The Zimbabwe Power Company management bypassed its board and paid $4,8 million to convicted fraudster Wicknell Chivayo’s Intratek Zimbabwe for pre-commencement works on the 100-megawatt Gwanda solar plant without the private firm submitting a performance guarantee to protect public funds
Managers at ZPC could now face action under their code of conduct.
A performance guarantee or bond is a form of financial security provided by a contractor before receiving any down-payment for a project and it enables the client to have recourse in the event the contractor fails to perform obligations in the contract.
The bungling has seen accusations that the Energy and Power Development Ministry or its Minister, Dr Samuel Undenge, pushed ZPC officials to make the payments to Intratek but Dr Undenge denied the accusations saying the ZPC management blundered on their own and were not supposed to release a cent to Intratek without putting in place mechanisms to recover the money in the event the firm defaulted.
Zesa Holdings and the ZPC board are now calling for an audit of all the power deals involving Intratek.
The $4,8 million was supposed to cover feasibility studies, topographical survey, boreholes, clearance of site, the geo-technical survey, fencing of the site, wayleaves and administrative structures.
Only feasibility studies and the topographical survey have been done on the $200 million project.
Zesa Holdings chief executive Engineer Josh Chifamba confirmed the development saying apart from the audit, the code of conduct would be applied against ZPC officials who defied corporate governance tenets.
ZPC is headed by Engineer Noah Gwariro.
Said Eng Chifamba: “That was bungling and we have asked to understand why (ZPC) management would do that with public funds. These are public funds and there is a well-established system that if you make an advance payment, there must be an advance guarantee against the money.
“That is a given and all officials know that. An advance payment should be secured with a performance bond and that is meant to manage the risk in the event of non-delivery of a service paid for. You will have recourse by cashing the bond and recovering whatever you would have paid.”
Eng Chifamba continued: “The fact that they decided to release money to Intratek without a bond means they had to alert the board and seek authorisation and apparently this was not done.
With this development, we have considered it prudent to do a forensic audit to review all the contracts just to check if they can stand to scrutiny as far as corporate governance and risk management is concerned.
“We have a code of conduct as a company and it is going to be applied to deal with staff who might have been negligent.”
The Zesa Holdings Audit and Risk Management Committee also raised a red flag and summoned ZPC officials to explain the bungling last week.
Zesa group legal advisor and corporate secretary Mr Saidi Sangula wrote to ZPC officials on May 9 requesting them to come for a meeting last Wednesday.
Reads Mr Sangula’s letter: “Your committee will be requested to brief the Zesa Holdings on issues surrounding the appointment of Intratek Company for the Gwanda and other power projects and the current status relating to that contract.”
Quizzed why they by-passed the board and released the money to Intratek without securing performance bond, ZPC acting managing director Joshua Chirikutsi referred questions to the board chairperson, Engineer Stanely Kazhanje.
“Haaaa, on that one, talk to the board chairman,” Eng Chirikutsi said.
Eng Kazhanje said: “I understand you talked to the group chief executive (Eng Chifamba) and what he has said is the correct information and the position of the board.”
On allegations that he had pushed ZPC management to act otherwise, Dr Undenge said he would never support a move that did not protect public funds.
“I would never do that because I called the Zesa management to a meeting where we wanted to know how they were going to manage the financial risk,” he said.
“I stated that they should pay any contractor against performance and ensure there are performance bonds in place because we are dealing with public funds. I asked ZPC to prepare a paper stating the mechanisms they will use to guard against any financial risk. That paper is still to come. Anything contrary and what has happened is against the ministry’s expectations.”
The ZPC board met last Thursday and spent the whole day discussing the Intratek issue with some board members calling for the suspension of officials involved.
Government is working on a new law called the Public Sector Corporate Governance Act that will see corruption and other related maladministration in the public sector being punishable at law.
The new law, which is likely to be effected next month, would largely incorporate recommendations made in the National Code for Corporate Governance that was crafted by Government and the private sector in 2014.