A DAMNING audit report has implicated the Office of the President and Cabinet (OPC) in a murky deal in which it arm-twisted Zesa Holdings into handpicking businessperson Kuda Tagwirei’s company, Sakunda Holdings, for the establishment of the controversial diesel-powered Dema Emergency Power Plant.
BY BRIDGET MANANAVIRE
This was in violation of tender procedures, as reported by the Zimbabwe Independent in a series of articles in 2016.
According to a final forensic investigation report dated January 2019 by PricewaterhouseCoopers (PwC) tabled in Parliament last week, the deal could have seen the country buying electricity from the plant at high tariffs had it not been for the fact that power charges were coincidentally very low at the time.
The audit confirmed that Sakunda, which dominates the country’s fuel market and the controversial command agriculture project, was awarded the tender outside set regulations.
The United States embassy in October last year confirmed that a US company, APR Energy Holdings, had initially won the tender, as exclusively reported by the Independent, only for government to interfere in the process, and cherry-pick Sakunda.
The embassy was responding to the Zanu PF government’s claims that sanctions, including those imposed by the US, were responsible for crippling the country’s economy.
According to the PwC report, government violated procurement regulations by awarding the US$498 million contract to Sakunda to construct the 200-megawatt power plant without the involvement of the then State Procurement Board (SPB).
“Ministry of Energy and Power Development, indicating that the diesel generator plant was a national project, gave Zesa Holdings authority to procure through Special Formal Tender, authority which should only have been given by the SPB. The SPB was sidelined from the procurement process thereby violating procurement regulations,” the report reads.
“OPC directed that the Sakunda bid be evaluated outside the standard tender evaluation process. Government made a direct appointment of Sakunda citing the need to pursue the indigenisation drive.”
The report further states that Sakunda failed to deliver in line with the Power Purchase Agreement (PPA).
“It is fortuitous that cheaper sources of power were available at the time that Sakunda failed to deliver per the PPA. If this had not been the case, the national crisis meant to be averted by setting up the Dema Diesel Generator Plant would have placed the country in a worse off position,” the report further reads.
The report was based on investigations done by PwC into Zesa Holdings and its subsidiaries, namely; Zesa Enterprises (ZENT), Powertel, Zimbabwe Power Company (ZPC) and Zimbabwe Electricity Transmission and Distribution Company (ZETDC).
As part of the investigation, the audit firm also carried out a site visit to the Dema Power Plant near Chitungwiza.
The firm also collected memos, letters, emails and other documents, which revealed how Sakunda was illegally awarded the Dema tender.
PwC said it had a letter dated November 27, 2015 written by Tagwirei accompanying their bid submission.
The auditors also had the due diligence report on Sakunda Holdings in respect of the 200MW diesel-powered emergency plant at Dema as well as evidence from two emails showing generation reports and Sakunda’s failure to deliver as per contract.
In addition, the audit firm also compiled letters from then permanent secretary Patson Mbiriri to group chief executive and others to Aggreko, APR and Atlaaq as well as the SPB and other parties regarding the Dema issue.
The power purchase agreement (PPA), was then signed between ZETDC and Sakunda Holdings on June 16, 2016.
PwC also said it had an executive board resolution dated February 15, 2018 where the ZETDC executive board in place at that time approved the write-off of the amount owed by Sakunda in the form of penalties.
Zesa Holdings also applied for a tariff review in order to align the new tariff to the increased tariff arising from the Dema diesel-powered plant according to the report.
The Independent has reported extensively on the Dema Emergency Power Plant, which had an inflated cost structure.
The cost of the Dema project escalated alarmingly from US$249 million to US$498 million over three years, after the government directed the controversial project’s managers to double its output to 200 megawatts at US$166 million per year at a time the country was failing to pay for power imports.
The Independent also revealed that the brother to former president Robert Mugabe’s son-in-law, Derrick Chikore partnered Sakunda in the project. Derrick is brother to Simba Chikore who married Mugabe’s daughter Bona.