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.
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. Zimbabwe Independent
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