By Gareth van Zyl
Cars, smartphones and solar powered cell towers were among items that inflated an initial price tag of Chinese telecommunications equipment firm Huawei’s controversial network upgrade deal for Zimbabwean state-owned mobile operator NetOne.
This is according to documents a source has provided to ITWeb Africa regarding the network upgrade deal, which is facing a court case in Harare amid allegations that the over $200 million contract was awarded illegally.
Zimbabwean-born Tafadzwa Muguti, who lives in South Africa, has taken NetOne, Zimbabwe’s State Procurement Board (SPB), Huawei and the Anti-Corruption Commission of Zimbabwe to Harare’s administrative court over the awarding of the $200 million contract.
The businessman, who is the chief executive officer of investment group Africapaciti, wants to find out how Huawei won the NetOne contract, even though the Chinese company did not go through an official tender process.
Because NetOne is a state-owned entity, it is obliged to adhere to Zimbabwe’s procurement laws with regard to the awarding of contracts, Muguti has argued.
Muguti also alleges the contract was awarded to Huawei despite Zimbabwe’s SPB having expressed concerns over an inflated price for the project. The SPB is the first respondent in Muguti’s court case.
And documents detailing the record of proceedings regarding the awarding of the deal, which are in the hands of ITWeb Africa, illustrate the SPB’s initial concerns about the Huawei deal.
In a July 2013 letter from NetOne to the SPB, in which the mobile operator addresses concerns about the Huawei deal to the SPB, an amount of $298.6 million is quoted for the upgrade, which hinged on a loan from China’s Exim Bank.
That figure was then dropped to $251 million, according to the documents, and ultimately — as the documents later reveal — this figure was cut to $218 million.
NetOne officials, in the document, argued that only Huawei could carry out the upgrade deal as the mobile network’s infrastructure is from the Chinese telecommunications firm.
But the State Procurement Board then raised the following issues, which are summarised below:
- “Members noted with concern that the Secretariat had failed to properly analyse the matter for logical presentation to the board.”
- “The presentation was jumbled up and comprised of disparate requirements including Upgrades, New Equipment and Construction of a Building.”
- “The matter was also hastily presented as an urgent item without adequate background and factual information.”
- “Background was inadequate and lazy.”
- “There was no clear justification why the current requirements should not go to tender, in light of the unclear relationships between the projects.”
The documents reveal that on 27 June 2013, the State Procurement Board deferred the pending of the contract to await further input.
The board also raised concerns about “the procurement of smartphones and tablets for resale to the public, which are not part of the network upgrade.”
Furthermore, the documents also highlight concerns that Huawei had quoted inflated prices for equipment that may not help with a widespread upgrade to next generation LTE.
Items that the deal was initially planned to include were as follows, according to the record of proceedings:
- Purchase of 1336 2.75G base stations
- Purchase of 600 3G base stations
- Purchase of 400 4G base station
- Supply of 500 diesel generators to serve as stand-by power at base station sites
NetOne in the documentation does argue that Huawei has quoted it at a lower price for base stations at $170,000 rather than the market price of $180,000.
In the documents, the Zimbabwe’s ministry for transport, communications and infrastructure development, did write to the SPB calling for the upgrade to be given to Huawei.
The ministry argued the deal could help NetOne boost its services, subscriber base and contribute to Zimbabwe’s ICT development.
But a letter from the Transport department then outlines how the project had been scaled down.
“Some of the key components that have either been scaled down or removed as a result, include Base station Towers that have been reduced by half, removal of four wheel drive vehicles for project implementation and maintenance, solar powered Base Stations that were meant to serve as coverage gap fillers, the online charge system, where NetOne will later have to expand the existing system to meet the increased subscribers to be connected,” says the letter.
The response goes on to allay fears regarding the number of 4G stations, as the Transport department said that these would be deployed in highly dense urban areas to cater for demand.
The Huawei-NetOne contract, though, was publicly announced in July while deliberations continued in the background.
And in that same month, concerns about the deal were communicated from the State Procurement Board in a record of proceedings.
Among these included:
- “Members noted that there were allegations of overpricing some aspects of the project components.”
- “Members noted with concern that according to the minute from the Secretary for Transport, Communications and Infrastructure Development to Treasury dated June 19, 2013, NetOne and Huawei Technologies of China had already signed a contract for the Works without authority.”
A board resolution on the 18th of July then further deferred the matter.
Further reading into the documents also reveals that the Post & Telecommunications Regulatory Authority of Zimbabwe but that concerns existed that the watchdog had not consulted the relevant industry experts.
The contract price in the documents goes down then to $218 million, while reports in July talk of a deal that was just over $200 million
Court case postponed
Subsequently, on 19 November, Tafadzwa Muguti’s court case against the relevant parties was postponed.
However, in court documents, the SPB has outline that it did finally approve the Huawei deal, despite its concerns outlined in the record of proceedings.
The board then further highlights how it consulted advice from three government ministries and telecommunication and IT engineers.
The board goes on to say in court papers that the urgency of the upgrade drove its decision.
As a result, the board asked that the court reject Muguti’s appeal as “frivolous and vexatious.”
The board also then asks that the court finds that its decision was “prudent and feasible.”
Finally, the board asks that the court throws out the appeal with costs for a lack of merit.
Chinese telecommunications equipment firm, Huawei, meanwhile has also denied alleged corruption regarding the deal.
“For the project with NetOne, we strictly abide by all procurement laws and regulations in Zimbabwe, our target is to help Zimbabwe people enjoy their life through communication at affordable price,” Jacky Zhang, who works with Huawei Technologies Zambia but manages communications for Zimbabwe, told ITWeb Africa.
“The allegation for over-inflated is not base on the truth,” Zhang told ITWeb Africa.
ITWeb Africa also asked NetOne for comment, but the company has not responded to emails.
August 5, 2013
Zimbabwe’s biggest platinum miner said this amount was 16 percent more than the money it spent in the first quarter of this year.
The firm’s local capital injection surged from $42 million to a little more than $49 million during the period under review.
It said this is in keeping with Zimplats duty to the advancement of local companies.
It is understood that the state of Zimbabwe is planning to introduce a policy that will not allow procurement of raw materials by external companies. The state is inclined to prefer Zimbabwean companies only.
It said this was 6 percent lesser than the quarter ended March because of a sharp decline in corporate tax disbursement due to weaker prices.
During the quarter under review, platinum prices sagged 10 percent than in the previous quarter.
Palladium and rhodium prices plunged 4 and 2 percent, individually.
By Ndamu Sandu
October 23, 2011
THE construction industry wants the State Procurement Board (SPB) to impose a 25% added value to all foreign construction companies’ bids to improve the competitiveness of locals as it emerged that Chinese and South African firms are getting most of the contracts.
The recommendation is part of measures the sector wants government to institute to grow the industry, which is on the increase since the use of multi-currencies in 2009.
According to a paper presented to government, the industry is of the view that locals are getting a raw deal as they are inadequately equipped to compete with foreign companies.
“This is as a consequence of hyperinflation experienced before the introduction of the multi-currency system when obsolete and depreciated capital equipment could not be replaced,” the industry said.
The sector said the prevailing high interest rates had made local bids uncompetitive compared to foreigners who have access to cheap finance, equipment and materials from their countries of origin.
There is no government incentives that exist for the construction industry to reduce the cost of importing capital equipment such as those offered to the agriculture and tourism sectors, the industry said. “On average, contractors are made to pay a US$250 non-refundable bid bond by SPB each time they go to tender, an exorbitant amount in the present economic environment,” the sector said.
The Procurement Regulations of 2002 granted a 10% preference to locally-based contractors over external ones.
It also said a 10% preference may be given to previously economically disadvantaged contractors…Read more.
October 6, 2011
A BOARD investigation into Meikles Africa Ltd former CEO Brendan Beaumont’s involvement with the group’s foreign suppliers resulted in the board resolving to sack him, businessdigest has established.
Sources told businessdigest that an investigation sanctioned by the board found that Beaumont was connected to some of the group’s foreign suppliers and did not declare his interest. Retailers rely heavily on imported goods, a situation made worse by low capacity utilisation in the local manufacturing industries.
Meikles FD Onias Makamba would not be drawn into confirming whether the board had instituted an investigation into Beaumont’s involvement with suppliers, insisting he had left to “pursue personal business interests.”
Makamba would also not comment on whether Beaumont had been serving notice, saying “his resignation is with effect from September 30 2011.”
Other sources say an internal auditor unearthed a transaction involving Beaumont’s company and alerted Moxon, prompting a full board investigation.
Sources say Beaumont had been supplying various goods to the group’s retail division — TM Supermarkets.
As a result, Moxon reportedly felt that he had to be seen to be strict when applying the rules of internal disclosure.
But other sources say Beaumont’s position no longer augured well with that of John Moxon, who is now back to his old position of executive chairman, a position that duplicates roles with that of CEO…Read more.
Published by the government of Zimbabwe
By Gertrude R. Takawira
12 September 2011
It has rendered to naught brilliant economic reforms. Most people hate it. A few benefit from it. Yet corruption is strong enough to have replaced traditional economic ethos of capital and production. No wonder the economic crises.
Like economics there is a supply-side and demand-side for corruption. The supply-side or the giver resides in businesses. Businesses pay the bribes. The demand side or taker is predominantly government officials.
In a survey carried out by the African Capital Markets Forum in Ghana during the year 2000, it was reported that 86 percent of households saw corruption as a major problem in the public sector, whereas 59 percent of households saw corruption as a major problem in the private sector.
It was also found that many firms in Ghana made unofficial payments (44 percent) to public officials with over a quarter (27 percent) frequently or always making such payments. Unofficial payments constituted a regular feature of transactions between business firms and public service agencies. 56 percent of firms reported that service was frequently delivered once they made an unofficial payment… Why then do corporations with good corporate governance systems pay bribes? First there has to be a conducive atmosphere for the supply and demand of bribery. This can take place in broad ranges of business activities over which some government officials hold discretionary powers.
Common among these are; where firms bribe public officials to avoid or reduce tax, to secure public procurement contracts, to bypass laws and regulations, or to block the entry of potential competitors.
On the surface bribery seems to be cost-effective for businesses because bribe payment is often a fraction of the monetary value of the services rendered by the corrupt officials.
The reason to bribe becomes even more compelling when public officials hold the power to punish the firms for not paying the bribe, such as revoking business licenses. Corporates are often duped to believe that the only cost of bribery is paying the government officials… Read more.
Meanwhile, other countries like China (the world’s fastest growing diamond consumer market), and India (which cuts and polishes 11 of 12 stones) have all given the green light to Zimbabwe, removing any potential problems of surplus minerals from Marange, which has been described by Zimbabwean Finance Minister Tendai Biti as “the biggest find of alluvial diamonds in the history of mankind”.
With potential revenues pegged at $1-1.7bn annually, the support of neighbouring governments like South Africa, another major diamond producer, and “host” country to 3 million Zimbabwean political and economic “refugees”, is not surprising. Nor is the potential KP rupture being shaped as a battle between politically “interfering” Western nations and cash-starved developing nations.
That Zimbabwe’s diamonds are mined under the direct surveillance of the country’s vicious military and controlled by brutal lifetime dictator Robert Mugabe is not in question. Since the discovery of Marange’s diamonds in 2006, the military has largely supervised mining; mass looting by political, corporate and military elites has occurred, accompanied by violent displacement and human rights violations; companies based in secret jurisdictions such as Mauritius and Hong Kong have been granted “due diligence” approval; and there exists complete opacity over volumes extracted, exported and sold.
But to what extent does the vehement opposition stem from political objections to a nation controlled by the blatantly anti-Western Mugabe? More broadly, was the KP system – propagating that less than one per cent of global diamonds constitute “blood” minerals - built for the purposes of eliminating corporate and state-sanctioned exploitation, or normalising and sanitising it? Read more.
- Zimbabwe and its diamonds: Forever dirty (economist.com)
The African Development Bank (AfDB) and the Zimbabwean government have signed a US $30 million grant agreement in support of the urgent water supply and sanitation rehabilitation project (UWSSRP) in the country. The UWSSRP is financed from the Zimbabwe Multi-Donor Trust Fund (the Zim-Fund).
The agreement was signed on Friday June 10, 2011 in Lisbon, Portugal, by Zimbabwe’s Finance Minister, Tendai Biti and the AfDB’s Vice President for Operations, Aloysius Ordu.
The grant is further testimony to the strong commitment of the contributors to the Zim-Fund - Australia, Denmark, Germany, Norway, Sweden, the United Kingdom and the AfDB – to support the people of Zimbabwe.
Speaking during the signing, VP Ordu praised the Zimbabwe government for its ongoing economic reforms, which had borne positive results, with inflation in the low digits in 2010. He reaffirmed the Bank’s commitment to the success of the Zim-Fund and its objectives. He said: “We wish to thank all the partners contributing to this initiative and we look forward to partnering and implementing more projects to help ensure the continued and sustained recovery of the infrastructure sector, and further contributing to the social and economic development of Zimbabwe. Dealing with Zimbabwe’s external debt, currently at US$ 8.8 billion, is key to unlocking major financial resources to support recovery.
Once implemented, the project will improve the state of the water and sanitation infrastructure in Harare, Masvingo, Mutare, Chegutu, Kwekwe and Chitungwiza, and benefit over 4.15 million people living in these cities.
Finance Minister Biti recognized the project as “essential and significant additional step” towards the restoration of basic services throughout his country. “The project will have real impact on men and women in the country,” he said. He also noted the need for his government to work towards the country’s arrears clearance as a significant step to accelerate the process of recovery.
The Zim-Fund was established in May 2010 and formally launched in Zimbabwe by the AfDB’s President, Donald Kaberuka, in March 2011.
Download the project appraisal report.
- AfDB approves urban devt strategy for African cities (vanguardngr.com)
Voice of America, March 26, 2011.
Zimbabwe’s long-troubled unity government was thrown into further turmoil on Friday with the arrest of Energy Minister Elton Mangoma for the second time this month on charges of corruption in connection with procurement of meters for the national power utility.
Mangoma, an official of the Movement for Democratic Change formation led by Prime Minister Morgan Tsvangirai, was arrested on March 10 on charges of abuse of office over a tender for the purchase of fuel from a South African company. Read more…
Traditional ways of approaching issues of development give preference to questions that seek to establish differences between developed and developing countries on specific issues. Put differently, we are used to defining and deriving policy from the experiences of states that distinguish themselves from rank-and-file statehood in the world system. For instance, it is customary to compare the U.S. and Africa’s GDP and derive inferences for African reforms more or less suggested by the path the U.S. took.
To some extent, this ‘prescriptive’ approach is reasonable because it allows developing countries to learn from developed countries without having to reinvent the wheel of development. Nevertheless, knowledge and intervention derived from ‘prescriptive’ comparative studies that solely focus on differences between developed and developing countries often fail to produce expected outcomes because they pay little or no attention to the learning processes of developing countries. Thus, while the emphasis on ‘difference’ is suited for prescriptive policies, it remains ill-fitted for ‘comparative understanding’ of important politico-economic problems in the world.
In contrast to GDP and other differential markers used to measure the evolution of societies and politico-economic institutions in the world system, similarity-based comparison yields high pedagogical value for both developed and developing countries. Public procurement is one of the many areas of study amendable to such a similarity-based comparison. With procurement studies, one could appreciate similarity and adopt a comprehensive –and, might I suggest, more humble? — approach to development models for developing countries. More often than not, mistakes made by government officials and parastatal procuring entities point to the same challenges that developed and developing states face. Two procurement stories involving the U.S. government at home and abroad illustrate this point.
In a televised interview recorded in Sept. 2010, Ashton Carter, the U.S. Under Secretary of Defense for Acquisition,Technology and Logistics, announced that the defense budget won’t go up or down but should stay within the limits of “the resources that the country and the taxpayer can afford.” He also predicted that the new post-9/11 era is going to be ‘good for industry and government.’
However, a report on the administration of provisions to troops in Afghanistan by the Inspector General of the United States Department of Defense released on March 2, 2011 shows that what is ‘good for government and for industry’ might exceed what the U.S taxpayer can afford. The report shows that the Defense Logistic Agency failed to provide ‘sufficient oversight of contract, cost, and performance.’ That is, the vendor for food products for Afghanistan was overpaid for work that remains incomplete.
What is interesting in this story is the ways in which the initial contract with the food vendor for Afghanistan was changed through a simple verbal order, which, as the Inspector General found, violated the provisions of the Federal Acquisition Regulation and Defense Federal Acquisition Regulation Supplement. The report clearly states that the verbal change of the contracting order by U.S. officials led to overpayment of the food supplier in Afghanistan. Because the modification of the initial contract through a verbal agreement between U.S. contracting officers and the Afghanistan food supplier was not definitized, transportation costs were exaggerated and the contractor was overpaid. Hence the verdict of insufficient oversight of cost.
Unfortunately, delays and overpayment related to cost assessment are not limited to U.S. activities abroad and in combat zones. Last year, the Inspector General for the U.S. Department of Veteran Affairs (VA) audited the Strategic Asset Management Pilot (SAM) project and found that the managers did not control cost. In the report, selected contractors unfamiliar with the VA’s needs poorly managed risk. Consequently, the SAM pilot project was delayed by more than 17 months potentially ‘doubling the original contract cost of $ 8 million.’
Delays, overspending and missed deadlines, poor cost and risk assessment in public contract renegotiation makes the U.S. procurement system less than perfect. In this sense, contract renegotiation mistakes made with the food vendor in Afghanistan and delays with the SAM project are similar to procurement challenges in Cameroon and Zimbabwe commented on last week.
Procurement challenges observed in Cameroon, Zimbabwe and the U.S. at the implementation and renegotiation phases highlight relative similarities between developing and developed countries in the management of public finances. Attention to government procurement makes the case for unbiased similarity-based case selection for ‘comparative understanding’ that could yield high pedagogical value because of the preeminent roles that decision making and forecasting play in defining outcomes. S.N. Nyeck.
The limitations of poverty-centered/scarcity approaches to underdevelopment
The story of the hospital in Gokwe North below reveals a few things about the procurement process in Zimbabwe and political decentralization. The government does not necessarily perform optimally even when resources are provided. Multilayered bureaucracy frustrates in-house procurement processes at the district level. Excess bureaucracy is correlated with poor time and resource management.
This story adds to our understanding of a source of underdevelopment and public waste. That is, as the case of Gokwe North shows, when resource abundance leads to unnecessary duplicated public actions, development is delayed. Better strategic planning might have cut time spent “going back and forth” and helped open the hospital on the due date.
One of the fascinating aspects of procurement is its ability to highlight the limitations of poverty-centered/scarcity approaches to underdevelopment. Instead, at times, an abundance trap, rather than a scarcity trap, perpetuates underdevelopment. S.N. Nyeck
AllAfrica.com December 6, 2010
The need to comply with State Procurement Board procedures has resulted in the construction of a district hospital in Gokwe North lagging behind schedule. Government allocated US$600 000 for the project. Principal director in the Ministry of Health and Child Welfare Dr Christopher Tapfumaneyi said this when he appeared before the Parliamentary Portfolio Committee on Health and Child Welfare last week.
He had been asked why the Ministry was taking long to fully use funds allocated to it by Treasury. Dr Tapfumaneyi said: “The issue of absorption is mainly to do with problems in procurement. “For example, we have a district hospital in Gokwe North and US$600 000 was allocated for its completion and by mid of this year this hospital should have been opened. “However, the procurement authorities keep having us go back and forth with regards to specific and specialised equipment. “The problems with the procurement authorities have always affected us especially where capital projects are concerned.” Dr Tapfumaneyi said they were consulting the procurement board on a way forward. Read more…