The Minister of Finance and Development Planning, Minister Kenneth Matambo, was economical with the truth when he briefed parliament about the goings on at the Botswana Development Corporation ÔÇô Sunday Standard investigations have revealed.
Explaining his decision to drop three members from the BDC board, Matambo suggested that this was to insure that the project is not stopped.
“It was in the ministry’s and public interest that the glass manufacturing plant succeed. Almost every part of the project is virtually complete and to stop it will be unfortunate in the interest of the nation.”
Sunday Standard investigations have, however, revealed that the BDC board at its meeting of October 17th had proposed that “initially BDC should try and obtain explanations from both the Engineering, Procurement and Construction (EPC) contractor Shanghai Fengyue China and the partner in Fengyue Glass Botswana Board Shanghai Fengyue British Virgin Islands (BVI).
The BDC board proposed that “should the responses received from both the Fengyue Board and the shareholder not be satisfactory to BDC, the partnership and the EPC contract should be terminated in accordance with the provisions of both the shareholder’s Agreement and the EPC contract”.
A memo that followed the board meeting suggests that although a forensic audit had revealed incidents of sleaze in the way the project was handled, the board did not push for the project to be shot down, but instead came up with proposals to clean up the mess.
For example, the forensic audit found irregularities in the way directors of Fengyue Glass Botswana (which includes some BDC officials) applied for a letter of credit.
The directors of Fengyue Glass Botswana applied for a letter of credit to the value of USD 44, 3 million (P290 million) when they were aware that BDC had only approved a loan amount of P179 million. The letter of credit was subject to the following security (even though the principal borrower was Fengyue Glass Botswana): Cash ÔÇô USD 22 million by BDC and corporate guarantee of USD 22 million by BDC. Fengyue Glass applied for a letter of credit significantly in excess of the loan amount, secured by an authorized guarantee, and the BDC board was kept in the dark.
The BDC board, however, in its attempt to save the project, proposed that “the guarantee has crystallized, it is irrevocable. Both partners need to contribute towards the guarantee, failing which BDC should convert the guarantee into ordinary shares and dilute Shanghai Fengyue BVI shareholding”.
The forensic audit found that BDC officials in Fengyue Glass Botswana “poorly managed the project. They failed to communicate with BDC board in an honest and direct manner. Various matters involving serious risk were kept from the board. There was serious non-compliance with the board resolution of June 2007, non compliance with conditions of the loan and the EPC contract and various other irregularities”.
The BDC board proposal was that the two BDC officials in Fengyue board be recalled and that two non-executive directors be appointed in the Fengyue Glass Botswana board.
The forensic audit also revealed that Shanghai Fengyue Glass BVI had not made its full equity contribution of P130 million in Fengyue Glass Botswana.
The board proposed that BDC should demand proof of payment and date of payment of equity contribution by its partner Shanghai Fengyue Glass BVI as stipulated in the BDC board resolution of June 2007, and the shareholders agreement.
It emerged during the audit that Shanghai Fengyue BVI was registered on 7th July 2007 a month after entering into an agreement with BDC. It has no track record in any area of business and its ability to provide this type of project was unknown.
The BDC board demanded an explanation on “the true identity of Shanghai Fengyue Glass BVI, its relationship with Shanghai Fengyue Glass China and the shareholders of each, their capacity to fund such a project given its magnitude.
The BDC board further sought an explanation on how the initial partner proposed to the board, Shanghai Fengyue China is now the ECP Contractor. The BDC board also demanded an explanation of the change of shareholders from Shanghai Fengyue to Shanghai Fengyue BVI, then the former to become EPC contractor.
The audit also revealed that the EPC contractor (Shanghai Fengyue China) was unable to obtain and produce a performance bond and BDC officials failed to disclose this to the board. The BDC board insisted that the BDC as a shareholder “needs to demand for the production of a performance bond forthwith from the EPC contractor through the Fengyue Board in order to mitigate the financial risk”.
The Minister further misled parliament when he claimed that the three directors who have been dropped from the BDC board were leaking information to the media.
Investigations by the Sunday Standard revealed that none of the reporters who have been investigating the BDC scandal had any of the three fired directors as their source.
The Sunday Standard can also reveal that the minister was not telling parliament the truth when he said the three directors’ terms were coming to an end.