By Staff Reporter
Dr Mbita Chitala has suggested that Former president Edgar Lungu was aware about the scandalous purchase of 42 fire tenders at US$1 million each, when he forewarned him to cancel a meeting to discuss the possibility of on-lend to Zesco of US$392 million, which was said to be more scandalous than the fire tenders deal.
In his book Corporate Capture, the Political Economy of Electricity Management in Zambia 2014-2021, (How Not to Manage a State Enterprise), first obtained by Daily Revelation, Dr Chitala stated that one of the most unacceptable conduct when he served as Zesco board chairman was the attempt by the various government bureaucrats to assert strip Zesco, which in the end contributed in him partying ways with the company “to give them a free reign.”
He stated that the first attempt was made by the bureaucrats under “the so called Smart Zambia Institute (SZI)”, while the second attempt was made by the management of the Industrial Development Corporation (IDC).
Dr Chitala stated that all sorts of individuals ranging from the secretary to the cabinet and politicians put pressure on Zesco and its staff to accept the Huawei project and sign the on-lent loan of USD 392 million and that the proponents for this were Huawei, Smart Zambia, the Secretary to the Cabinet then late Dr Msiska and later Dr Simon Miri and his deputy, former deputy Finance minister and Bank of Zambia Governor Patrick Mvunga and some officials from State House.
He stated that the pressure on the Zesco board and management was so much that he as chairman got concerned that some people could be hurt.
“It was obvious that some people had either already benefited from the deal or were being prevented from benefitting. Some of the members of the Zesco management expressed genuine fear of the situation and requested for my protection,” Dr Chitala stated, adding that he therefore summoned an urgent meeting of the Zesco board to resolve the matter.
But before the meeting could start, president Lungu, who he said had been briefed of the meeting by the Zesco managing director of the situation, called him on the phone and advised against proceeding with the meeting “as the matter the ZESCO Board was about to discuss on the possibility of on-lend to ZESCO of USD 392 million for Smart Zambia was more scandalous than the buying of 40 (42) fire tenders at USD 1 million each.”
“The President advised me to cancel the meeting which I gratefully did as I had planned to resign from the board if the Board members resolved in the affirmative to accept the on-lent loan,” Dr Chitala stated. “I had earlier made up my mind that if the board accepted that Zesco receive the USD 392 million as on lent to Zesco by the Ministry of Finance knowing that Zesco Limited could not accommodate the loan on its balance sheet and further knowing that the loan was essentially a way of defrauding Zambia, I would respectfully resign as chairman and board member of ZESCO Limited.”
He stated that fortunately, president Lungu forwarded him of the attempted fraud and that he was able to cancel the extra-ordinary board meeting.
“It was common knowledge that the more than US$ 60 million that the Ministry of Finance released as its 15% counterpart contribution funding for the loan was not only wrongly released but was also grossly abused and that many people may have received bribes on that deal and hence the pressure on ZESCO to accept the USD 392 million on-loan let instructions,” Dr Chitala argued. “It was apparent that since government money had been expended without any work to show for, this would add to the other scandals that the Auditor General used to publish as examples of abuse of public office of trust or common theft of public resources by politicians and public servants.”
However, Dr Chitala stated that this matter did not die with the rejection of Zesco of the facility but was resurrected in another form by the management of the Industrial Development Corporation (IDC).
“The bureaucrats had to find a way of justifying this expenditure and I and the ZESCO Board appeared to be in the way of this criminality,” Dr Chitala stated, adding that the IDC, which had been incorporated by former Finance minister Alexander Chikwanda in 2014 under the company’s, operated as a private company under the Act but was carrying itself as a state owned enterprise.
He stated that the omission has resulted in some observers stating that the company was simply a tool for illicit activities by the politicians as it is not subjected to the Auditor General or the Public Accounts Committee of Parliament, adding that IDC had made controversial investments such as the acquisition of the overpriced farm in Mpika, the overpriced acquisition of an insolvent mealie meal company and investment in a rile manufacturing company where instead of being the majority shareholder by virtue of the capital injected, it is still a minority shareholder.
“Some observers regard it as an illicit company involved in laundering public assets. The company is strangely chaired by the President of the Republic and had given itself the mandate of unlawfully managing public enterprises,” Dr Chitala stated. “From the beginning of my appointment to be on the Board of Zesco, I was sure I would have problems relating to the ID. As I knew I could not accept instructions which either were unlawful or aimed to work against the interest of Zesco.”
Giving details of the USD 392 million deal, Dr Chitala stated that the government established what they called Smart Zambia Institute (SZI) which was headed by a deputy secretary to the Cabinet Dr. Martin Mtonga.
He stated that the SZI, through the government of Zambia had entered into and agreement with Huawei, which was for the design, supply, delivery, installation and commissioning of a National Optic Fibre Broadband and Network (Backbone), Metropolitan Area Network (Metro) and Access Network (Access) designated as lots 1,2 and 3 respectively under the Smart Zambia Phase II Project, with a large portion of the project scope involving the installation of equipment on the existing Zesco infrastructure.
He stated that Zesco was told by the said Mr. Mtonga that the Smart Zambia Phase II Project was aimed at improving communication, reducing the cost of doing business, spur ICT development and bridge the digital divide in the country as well as improve government service delivery to business entities, citizens and within government institutions.
Dr Chitala stated that the project involved extension of the Zesco national optical fiber backbone by 2,700 kilometers covering 64 backbone sites; the establishment of the metropolitan area network with a cumulative cable distance of 3,600 Km across 17 districts in Zambia; and to implement full IP based Access Network to cover 2,750 Km covering 17 districts, and that to achieve this programme, Zesco was informed that a concessional loan agreement had been signed between the Ministry of Finance representing the government and Export and Import Bank of China (EXIM Bank) on February 24, 2017.
“ZESCO was informed that this loan contracted with a view to on-lend the facility to ZESCO Limited who would also absolve all the liabilities of the loan. Smart Zambia Institute identified ZESCO Limited to be its strategic partner in the implementation of the project because over 70% of the project implementation would depend on ZESCO infrastructure,” Dr Chitala stated, and that Zesco learned that the government through Cabinet office and Huawei Technologies Company Limited had signed the USD 392 million contract, and that in addition the company learned that on December 28, 2017 the government through the Ministry of Finance and EXIM Bank signed a preferential buyer credit loan agreement for a total sum of US$ 332 million.
Dr Chitala further indicated that Zesco was informed that an advance payment of 15 percent of the loan had already been paid by the Ministry of Finance to Huawei which brought the total contract amounting to USD 392 million.
“From the onset, ZESCO observed the difficulties in the project. It was clearly non-transparent and the ZESCO Board immediately brought this matter to the government officials that were advancing the project,” Dr Chitala stated. “ZESCO observed that Huawei had presented a solution to Smart Zambia for the optic fibre backbone network whose connection matrix was the same as what was existing in Zesco’s Fibrecom except for 4 links, namely Mongu-Lukulu, Kaoma-Mumbwa; Nakonde-Mbala and Chama-Nakonde,” Dr Chitala stated. “Further, Huawei had proposed to Smart Zambia to install their equipment in the same location as those already installed by ZESCO’s Fibreson Network. Huawei wanted to configure their equipment as redundancy to the existing ZESCO equipment which was basically to duplicate the ZESCO infrastructure and ZESCO noted that this was not necessary as ZESCO network rings were able to achieve that objective.”
Further, Dr Chitala stated that the equipment of Huawei was not compatible with ZESCO existing network, as it was 3rd generation equipment while Zesco’s was 4th generation, which was far superior to what Huawei wanted to install, and that the equipment that was being supplied to Smart Zambia Institute had a total transmission capacity of 100 abps while Zesco’s capacity was 400 abps and that the suggestion to close Zesco network would not only be retrogressive to Zambia but was a bad business deal.
“Furthermore, ZESCO observed that Smart Zambia Institute had not conducted any on-site survey to justify the quantification of the Bill of materials. The figures totaling to USD 392 million that were submitted to ZESCO for the project scope were based on desktop estimation. ZESCO considered this omission as gravely unprofessional,” stated Dr Chitala. “It was evident according to ZESCO analysis that the whole project was a conspiracy to defraud Zambia. Huawei proposed a solution that was not only inferior to ZESCO existing network, but covered the same towns as those covered by ZESCO on the Metropolitan Network.
“Huawei and Smart Zambia Institute proposed to use equipment whose end of the market (EOM) was in 2013 and they further failed to provide to ZESCO a financial model of their business proposal on how ZESCO would have its Return on Investment (ROI).
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