KUKHANYA TO POCKET E100M FOR DOING NOTHING

MBABANE – It looks as though it never rains but pours for the government of the Kingdom of Eswatini.

The Times SUNDAY can reveal today that if contract obligations were to be followed to the letter, Kukhanya Civil Engineering could be owed E100 million by the government in penalties for the stalled 42 kilometre-Sicunusa-Nhlangano road.

This is despite the fact that the taxpayer has already spent E576 million on the incomplete project.
The Public Accounts Committee (PAC) whose chairperson is Deputy Speaker MP Phila Buthelezi stated in its report that government should immediately terminate the contract with the contractor as it was allegedly attracting monthly penalties in the region of E5 million while the project was being stalled.

The project stopped in April 2018. Conservatively, it effectively means there has been no project activity for 20 months now, translating to E5 million multiplied by 20 months, totalling to E100 million.
If the E100 million was to be paid in full, it could mean government would have paid E676 million for a failed project.

Negotiations ongoing

It has been revealed the contract between government and Kukhanya has not yet been terminated. Negotiations over a settlement are ongoing, sources said.
“While negotiations are ongoing and the project is stalled, government attracts monthly penalties in the region of E5 million,” the government source said.
Despite challenges in completing the project on schedule, it has been further revealed that Kukhanya Civil Engineering still has a role to play or say in the failed project.

To complete the construction of the road, the initial cost was E465.99 million (E465 990 202.85) but government ended up spending E576 million.
Sources say government is currently working with the company in finalising finer details of the project. Before engaging another contractor to finish the project, it has now emerged that Kukhanya should consent to this arrangement through termination of its contract with government.
As it were, government sources said the Manzini based company was still in charge of the Sicunusa-Nhlangano road project.
Impeccable sources within the Ministry of Public Works and Transport said the termination of the contract could be done at a cost.

breached contract

A party found to have breached the contract should compensate the other, according to information from those who are in the know. 
However, it must be said that it is not yet clear as to which party breached the contract between government and the company.
Sources pointed to two argumentation theories that could be put on the table to determine or conclude the impasse –one being the fact that the project could have been completed in 24 months but wasn’t finished five years later and the second being which party actually caused or contributed to the delay.

Investigations revealed that Kukhanya would argue that government’s delay in paying for interim certificates was one of the reasons that stalled progress.
At some point, the failure by government to pay for the certificates accrued interest of E14 million.
Government’s argument could be that despite those delays in payments of interim certificates, it finally spent E576 million on an incomplete project, sources said.
Engaged on this issue, Principal Secretary in the Ministry of Public Works and Transport Khangeziwe Mabuza confirmed that government was negotiating with Kukhanya over a settlement. She indicated that she was not sure what would be the outcome of their negotiations.
Mabuza mentioned that talks could revolve around whether the contractor had capacity to continue with the project under the prevailing circumstances.
The principal secretary said she was also not at liberty to divulge information on who should be paid after the termination of the contract – Kukhanya or government.

She made it clear that government could not just force out the contractor.
“We cannot just push out the old contractor. We have a contract with it,” she said. If Kukhanya agrees to terminate the contract, she said legal tendering processes would be followed.

“The project will go through the tendering process. That’s my philosophy, things must be done transparently,” the principal secretary insisted.
Those in the know told this newspaper that certain managers within the Ministry of Public Works and Transport had suggested that one of the well established companies be engaged to take over the project through a single source procurement system.

To the contrary, others are of the opinion that Kukhanya will take government to court for the breach of contract. Single source purchasing refers to purchases from one selected supplier, even though there are other suppliers that provide similar products.

pushing agendas

Reacting to moves to engage another company through the single source procurement system, the PS said there was none such but pointed out that it was possible some people could be pushing their agendas. 

Minister Chief Ndlaluhlaza Ndwandwe said the PS was the rightful authority to comment on the matter.
In his preamble to his report to Senate which he submitted in November 2019, the minister said: “the ministry is engaged in concerted efforts to complete the stalled projects such as the Nhlangano-Sicunusa road, and the Mpandze-Mbadlane road, which have become a reflection of disservice to the intended beneficiaries.”

The minister also pointed out that the contractor on site suspended works due to non-payment. He mentioned that the Ministry of Public Works and Transport opted to terminate the contract.
He further disclosed that they applied and subsequently obtained a no-objection to terminate the contract from the co-financiers.
“Once the termination process is complete, the project will be re-launched in order to complete the remaining works,” said the minister.

Chairman of the PAC MP Phila Buthelezi could not be reached for comment as he was reportedly in Taiwan.
Persistent attempts to get hold of Peter Ngwenya, the Director of Kukhanya, failed.
Since the rigmarole began, Ngwenya has never talked about the issue, and PAC has also failed to have him appear before it in Parliament.

joint venture

Meanwhile, another reason that might have caused the project to fail is the withdrawal of a Portuguese company styled Gabriel Couto, which had formed a joint venture with Kukhanya.  Gabriel Couto held a shareholding of 70 per cent against 30 per cent held by Kukhanya.
This joint venture was found to be in conflict with the conditions of the loan secured from BADEA.

Gabriel Couto did not qualify to build the road because it was neither an Arabic nor African firm or from an OPEC (Organisation of the Petroleum Exporting Countries) member country. On February 11, 2014, the financier, the Arab Bank for Economic Development in Africa (BADEA), wrote to the Government of Eswatini: “According to your above mentioned letters (written by Naniki Mnisi who was acting as Principal Secretary in the Ministry of Public Works and Transport), the Ministry of Public Works and Transport (the executing agency of the project) has proceeded with awarding and signing the contract, without obtaining BADEA’s approval on the evaluation report.”

The letter, written by Kamal Mahmoud, BADEA’s Director of Operations, was a response to Mnisi’s letters dated September 30, 2013 and January 12, 2014.
The bone of contention was that government did not comply with BADEA’s loan agreement.
Further read the letter from the bank: “The firm Gabriel Couto, which was awarded the contract, is not eligible for the project bidding, based on the submitted documents via your letter dated January 12, 2014, which clearly identified that the firm is a Portuguese company.”

project still incomplete

In the current financial year, Auditor General Timothy Sipho Matsebula reported that the initial planned duration of the project was two years but it was still incomplete five years later. 
He said the main concern was that the works on the project site resembled a drought stricken grazing area.
He had noted that the project would be of compromised quality, if it was to be completed by the current contractor.

 That was due to the fact that Gabriel Couto had demobilised from site and suspended their works, regardless of the fact that a Joint Venture agreement between it and Kukhanya Civil Engineering was entered into and signed by both parties on August 9, 2013.
Gabriel Couto was the lead partner, by virtue of holding the majority shareholding of 70 per cent in the joint venture.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: