HomeLocal NewsFresh details on CMED US$3,8m botched fuel deal

Fresh details on CMED US$3,8m botched fuel deal

STATE-OWNED transport enterprise CMED (Private) Limited’s protracted battle to recover US$3,8 million in a botched fuel deal in which private supplier First Oil failed to deliver for paid supplies has sucked in President Robert Mugabe’s office as it has emerged the parastatal, together with government’s fuel distributor PetroTrade, approached officials in the Office of the President and Cabinet to resolve the fiasco.

Taurai Mangudhla

CMED alleges it made the decision to procure diesel from First Oil based on a recommendation by PetroTrade and National Oil Infrastructure Company (Noic), although these firms deny this saying the state-owned entity handled the transaction internally in violation of its own procurement procedures.

The case, which has brought into sharp focus government’s procurement systems and its commitment to fight corruption, has claimed the scalps of top management at CMED.

A letter dated September 22 2014, written by PetroTrade acting CEO Tanaka Sikwila, says suspended CMED managing director Davison Mhaka, fuels manager Brian Manjengwa and himself were summoned to deputy chief secretary in the Office of the President, Ray Ndhlukula to try to resolve the issue.

This, according to Sikwila, was after CMED had escalated the matter to the highest office in the land for intervention.

Contacted for comment yesterday, Ndhlukula confirmed being approached by the parties and that he referred them to the permanent secretary for Transport.

“After the presentations by the two companies, it was resolved that the two companies had to await for the outcomes of the court process and the findings of the CMED internal tribunal chaired by former Attorney-General Sobusa Gula-Ndebele which had also been seized with this matter,” Sikwila says in the letter addressed to CMED acting managing director Tambirayi Nhongonema.

The Gula-Ndebele-led board of enquiry in October 2013 produced a thick report on the circumstances surrounding the potential loss of US$2,7 million paid to First Oil on March 1 2013 for the delivery of three million litres of diesel which remain undelivered.

It recommended First Oil and its directors should be held to account and be forced to pay back to CMED US$2,7 million within a given time. Apart from recovering the money from First Oil, the board also said CMED should plug holes in its procurement process going forward.

According to Sikwila’s letter and the Gula-Ndebele report, First Oil approached PetroTrade seeking to buy three million litres of diesel from the distributor and was quoted a price of US$1,27 per litre to give a total of US$3,81 million in February 2013.

First Oil is said to have indicated to PetroTrade they had a potential financier called Globe Investments/ORBSA who wanted to fund the procurement, but required a letter from the suppliers confirming availability of the product, which they got.

First Oil then reportedly approached PetroTrade in March 2013 and indicated they had an undisclosed customer whose banker, ZB Bank, wanted to finance the payment of fuel upon production of a confirmation from Noic indicating that PetroTrade had the product. First Oil had advised the bank that they would procure fuel from PetroTrade.

It emerged First Oil was procuring the diesel for CMED and reselling it at a lower price of US$1,21 per litre.

“I got curious in that PetroTrade was selling this product (diesel) to First Oil at US$1,27 (per litre) and in turn, First Oil was selling the same product to CMED at US$1,21 (per litre),” Sikwila says.

His letter adds that First Oil indicated they could take the knock as they had a shipload of fuel at a very cheap price and that this ship would arrive within 30 days from the agreement date, but because CMED required fuel immediately First Oil was willing to buy the product from PetroTrade at a higher price and then sell it to CMED at a lower price. It would then make good of this loss from the sales proceeds of the cheaper consignment.

Sikwila says First Oil and CMED later requested PetroTrade to release part of the product on the basis of a “forged” US$2,064 million bank guarantee telex swift code transcript that was allegedly done by Tetrad Bank and addressed to BancABC.

“In April 2014, CMED and First Oil further tried to dupe PetroTrade into releasing fuel by submitting a fraudulent bank guarantee purportedly from Tetrad, which was rejected,” Sikwila says. “Sometime in September 2013, CMED (represented by Mr Mhaka and Mr Manjengwa) and PetroTrade (represented by myself) were summoned by Dr Ndhlukula of the Office of President and Cabinet. This was after CMED escalated the issue to the Office of President for intervention.

After presentations by the two companies, it was resolved that the two companies had to await for the outcomes of court processes and findings of the CMED independent internal tribunal chaired by former Attorney-General Sobusa Gula-Ndebele which has also been seized with the matter.”
CMED has sued First Oil, PetroTrade and Noic for the non-delivery of the fuel, although its claim is being contested, particularly by PetroTrade which says the money was paid to First Oil which it then transferred to its offshore account and not itself as the supplier.

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