TIZ says the Patriotic Front government will spend millions to compensate companies whose contracts were illegally terminated since they assumed office in 2011.
And TIZ has challenged government to present a clear plan of how they will settle the debt owed to LAP GreenN without compromising the economy.
Responding to a press query following LAP GreenN’s demand letter, TIZ president Rueben Lifuka observed that there were a number of companies which had won cases against the Zambian government in similar circumstances.
“This LAP GreenN episode raises a number of questions on the efficacy of some of the decisions made both by the MMD and the PF governments and in fact, this points to weaknesses in the public procurement process, especially when this is driven by political interests and private considerations. What is surprising is that the penchant for single sourcing of major projects has not stopped under this government. Clearly, PF came into government and did what MMD did to UNIP – namely, distance itself from most of the MMD government contracts, in the name of fighting corruption. Admittedly, some of the contracts signed by the MMD government were questionable and the PF should have systematically worked to deal with the specific fraudulent agreements. We do recall that the PF under the late President Michael Sata terminated the contract which the Zambia Revenue Authority signed with Bradwell International for supply of scanners to the Nakonde border and the PF Government alleged corruption in the whole deal. As far as we know, this decision was subsequently reversed and the question is how much did the government pay to Bradwell International?” Lifuka asked.
“Secondly, we recall another case of the Zambia Border Crossing company run Kasumbalesa border- another concession agreement signed under the MMD government, which the PF government later tried to terminate. Again, this seems to have been a futile exercise. LAP GreenN is the latest company which has a judgment against the Zambian government. What is puzzling is that in 2014, the Zambian government agreed to repay the US$103 million loan that LAP Green Networks obtained from China’s ZTE in 2011 for the expansion of Zamtel network. The loan was obtained by Lap Green Networks in 2011 from ZTE in order to implement Zambia’s Global System for Mobile Communication (GSM) phase IV and Universal Mobile Telecommunication System (UMTS) projects. All these are the debts that the Zambian taxpayers and the Zambian people have to shoulder for the next number of years. What is unfortunate is that the people who led us to this situation, continue to live at large without suffering any consequences for their actions. Surely, in the last 6-7 years, the Zambian government will pay a lot of money in different forms of compensation for judgments or court orders obtained against it by these companies.”
He recalled that government had instituted a Commission of Inquiry into the sale of Zamtel, wondering if the recommendations made were used.
“Added to that the PF government instituted Commissions of Inquiry and one of them was on the sale of ZAMTEL as well as the sale of ZANACO to Rabo Bank of the Netherlands. One asks the question, what happened to the recommendations of this Commission? Did government ever implement these recommendations? We do recall media statements quoting sources who were privy to the Commission’s report highlighting that the commission of inquiry concluded that the Zamtel sale was a clear case of economic sabotage which pervaded and compromised key government institutions to the extent that the government decisions and policy were being managed by a foreign consultant. It further states that the full extent and continuing effect of these actions can only be determined if a full scale and thorough comprehensive forensic audit of the Zamtel privatisation process is instituted. If this was the conclusion of the Commission of Inquiry, how come the Zambian government failed to defend this position in court? And did the Zambian government ever institute a forensic audit of the Zamtel privatisation process?” Lifuka asked.
He hoped future leaders would learn not to politicize contracts.
“Transparency International Zambia finds it unfortunate that the Zambian government under the Patriotic Front leadership, are defaulting in meeting the terms of the Consent Compensation Order obtained by LAP GreenN. The whole handling of the privatisation of ZAMTEL – from the appointment of RP Capital as financial advisors, the awarding of 75% shareholding to LAP GreenN by the MMD Government and the subsequent repossession of the ZAMTEL by the PF Government, has been chaotic and extremely costly to the Zambian taxpayer. And despite all this money that will be spent settling this Compensation order, ZAMTEL remains in dire need of capitalisation. We have no doubt that the Zambian Government is fully aware of the Consent Compensation Order and it should therefore meet these obligations before it attracts further costs which may arise from any other additional legal steps that LapGreenN may take. It is our sincere hope that the PF government and any parties that may assume power, have learnt important lessons not to unnecessarily politicise issues without taking time to chart a well thought way forward,” Lifuka stated.
“We challenge the Minister of Finance or indeed the Vice-President as leader of government business in the House, to give a full account of the monies that have been spent on these costly public decisions taken by the PF government. It will be important for government to categorically state the compensation paid not just to LAP GreenN but other companies whose contracts were terminated. We equally urge government to highlight what has happened to the allegations that it made of corruption in these transactions. Did the ACC ever investigate these cases and was there any credence in the allegations made of corruption? It is evident that from the US257 million transaction – highlighted below, the Zambian people are the real losers in this transaction and now we have to pay back this amount with interest at 8%.”
Lifuka went further to list LAP GreenN’s initial investment.
“ZAMTEL STAFF PENSIONS LIABILITY: US$20,000,000
CHINESE BANK LOANS: US$32,700,000
ZAMTEL WORKERS REDUNDANCIES: US$97,700,000
LAPGREEN NETWORKS EQUITY INVESTMENT: US$64,000,000
GRZ PROCEEDS: US$42,600,000
TOTAL PAID BY LAP GREEN N: US$257,000,000.”
Lifuka also lamented that government would have to absorb so many costs from expenditure made during the transaction with LAP GreenN.
“The information provided by the Commission of Inquiry in fact demonstrates that from the GRZ proceeds, the only balance of funds due to government was USD13million and now we have to repay back LAP GreenN and government has to absorb of these other expenditure which it made during this transaction. Surely, someone has to pay of this decision made on LAP GreenN. We cannot continue to lose colossal sums of monies in this manner,” Lifuka stated, going further to list the specifics.
“Expenditure Breakdown of Govt Proceeds of $42,600,000
RP Capital Advisors $12,689,759.03
Net Cash GRZ Proceeds to date (MoFNP) $15,000,000.00
Legal Fees $702,296.33
Zamtel Staff Incentives $85,926.59
ZDA/Zamtel Staff Incentives and Overtime $307,462.73
ZDA Negotiating Team $65,797.25
Zamtel Staff Training $192,907.51
Grant Thornton Consultants – Financial $94,859.14
ZDA (Zamtel sale) Assets $46,388.08
Bank Charges $8,304.28
Other Zamtel Related Payments $19,473.60
Total Disbursed $29,300,643.52
Balance of Funds due to GRZ $13,299,356.48”
And Lifuka challenged government to explain how it would clear the LAP GreenN debt without affecting the economy.
“Lastly, we would like to know what the PF government is doing differently to ensure that such contracts are handled in the best interest of the country and not to benefit a few individuals? And we would like to request that government presents a clear undertaking on how it is intending to settle this claim from LAP GreenN without compromising the socio-economic development of the ordinary people,” stated Lifuka.