INYATSI INVOICES FOR WORK AT PHUZUMOYA

MBABANE – What does construction entail?

Kantey & Templer (K&T) (Pty) Ltd’s contract for the construction of the Strategic Oil Reserve Facility was revoked, amid complaints by the Ministry of Natural Resources and Energy that it has allegedly lapsed. However, documents seen by the Times SUNDAY reveal that Inyatsi Construction (Pty) Ltd invoiced Kantey & Templer for work evaluated at over E5 million. Invoices marked ‘12’ show that there was work that was done by the giant construction company on the project site. Inyatsi charged K&T a sum of E3.4 million and it is stated in invoice 11 that work for E1.67 million was done. A South African company came to the country to undertake geotechnical studies, which involved soil testing, drilling and other related works. For this task, K&T was charged E600 000. The company also paid E500 000 for site establishment. Acting Minister of Natural Resources and Energy Jabulani Mabuza referred to a press release that was published to set the record straight on the revocation of K&T’s contract.

violates

The ministry reacted to a Times SUNDAY article titled ‘government violates E900m fuel reserve contract’. The Ministry of Natural Resources and Energy said it entered into a turnkey written agreement with K & T on November 22, 2014 (2014 Agreement), in terms of which K & T undertook to design, finance and construct the Strategic Oil Reserve Facility at Phuzumoya area within a period of two years. This meant that K & T was obliged and expected to complete the project by October 2016, according to the ministry. Four months after the signing of the contract, K & T requested government to provide a guarantee (Government Guarantee) for the project in order to enable the company to unlock the funding. In May 2015, the ministry said government duly prepared and signed the requested guarantee. It said it accordingly furnished the contractor with same. It effectively meant K&T had 17 months after the guarantee had been issued to look for funding and complete the project in October 2016. “It is worthwhile to point out that the guarantee was an assurance to pay K & T for the construction of the facility upon completion of the facility,” the statement read.

agreement

The ministry argued that three years after signing of the 2014 agreement passed without construction of the facility as undertaken by K & T in the signed agreement. It alleged that the contractor cited failure to unlock funding as the cause of its failure to perform.  The Ministry of Natural Resources and Energy stated that K & T thereafter claimed that what would enable it to unlock funds was for government to grant it further rights to operate the facility upon completion in the form of an additional agreement commonly known as a Build, Own, Operate and Transfer (BOOT). Therefore, at the request of K & T, in addition to the Government Guarantee as well as the 2014 turnkey agreement, the ministry said a BOOT agreement was signed with K & T as well as a subsidiary supply agreement with Vitol (VTTI) in April 2017, all in a bid to assist the company to unlock funding.

activities

Upon signing of the BOOT agreement, it said a detailed project work plan with timelines was submitted by the company to the ministry in April 2017, stipulating when construction works and related activities would be undertaken. According to the detailed project work plan, it said K & T undertook to commence construction of the facility on August 9, 2017. It must be mentioned that the BOOT Agreement had certain condition precedents, according to the ministry’s statement. The ministry stated that one of the conditions was that the company had an obligation to commence construction of the facility within six months from the date of the signature, failing which, all the agreements such as the turnkey, supply agreement, guarantee agreement and the BOOT would lapse. From the signing of the BOOT contract on April 5, 2017, the ministry said it continuously monitored closely progress on site, and regrettably there was no commencement of construction of the facility despite the undertaking in the detailed project plan submitted by the company. By the end of six months (which fell on October 5, 2017) the construction works had not begun as stipulated in the work plan thereby causing the contracts to lapse, argued the natural resources and energy ministry.

statement

It is mentioned in the statement that the company was duly informed of the lapse of the agreements on October 9, 2017 in a meeting and also in writing. “It is worth mentioning that several attempts were made by the ministry through letters and meetings to follow up on progress as there was no physical activity on site as per the work plan,” read the statement. It claimed it was not aware of any dispute between it and K & T particularly since no notice of such dispute had ever been received by it. “Furthermore, the ministry is not aware of any funding letters from prospective funders and in any case such letters are said by the article to be dated May 2019, way after the lapse of the contracts,” the ministry argued. “Also, it was never an obligation on the part of government to source funds. This was supposed to be done by K & T. Government’s concern in the circumstances was to determine if construction commenced within the six months as agreed upon.”

The ministry then made a declaration that it was proceeding with the project as it was to use other avenues. It is now about four years since the ministry terminated the contract and there is no construction on project site. Article 22.1 of the agreement provides that in the event of any dispute arising out of or relating to this contract or the ‘breach’, termination or ‘invalidity’ thereof,  then any party may give written notice to other party to ‘initiate certain processes’. The agreement, which served as a contract, can be terminated by either party to initiate certain processes. In terms of Article 22.2, the parties shall first settle the dispute by ‘mediation’. Unresolved disputes are referred to the arbitrator in terms of the contract.

concern

Sources have raised concern that there was neither a mediator nor arbitrator that legitimised the termination of the contract by the ministry on behalf of the Eswatini Government. “The parties may agree on the mediation procedure and on the mediator and failing agreement within five days of the notice referred to in Clause 22.1. The mediation shall take place in accordance with the United Nations Commission on International Trade Law (UNCITRAL) Model Conciliation Rules and the mediator shall be appointed as agreed to by all parties,” partly reads the contract that was terminated by the Ministry of Natural Resources and Energy through a letter. K&T and government had agreed that the appointing authority was to be the Association of Arbitrators (Southern Africa). “The number of mediators shall be one, and the number of arbitrators shall be one,” partly reads the agreement.

The parties agreed that the place of mediation and the arbitration shall be Ezulwini, Eswatini. It has been established that K&T hasn’t stopped working on the project behind the scenes. This is regardless of the fact that K&T directors are unable to access the project site at Phuzumoya in Siphofaneni since gates were locked in 2017. Sources said the local company received correspondence dated February 9, 2023 from BMT Portugal LDA in which the European firm expressed an interest in entering into a joint venture with K&T. The proposed joint venture agreement which K&T sought from BMT is for the design, engineering and construction of the strategic oil reserve facility of 90 million litres storage capacity.   

pledged

The foreign company pledged to secure the project funding against the sovereign guarantee of about E900 million issued by the Government of the Kingdom of Eswatini. The Times SUNDAY reported about three weeks ago that there is an Act of Parliament to which His Majesty King Mswati III assented on February 26, 2015. It is still in force. It is called the Strategic Oil Reserve Facility Project Guarantee Act, 2014. This law was enacted by the King and the Parliament of the Kingdom of Eswatini. It is an Act to authorise the minister of finance to issue a guarantee for the payment of a sum not exceeding E885 972 000 in respect of the Strategic Fuel Oil Reserve Facility Project. Reacting to this law, Mabuza, the acting Minister of Natural Resources and Energy, said Acts for loans were not amended or revoked because they were enacted specifically to address a certain issue. After the issue has been addressed, he said the law could not be said to be in force. He was specifically reacting to the notion that K&T (Pty) Ltd was removed from the project site at Phuzumoya in the eastern part of Eswatini, but the law that recognises it was never amended or revoked.

revoke

While the Guarantee Act was understandably still in force, Parliament passed the Petroleum Act of 2020. The Petroleum Act did not revoke the Strategic Oil Reserve Facility Project Guarantee Act. The custodian of the Petroleum Act is the Ministry of Natural Resources and Energy, which later established the Eswatini National Petroleum Company (ENPC).
It has since emerged that the idea to set up an oil company is contained in an operation and supply agreement for the Strategic Oil Reserve Facility. Government, through Winnie Stewart, the former Principal Secretary (PS) in the Ministry of Natural Resources and Energy wrote to K&T in March 2017,  stating that the operation would have a shareholding as follows: 
* Kantey & Templer – 30 per cent.
* Government (represented by the National Oil Company).
* Citizen empowerment – 29 per cent.

In the Petroleum Act that was later enacted, government is the sole shareholder in the oil company styled ENPC. Section 77 of the Act establishing ENPC provides: “the government, through the national oil company may, at its expense or in partnership with the private sector, establish and maintain strategic stocks of petroleum products, in this Act referred to as National Strategic Stocks.

strategic

“All installations and operations for the purposes of establishing and maintaining the national strategic stocks under this section, including, but not limited to the storage, transport and sale or any form of disposition of the stored products shall be subject to the provisions of this Act.” On the other hand, it must be said that the Strategic Oil Reserve Facility Project Guarantee Act was published in the gazette. In terms of Section 2 of this Act, under interpretation, ‘contractor’ means the company engaged for the construction of the project. Agreement, in terms of the Act, means ‘the agreement between the contractor and the Eswatini Government represented by the Ministry of Natural Resources and Energy. The contractor mentioned in the law is Kantey & Templer (Pty) Ltd. The Times SUNDAY has seen the Government Guarantee Agreement. It is between the Government of the Kingdom of Swaziland (Eswatini) and Kantey & Templer (Pty) Ltd – in respect of the Strategic Fuel Oil Reserve Facility Project. Article 1.2 of the agreement states: “And whereas in terms of the Strategic Oil Reserve Guarantee Act No.1 of 2015, the Ministry of Finance is authorised to issue a guarantee in favour of Kantey & Templer Swaziland (Pty) Ltd for purposes of paying a sum not exceeding eight hundred and eighty five million nine hundred and seventy two thousand Emalangeni (E885 972 000.00).”

irrevocably

It further states: “And whereas the guarantee hereby irrevocably represents and warrants to K&T that it has reviewed and considered an authentic copy of the agreement concluded between it and K&T in its capacity as guarantor.” The agreement, to which Section 2 of the Act refers, was signed by Martin Dlamini, the former Minister of Finance in his capacity as a guarantor. The guarantor’s witnesses are former PS in the Ministry of Finance, Bheki Bhembe and Sikhumbuzo Hlophe. Witnessing for K&T was the late Mphilo Dlamini and Mondli Nxumalo. The meaning of commissioning in terms of the law means the ‘time when the facility is available for use’. To demonstrate full recognition of K&T, the office of the accountant general (AG) authorised the opening of a sinking fund for the Strategic Oil Reserve Facility. A sinking fund is a strategic way to save money for a specific purchase by setting aside a little bit each month.

finalised

Based on the agreements signed by government and K&T and the Guarantee Act of Parliament, it remains to be seen how this issue would be finalised in terms of the law. An esteemed attorney, speaking on condition of anonymity, said the Petroleum Act, at least, should have revoked or amended the Strategic Oil Reserve Facility Project Act. As it stands, the Mbabane-based attorney said the Petroleum Act rightfully establishes the ENPC, while the Guarantee Act allows the contractor to continue with the project. “This is a very sensitive matter. I think Parliament or the King was never told the whole truth because it was the 10th Parliament that passed the Guarantee Act while the Petroleum Act was passed by the 11th Parliament. I suspect certain facts of the issue were hidden when the current Parliament passed the Petroleum  Act,” stated the senior attorney. Another senior attorney spoke on record.  Sipho Gumedze, an esteemed constitutional and human rights attorney, said the two laws appeared to him as complementing each other. He said the Strategic Oil Reserve Facility Project Guarantee Act allowed the contractor, K&T, to raise money for the construction of the facility at Phuzumoya, while the Petroleum Act authorised ENPC to operationalise it (facility).
Gumedze said ENPC would then be at liberty after the construction of the strategic oil reserve by the contractor to set up regional storages and build filling stations in the rural areas, among other things.

overridden

Asked what K&T should do because it was kicked out of the project through a letter signed by ex-PS Winnie Stewart, he sounded surprise that an Act signed by the head of State was overridden by a simple correspondence (letter). The attorney wondered where the ex-PS got the mandate to issue a letter that was in contravention of the Strategic Oil Reserve Facility Project Guarantee Act. He said this Act was passed by both Houses of Parliament before it was signed by the King. “The King legislates in Parliament,” he said. He added: “the letter signed by the ex-PS evicting the contractor from the project site is good for nothing when you consider the validity of the Guarantee Act.” Attorney General Sifiso Khumalo was asked whether the unrevoked Guarantee Act allowed the contractor to continue with the project. He was informed that the issue was not about government liberty wherein it should pay the guaranteed sum. After lengthy discussions, the attorney general said: “the guaranteed sum is conditional upon commissioning of the facility as per Section 4, and you say it was never done.” The attorney general, who was in office when the Guarantee Loan Act was passed is Majahenkhaba James Dlamini, the current Supreme Court judge.

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