The Sunday Mail
China Machinery and Engineering Corporation (CMEC) overpriced its labour cost for refurbishment of Harare’s Morton Jaffray Water Works by US$20 million.
Further, auditors are failing to account for six luxury vehicles purchased under the project.
There is suspicion that the transactions could have been facilitated through kickbacks.
It also emerged last week that a significant number of water pumps at Morton Jaffray Water Works were decommissioned way before works began, resulting in water production dropping to critical levels, prejudicing residents of water and council of revenue.
The entire project is running behind schedule with contractors still erecting equipment warehouses for items that are yet to be delivered from China.
The bulk of the equipment is still being manufactured, according to an audit report on the implementation of the Harare Water and Waste (System) Rehabilitation Programme. The programme is being funded courtesy of a US$144, 4 million loan from the China Export Import Bank (China Eximbank).
According to the audit, the contractor overstated labour costs and the price of building three warehouses. The company and council are said to have pegged labour at US$28 million. However, according to auditors, this amount is three times the industry norm for a refurbishment contract.
The report also says the two parties put the cost of three warehouses at US$2,6 million, but an evaluation put the value at US$700 000.
In addition, there are suspicions that the cost of equipment, technical services and taxes were overstated in a bid to “balance off the figures” with US$144,4 million.
The report questions why council used project funds to purchase 21 luxury vehicles at a cost of US$1,3 million when the local authority had only appointed a 15-member project team. The six extra vehicles remain unaccounted for.
The 21 vehicles are said to have been purchased without following laid down rules under council’s procurement regulations.
No vehicle disposal plan was drawn up.
Project executive and town clerk Dr Tendai Mahachi, who authorised the vehicle purchases, is said to have declined being interviewed by auditors saying he was ill and asked for written questions.
A panel comprising councillor Stewart Mutizwa, Deputy Mayor Cllr Musarurwa Muzuwa, Mr Gabriel Chipara, Engineer Richard Maasdrop and Mr Tendai Toto conducted the audit and presented it to council two weeks ago.
“No project accounting reports were availed to the investigation team. Only schedules showing how much had been disbursed by a certain date were furnished. There are no internal audit reports for the project either,” reads the report in part. “These reports are key when tracking budgeted cost and actual cost, variance analysis reports, project cash flows, fixed assets tracking, errors of omission and commission, project deliverables, negligent and wilful misstatements, among other things.”
The report continues: “There is no demonstrable ownership and accountability for the project by the project team. This is attributed to the lack of project management skills and experience by some of the project team members. Very few members in the project team have major project exposure. There is inadequate legal, commercial, contract management, logistics, procurement or project finance skills.
“Particular note should be taken of the fact that the labour charge in the contract is US$28 million being 38 percent of the value of fitted equipment. This is a factor of three times the industry norm for a refurbishment contract. In the absence of any justification for the magnitude of this costs there is an implication an overcharge in the region of US20 million.”
The project, which began in March, has suffered delays with the only progress being construction of three warehouses and the much-publicised decommissioning of old water pumps.
At the time of investigation, the project was reportedly 25 days behind schedule and CMEC’s resident point-person told investigators that personnel at times go for days without work to do.
According to the audit report, the refurbishment contract does not state the project commencement date, meaning council will find it difficult to bind CMEC in the event of delays. The 15-man project team selected by council also lacks “major project exposure” and has technical deficiencies in the areas of legal, commercial, contract management, logistics, procurement or project finance. To date 58 percent of the loan disbursement has been surrendered to CMEC, in contravention of the contract guidelines.
A council team sent for pre-manufacturing factory inspection in China did not make price comparisons and dwelt on product specifications. “Council does not have a project bank account for this project. All payments for this project are made offshore by CMEC,” reads the report. “The investigation failed to inspect project bank accounts and payment documents to enable it establish whether there was abuse of funds. If, for example, the contract prices were fixed and agreed upon with criminal and corrupt minds, no one can track payments towards kickbacks.”
