MBABANE – Unlike other projects awarded to foreign firms, the Strategic Oil Reserve Facility agreement mandates a 30 per cent subcontracting quota dedicated to empowering local suppliers.
The Times SUNDAY has learnt that the agreement requires the four Taiwanese project partners to empower emaSwati by providing employment opportunities and collaborating directly with Eswatini companies.
Whether conservatively viewed or otherwise, this provision represents a significant commitment to local economic inclusion, sources said.
In monetary terms, 30 per cent of E5.2 billion, is the equivalent of E1.5 billion.
It is understood that material such as cement, trucks and other construction equipment may not be shipped from Taiwan.
A source at the Eswatini National Petroleum Corporation (ENPC) said the project partners will outsource some of the works to Eswatini companies, such as the building of offices on the construction site.
This newspaper reported recently that mainland China companies preferred their own trucks. There were instances where they also bought cement from Chinese firms in South Africa.
Local suppliers complained about unnecessary imports of building material from neighbouring countries.
It was announced that there will be no open tender for the construction of the Strategic Oil Reserve Facility to be built at Phuzumoya in the Lubombo Region.
This conflicts with the principle of procurement as stated explicitly in Section 38 of the Public Procurement Act, 2011, which reads: “All procurement shall be conducted in a manner which promotes economy, efficiency, transparency, accountability, fairness, competition and value for money.”
However, Section 5(1) caters to this discrepancy.
The section reads: “Where this Act conflicts with an obligation of the Government of Swaziland (Eswatini) arising out of an agreement with one or more States or with an international organisation, the provisions of the agreement shall, to the extent that this Act conflicts with that obligation, prevail over this Act; but in all other respects, the procurement shall be governed by this Act.”
The Strategic Oil Reserve is valued at E5.2 billion and is designed to hold a 60-day fuel supply, which is about 60 million litres of petroleum and diesel.
CECI was announced as the project manager. Eswatini companies have been nursing hopes that they may have a chance to be the main contractor.
This week, Mafutseni Member of Parliament (MP) Sabelo Mtetwa asked Prince Lonkhokhela, the Minister for Natural Resources and Energy, to disclose the name of the main contractor for the project.
Responding to MP Mtetwa, the minister said: “The contractor awarded the tender is Overseas Electrical Engineering Corporation, a Taiwanese contractor, which came with the loan conditions from Exim Bank.”
The correct name is Overseas Electric Engineering Corporation (OEC). It was established in 2021 to undertake electrical and mechanical work.
OEC is 100 per cent owned by Overseas Investment and Development Corporation (OIDC), a private company established in 1995 to assist the government to enhance bilateral relationship between ROC (Taiwan) and countries with diplomatic relationships by fulfilling its international obligations.
To this end, late Dr Jeffrey LS Koo, former Chairman of Chinese National Associate of Industry and Commerce, invited Taiwan major public and private enterprises, group and financial institutions to incorporate the company.
On the other hand, the notable parent company for OEC (contractor for the Strategic Oil Reserve Facility) is Taiwan Electrical and Mechanical Engineering Services (TEMES). TEMES has undertaken a wide range of projects globally, including power generation (thermal, hydropower, solar and wind), transmission, substation projects and power grid enhancement.
Some notable international projects include a BOT contract for a power plant in Guam, the enhancement of the power grid in Haiti and solar PV training in the country.
Minister for Finance Neal Rijkenberg formally signed a financing agreement with the Export-Import Bank of the Republic of China to support the construction of Eswatini’s first Strategic Oil Reserve Facility.
Section 204(1) of the Constitution of the Kingdom of Swaziland (Eswatini) gives government, through the minister for finance, to borrow or raise monies from any reputable source.
Since Rijkenberg is both the custodian of the constitutional provision empowering him to sign loan agreements and the Public Procurement Act, the Times SUNDAY spoke to him.
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Deviation from normal tendering allowed, but…
MBABANE – The law requires that government entities should seek the opinion of the Eswatini Public Procurement Regulatory Agency (ESPPRA) before entering into any agreement.
They must seek the opinion of the ESPPRA if the agreement shall require the application of procurement procedures or arrangements other than those in this Act.
Vusi Matsebula, the ESPPRA Chief Executive Officer (CEO), said he was yet to check what was last said about this issue but there were lots of talks about it.
Section 6 (1) of the Act accommodates a deviation from normal tendering procedure, but the entity must seek permission from the agency.
Reads Section 6 (1): “A deviation from the use of a public procurement method, rule, process or document may be permitted by the agency.”
It is permitted on the following grounds:
(a) Where exceptional requirements make it impossible, impractical or uneconomical to comply with the Public Procurement Act, 2011.
(b) Where market conditions or behaviour do not allow effective application of the methods, rules, processes or documents.
(c) For specialised or requirements that are regulated or governed by harmonised international standards or practices. ,
(d) Where national security may be compromised.
Recently addressing Eswatini Financial Times, Musa Shongwe, the acting Eswatini National Petroleum Company (ENPC) CEO, clarified that there was a false narrative about the cost implications of the project as perception had it that the project increased from E2.2 billion to E5.2 billion.
Shongwe said the E2.2 billion was only an engineer’s cost estimate, which was based on ready-for-tender designs, with the scope excluding certain quality and safety provisions.
The acting CEO mentioned that the deal with the Republic of China (Taiwan) included finance-raising for the 60-day storage facility.
He noted that finance was a challenge for ENPC in the last couple of years, further pointing out that the contract price was fixed.
Shongwe said there was no risk that it could escalate as any variations will be absorbed by the contractor.
Thirty-six months after the commencement of construction, he said an operational and fit-for-purpose facility would be handed over to ENPC, failing which the contractor would be compelled to pay penalties to ENPC.
He then unpacked the package that accompanied the deal, stating that it includes the financier (EXIM Bank), design consultants (CTCI), EPC contractor (OEC) and project manager (CECI).
He said they would ensure that the budgeted figure and actual project cost stayed the same.
He pointed out that other differences include, but are not limited to, ready-for-construction designs issued, whereas previously, ENPC would have only received ready-for-tender designs, thereby having to pay more to improve the designs to ready-for-construction designs.
*Full article available in our publication.
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