Rural Electrification Agency explains Hotspeck operations

19 Oct, 2014 - 06:10 0 Views

The Sunday Mail

The Rural Electrification Fund board formed Hotspeck Enterprises in 2010 to augment fiscal funding and levies charged on all grid electricity consumers as provided for by the Rural Electrification Fund Act, a senior official has said.

Rural Electrification Agency (rea) chief executive officer, Engineer Joshua Mashamba, said this while responding to reports that Hotspeck was formed without Cabinet approval and that it connived with Wattle Company to produce treated wood poles for rural electrification.

He said the firm was established following a pole shortage on the market between 2008 and 2012.

“The practice of backward integration is a business strategy to secure an uninterrupted supply of inputs and control of inputs cost to keep in check overall cost of rural electrification so as to cover more projects with the same budget than was possible under a situation of erratic supply and escalation of inputs costs.

“All the additional funds that are generated through Hotspeck Enterprises’ business are ploughed back into the Rural Electrification Fund for the purpose of accelerating the Rural Electrification Programme.”

Eng Mashamba said a contract to supply poles was awarded to the Wattle Company by the State Procurement Board in April 2012.

Deliveries started in June 2012, but were suspended on March 20, 2013 after creosote shortages on the market inhibited the Wattle Company’s operations.

“REF subsequently applied to the SPB for cancellation of the contract in March 2013, whereupon the SPB responded and advised that the two companies should resolve the matter amicably.

“In order to meet its obligation to REF, Wattle Company sub-contracted Hotspeck Enterprises (Pvt) Ltd, a subsidiary of REF, who came into operation in October 2012 and have a state-of-the-art plant to treat its raw timber on the basis of a commercial agreement between the two entities, Hotspeck and Wattle Company.

“Deliveries of poles to REF resumed in October 2013, and the contract is still running.”

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