC that also Powertel transacted with Zebra Contracting without going to tender and without SPB approval for the deviations. Sunday Mail