Parliamentary Committee on parastatals hears how Savenda defrauded PSPF

The Parliamentary Committee on Parastatal Bodies yesterday learnt how Savenda Zambia Limited
fraudulently supplied a 160KVA generator to the Public Service Pensions Fund (PSPF) when it was contracted to supply a 300KVA generator at a contract sum of K128,384.

Savenda Zambia was awarded a contract to supply, install and commission a 300KVA standby generator within a delivery period of four to six weeks but despite being engaged to supply the generator in 2013, Savenda only delivered a wrong generator in May 2014, 46 months after the expected date of delivery.

“As a result of the contractor’s failure to meet the contractual obligations, on 15th August 2015, the Fund filed a claim in the courts of law so as to seek relief which included the refund of the 90 per cent payment made, associated legal costs, interest on the payment made and any other relief that the courts would deem necessary. However, at an ordinary procurement committee meeting held on 11th November 2015, the committee resolved that the case be withdrawn so that the Fund could retain ownership of the generator with a view of disposing it off by public auction, to recoup the money paid on the generator. In this regard, following the auctioning of the generator, only K58,208 was recovered resulting in a loss of K57,338. The rationale to withdrawal the case from the courts of law was therefore questionable,” read the Auditor General’s report for the financial year 2013, 2014, 2015, and 2016.

Speaking when he appeared before the committee, Ministry of Finance Permanent Secretary in charge of Economic Management and Finace Mukuli Chikuba, who was accompanied by PSPF Secretary and Chief Executive Officer Dr Richard Mwiinga and his team, said the contractor was taken to court but the case was later withdrawn.

Asked why the matter against Savenda was withdrawn from court, the PSPF legal team said they had received instructions from the Procurement committee to withdraw the case on the basis that there was a possibility that the matter could be resolved outside court.

Committee member Mukumbuta Mulowa, who is also Senanga UPND member of parliament, was the first one to ask a question surrounding the supply of the said generator.

“Chair, there is something which I do not understand on the issue of procurement of a genset. What the PS is giving us, I cannot understand. Apart from the period of delivering this genset from weeks to months, I think my main worry is on the size of the generator. The generator which was delivered was 160 KVA but what was needed was 360KVA, there is a very big difference, which means even from the source, the price was underpayment and you decided to take this issue to the court instead of, if there was a mistake from the supplier, why didn’t you just take it back so that they can refund you with the money? Now you decided to sell it at under price. So why didn’t you take it back?” asked Mulowa.

Another committee member Mumbi Phiri, who is a nominated member of parliament, also asked a follow up question.

“Just in addition to what the Honorable has said, I am sure all of us are wondering what procedure was used when this machine was delivered? Was it just given to maybe a cleaner who had no idea or it was just dumped at the place for them not to see the difference of what they ordered and what was brought? And if there was somebody who received through procurement, what has been done to the officer?” Phiri asked.

Before the witnesses could respond, acting Auditor General Roy Mwambwa chipped in: “I think that it’s an important dimension which honorable Mumbi Phiri has brought. If you look at the terms of payment, 10 per cent was suppose to be made after the machine had been tested and actually accept it. The question is, was this done? And if not, why wasn’t it done because it was part of the condition?”

In response, PSPF Director Benefits and Contributions Sampa Kangwa explained how they were duped into accepting the genset.

“I would like to confirm that indeed we have an expert but as earlier explained by PS, when it was delivered, the actual label of the genset was indicating 300KVA and in terms of testing, this was not suppose to be tested by the supplier because we had an independent person that we engage in terms of testing. And it is at that particular point in time that when we were testing that it could not start. Then we had to find out the reasons why hasn’t this genset started. We had already paid the 80 percent because it was suppose to be paid at delivery. So we followed it up and I think there were so many correspondences I think the Auditor General can confirm in terms of how long it took for us to write to the supplier. In fact, initially we wanted this generator returned and at a certain point in time, the supplier promised that he would deliver another genset. Now because of the period we were in which was load shedding, we looked at also the operations of the institution. So we could see that this supplier was not genuine and that is how come we had to go to the court,” Kangwa said.

“Again when it went to court, we started evaluating how long would this case take? Because of that, we had no option but to try the option of selling it out. But it was not the first option, the first option was to sell it at market value and that’s how we advertised it in the paper but unfortunately no one came to that purchase. Then that was when we auctioned it.”

Chirundu member of parliament Douglas Syakalima wondered how a company that had failed to supply a single generator from one government entity was awarded another contract to supply ambulances in another entity of government.

“There is a complication here I think, because if we are to follow, before even going to court, you could have just said ‘give us our money’ was he refusing to give you money? Or is there anything that you are not telling this committee? Because you should have just said ‘here is your machine and give us our money’. Was he refusing to give you back the money? And this name Savenda, I am suspicious because this is the same who was awarded a contract to procure ambulances. PS, in you government system, don’t you have sanctions on such suppliers from one entity of government to another. You lost money here and this supplier continues to get contracts of government. What do you do?” asked Syakalima.

Lunte PF member of parliament Mutotwe Kafwaya guided the witnesses on what answers the committee was expecting.

“PS, I think what the Honorable members are asking is that there was loss of public money and that what explanations you are giving should be going towards the recovery of the money,” Kafwaya guided.

Chikuba then proposed another set of audits to be conducted on the procurement procedure.

“Even us in the ministry we have had meetings with them (PSPF) to clearly understand how it was accepted. So my proposal honorable chair and honorable members will be for the Ministry of Finance to immediately embark on legal audits to see what damages or costs can be claimed from the supplier and an audit on the decisions that were taken against the supplier in order to find out if there was negligence in this transaction,” suggested Chikuba.

But Syakalima insisted that Savenda had committed a fraud and the matter should be reported to the Drug Enforcement Commission.

“The other madam there said when the machine came, it had a label 300KVA, upon testing it, it was found out that it was less. So this supplier was lying. He was actually stealing money knowing that probably…he is a thief. It is very clear, the specifications were made and they were quoted. Here is a person who brings you something written 300KVA which you wanted and it was proved that it is not what you wanted, that is fraud. There are no two ways about it but that is fraud. You what do you with such people? You report them to the police. This is a pure fraud. So instead of you telling us ‘no, we will go and do a audit and see who did what and what’, no, this is a case of fraud,” said Syakalima.

The committee further wondered what the board was deliberating on in its 20 sittings when the issue of the generator had taken 46 months without a concrete solution.

In closing the debate, Committee chairperson Patricia Mwashingwele gave the committee two weeks to resubmit satisfactory responses.

“I as Honorable members we are very disappointed and that is why the honorable members keep on saying that there is something you are not telling us which we want to know. But there is a suggestion that can you go back and clean up on this. You should resubmit on this one, just this specific one. And please if we call you back as a Fund, don’t be surprised because now we need to sit with the Auditor Generals office and refocus ourselves on you. There are things that we need to know very clearly for the good of our people and they want to know,” said Mwashingwele.

         

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