Times Of Swaziland: MINISTERS ILLEGALLY COMMIT E220M FOR FACTORY PROJECT

MINISTERS ILLEGALLY COMMIT E220M FOR FACTORY PROJECT
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BY WELCOME DLAMINI on 08/02/2020 23:09:00


MBABANE – Two Cabinet ministers came under severe scrutiny from parliament in
the past week for committing government funds without seeking approval from the
House.
Minister of Finance Neal Rijkenberg and his colleague Manqoba Khumalo, the
Minister of Commerce, Industry and Trade, committed an amount of E220 million
towards the construction of a factory from which an international investor is
expected to operate.
The name of the investor has been withheld to protect the investment that is
coming to the country and the about 200 jobs the investment is anticipated to
bring. Initially, the project was handed to the Industrial Development
Corporation of Eswatini (IDCE) for financing but government, it has now been
revealed, has since taken it over. This is said to have happened in November
last year.
Rijkenberg and Khumalo, by committing the government funds to the project, in
essence, violated the Public Finance Management Act, which spells out clearly
what processes need to be followed before such an undertaking could be made.
The Act, in Section 36, prohibits ministers from making commitments ‘that have
financial commitments for the government budget or any local government budget
that are not authorised by the annual budget, or an authority provided by the
Act, or other legal authority.
The Act also states that ministers “shall not expend public money other than
in accordance with authority under the annual budget, or an authority granted
under an Act”.
In Section 28 (1), it is provided that “government shall seek approval of
parliament for making multi-year commitments by presenting the proposed
multi-year commitments in the annual budget documents for approval by parliament
and shall, in addition, provide information on the previously approved
multi-year commitments and the current status of these commitments”.
‘Multi-year commitments’ include capital investments and related recurrent
costs, obligations for government under public-private partnerships and other
investment and financing arrangement.
Over E18m already spent
The Times SUNDAY spoke to two highly-placed and senior sources who said the two
ministers, Rijkenberg and Khumalo, had a tough time trying to convince
parliament not to stop the project because of the violation of the Act.
Parliament only became aware of the commitment made by the two ministers when
Rijkenberg appeared before the Finance Sessional Committee and the Portfolio
Committee on Finance for final deliberations before he tables the Appropriation
Bill (National Budget) on Friday.
“We discovered that they have already spent over E18 million on the project.
How do you spend so much money without parliament’s approval? The project
shouldn’t have continued because it has violated all financial rules,” said
an astute legislator who is privy to the discussions.
What saved the ministers, the legislator said, was a collective decision by the
two committees to put the country’s image first before everything else. “At
the end of the day, the project has to continue because, as MPs, we are not
reckless and irresponsible. We decided to give the ministers the benefit of the
doubt because we all want this project to continue,” said the MP.
The legislator said they decided to let the ministers face the Public Accounts
Committee, when the time comes, where they will have to explain their reasons
for deciding to ignore legal processes.
Another issue that is said to have come up was that since government had taken
over the project, what would happen to the contractor who was already on site
continuing with the job.
“The contractor was appointed by IDCE who have since pulled out of the
project; so the fundamental issue now is since the project is now funded by
government will it want to continue with this contractor who was not hired
through government’s tender process? If there’s no re-tendering for the
project, then it means you cannot use government funds,” said The MP.
But the legislator noted that this might be a catch-22 situation because the
contractor is under contract and will demand payment; “but the question is who
will they demand the payment from because IDCE pulled out?”
According to the MP, this is now a mystery that needs to be solved by
government, IDCE and the Eswatini Investment Promotion Authority (EIPA).
Problems with project
Meanwhile, a source who works closely with the Executive (Cabinet), said the
project began experiencing problems under IDCE when the corporation had a
fallout with its Chief Executive Officer (CEO), Phiwayinkhosi Ginindza, which
resulted in the latter being suspended.
The impeccable source said IDCE then informed government that they were not in a
position to fund the project and asked that alternative funding should be
sought.
This was reportedly in November and by the time government concluded everything,
parliament had already adjourned for the year 2019. “The alternative was to
raise bonds that people could buy to raise funds for the project and that was
agreed. This was supposed to go through parliament but then the House had
already adjourned,” explained the source.
A decision was reportedly taken to go ahead with committing government funds for
the project, with the assumption that a supplementary budget would be tabled in
parliament once it opened in 2020.
“The problem was that when IDCE pulled out, work was already underway and the
contractors had to be paid and government therefore had to inherit all the debts
that came with the project,” elaborated the source.
However, the source said, when the two finance committees heard about this, they
informed Rijkenberg and Khumalo that they had been misguided because ‘you do
not request supplementary budget for an item or project that was not even in the
budget initially’.
“The two ministers pleaded ignorance and apologised for the oversight. This
was understood by the MPs, who gave them the benefit of the doubt because they
were relatively still new in office. The MPs then took time to educate the
ministers about the process,” stated the source.
Two other concerns were reportedly raised by the MPs; and these included the
cost of the project, which was viewed to be high, and why the investor did not
build the factory instead of government shouldering the responsibility.
But with these two concerns, there was reportedly a lot of disinformation that
had been spread around the project. “For instance, there was information to
the effect that government does not construct factory shells for companies but
they do these themselves. This was pure lies because there are more than 15
companies that are operating from factory shells constructed by government,”
said the source.
investor’s pre-condition
According to the source, the two ministers also explained that it was the
investor’s pre-condition that government should construct the factory for them
and they would rent it with the option to buy it after three to five years.
This is reportedly part of the Memorandum of Understanding entered into with the
investor. “The MPs understood this and agreed with what the ministers were
saying,” stated the source.
Regarding the cost, the ministers are said to have told the MPs that the
calculations were based on the money that was spent in constructing two other
factory shells in Matsapha about five years ago.
“These factories were each built on 3 000 square metre land at a cost of E30
million. The current project is being built on 18 000 square metre land, which,
in other words, is six times bigger than the other ones. When you do your
mathematics, you come to E180 million. But this was five years later and the
cost of things has gone up, which is why the budget is at E220 million, and this
makes sense,” further explained the source.
The ministers are said to have also explained that the issue of the contractor
would not be tampered with because the proper procurement process was followed
when the service provider was engaged.
“The ministers said they found no reason to tamper with the tendering process
because government was literally continuing with an already existing project.
They said there were just unforeseen circumstances that arose along the way,
that have nothing to do with the contractor and how they were selected,”
stated the source.
He said ministers told the MPs that they were cognisant to look at whether there
were previously any problems that were encountered when the contractor was
engaged and found that there were none.
“They explained that starting the ender process afresh was not necessary and
was going to waste time and there was just no motivation to terminate the
services of the current contractors. The MPs appeared satisfied with the
explanation,” added the source
A reputable forensic audit firm is said to have also found the tendering process
to have been without controversy.
IDCE Chairman Dumisani Kunene confirmed that they were no longer part of the
project. “This has always been a government project, we were just asked to
participate in terms of financing it. Government then had other options and
decided to continue with the project on its own,” he said.
He said IDCE leaving the project had nothing to do with the corporation’s
fallout with its CEO.
“Government just had urgency that we could not meet on the project in terms of
timelines. We had committed some funds to the project management cost but were
still going to engage government in terms of the timeline; whether they were
going to accept our timelines. Eventually they had an urgency to complete and
their urgency was far before our timelines. In that case we couldn’t actually
assist them,” Kunene said.
‘budget speech to shed light’
Minister Rijkenberg said he could not talk about the project because that would
give away part of what he would say when delivering his budget speech on Friday.
“It would be wrong for me to reveal at this stage what is in the budget and
what is not. The factory is being built by EIPA, please check with them. They
did start the process with IDCE but they have now applied for a budget to
complete it,” the minister said.
Minister Khumalo said he was currently out of the country and could only talk on
his return. On the other hand, Chairperson of the Finance Sessional Committee MP
Thandi Nxumalo said everything that they deliberated with the ministers would
only be revealed on Friday when the finance minister tables the national budget.
“I cannot pinpoint a particular issue because we looked at the budget
holistically. It is a norm that the minister sits down with the finance
committees for deliberations before tabling the budget in the House. It’s not
proper for me to divulge what we discussed with the minister. Friday is around
the corner, you will hear what the budget contains,” she said.
Nxumalo said, anyway, the budget would still be debated by the House.