Kedikilwe/Merafhe multi-billion Pula blunder brings economy on its knees
by Sunday Standard Reporter
Botswana faces a crippling electricity shortfall that threatens to bring the country’s economy to its knees because Botswana Power Corporation (BPC) managers helped an inexperienced Chinese company, China National Electric Equipment Corporation (CNEEC) clinch the P11 billion Morupule Power Station contract through questionable means – Sunday Standard investigations have revealed.
While Botswana’s increasing power demand, up by three percent annually since 2008, continues to outpace supply, the multibillion Pula plant, which, it was hoped, will save the situation, has been paralysed by a litany of problems and is expected to be completed long after the scheduled time.
The looming power crisis is not helped by a decision by Eskon to reduce its exports to Botswana.
The reduction is in line with an agreement between the South African power utility and BPC. Eskom is also under pressure to meet South Africa’s needs first, then Africa’s later.
Minutes of a BPC board committee meeting, which sat on 12th September 2007, prior to the tender award, state that bidding companies, among them CNEEC, were pre-qualified because of their “technical capacity, financial capacity experience and expertise to undertake the project”.?Sunday Standard can, however, reveal that CNEEC was pre-qualified although it had failed to secure financing to justify their financial capacity and did not have a single completed project of the size of Morupule B Power Station to justify their experience and technical capacity.?Doubt on the capability of CNEEC were further raised by the Chinese Ambassador to Botswana, Ding Xiaowen, who advised Ministers Ponatshego Kedikilwe and Mompati Merafhe that the Chinese state owned company was not certified to undertake a project of that magnitude.??In an apparent attempt to help CNEEC’s financial capacity, a BPC manager issued a letter to the company confirming that should they be able to secure financing for the project, they would be the preferred bidder. The contractor used the letter to try and secure financing from SINOSURE, an export credit assurance company which the competing contractor, DEC/Zelan had put forward as their financier. DEC/Zelan was the only bidder who the Chinese ambassador said was certified to undertake a project of the size of Morupule B Power Station.??Although CNEEC failed to secure financing, BPC went ahead and chose them as the preferred bidder over DEC/Zelan, another Chinese company that had been recommended by the Chinese government and had been able to secure financing.
Sunday Standard can further reveal that DEC/Zelan wrote a letter to the BPC board complaining of “behind the scenes encouragement of financial institutions to support CNEEC”.
In another curious turn of events, the BPC allegedly gave the bidding companies wrong fuel analysis data while CNEEC were given the correct data. The BPC management then used this to undermine the bid by DEC/Zelan, arguing that the consortium had priced their bid on utilizing a fuel source not in compliance with bid documents. The fuel issue was cited as a major risk and non compliance.??Sunday Standard investigations have further turned up information that some BPC managers and board members undertook a site inspection of manufacturing facilities and completed projects of the bidders in September 2007. CNEEC, who were ultimately given the contract, was not able to show the team equipment manufacturing facilities or a completed project during the tour. DEC/Zelan, on the other hand, showed the BPC team multiple and extensive manufacturing facilities, including a 1200Mw completed power station in operation.??Although DEC/Zelan lost the bid, they have a history of executing EPC projects, among them the 2,100Mw Tajung Bin coal fired power station in Malaysia, which was completed in August 2007; the 2x500Mw Sultan Abdul Ziz power Plant in Malaysia, which was completed in March 1998; the 2x300Mw Chattissagrh power plant in India, which is still in progress; the 2x300Mw power plant in Rambang, Malaysia, which is still in progress; the 4x123Mw Tal Quadis Power Station which has been completed; the 2x300Mw Hai Phong Power Plant in Vietnam, which has been completed, and the 2x600Mw Nagarjuna power plant in India, which is still in progress.??CNEEC, on the other hand, has never completed a project of the size of Morupule B Power Station. They are currently undertaking the 3x330Mw power plant in Indonesia and the last ten years competed only one smaller EPC thermal plant of 2x125Mw in China.??CNEEC, which has been awarded the plum contract, was also allowed to increase its bid price by 30 percent after bids had closed. The initial bid by CNEEC at tender was US$693 million. When the contract was announced, it had shot up to US$ 970 million.?There are also unconfirmed reports that key members of the BPC technical evaluation team were threatened and forced to change their recommendation from DEC/Zelan to CNEEC.
An investigation by DCEC commissioned following a series of articles carried exclusively in the Sunday Standard, however, cleared both the BPC and CNEEC. Minister Kedikilwe stuck out his finger at the Sunday Standard which was concerned at CNEEC capacity to carry out the project and appealed to potential financers of the Morupule B Power Station to ignore media reports concerning the awarding of a tender for the project. After the project ran into a raft of problems owing to technical and environmental malpractices, BPC finds itself at odds with CNEEC as the projects fumble over a litany of structural and environmental crises. The BPC recently published adverts in local newspapers calling for companies who can clear up the mess at the site. The strongly worded advert revealed that BPC is concerned with "the safety and environment record to-date". The advert says a risk manager had been sent to site. "Considering the large number of workers at the site (approximately 2,400), the working hours (seven days a week and in some plant locations there is a day and swing shift) and the safety and environmental record to-date, it is proposed to contract a safety and environmental firm to supplement the BPC Safety, Health and Environment Officer," the ad says in its preamble. BPC therefore seeks "to ensure that health, safety and environmental violations are quickly resolved to the satisfaction of BPC and the relevant authorities". BPC wanted a consultant engaged to ensure "that the safety, health and environmental track record at the plant and associated construction sites immediately improves to meet best international standards; (ii) all health, safety and environmental violations are quickly resolved to the satisfaction of BPC and the relevant authorities; and (iii) the capacity of BPC SHE officer is significantly increased". This followed an investigation into the project's environmental programme revealing far-reaching abuses, such as the dumping of sewage and industrial waste into the surrounding area and an unsafe working environment for workers on site. CNEEC contracting manager, Jianio Caiyi, and two other company project supervisors allegedly fled the country, leaving the Station Project Manager, Glenn Black, to clean up the mess. Black, who allegedly found himself in the deep end, handed in his resignation.
Local investors are having the worst of the power crisis. A number of manufacturing companies have raised alarm over the prevailing electricity shortage, citing serious losses in business. “It is more than a mild effect to us; we manufacture mine equipment and we have missed our targets and our manufacturing equipment is computer based and the power cuts are affecting the whole process,” said Lovemore Diya, Marketing Manager of Gaborone Hydraulics earlier this year. ??An IKEA Operations manager added, “Power cuts have badly affected our production; we have not been able to manufacture for two consecutive days and we suffered a loss equivalent to about 100 gas stoves.”?“We are very concerned about the frequency of the outages; they are disrupting different sectors, causing a loss of production and products,” said Sithembile Dube, Acting Director, Botswana Exporters and Manufacturers Association (BEMA).?Dube said the regular power cuts have been a thorn in the flesh for Botswana economic growth, as intermittent power cuts continue to hamper production across all sectors.?“We can’t put in number the impact at the moment but certainly the impact of these power cuts reflects badly on the economy,” said economist, Dr Keith Jeffries. “This affects the growth of the economy and it has become difficult to talk of economic growth now without addressing power shortage.” ?He said a scenario such as this that the country is facing depicts a serious failure of long time planning.?Jefferies said the food industry is particularly faced with a serious loss as they deal mostly with perishables. The Operations manager of Sally Dairy Company, Ajith Weerasege, said that last week they threw away 4000 liters of milk, which had gone bad due to power shortages. “The losses we are experiencing are unimaginable,” said Weerasege.
Jefferies said manufacturing companies that are exporting are really affected and risk losing both local and international markets by failing to meet their quotas.