Chipimo sounds alarm of systematic corruption in UNZA land scam

Prominent Lusaka lawyer and opposition NAREP president Elias Chipimo has questioned the lack of transparency in a case where the University of Zambia (UNZA) Council doubled the lease period for the development of its land by the East Park Mall Concessionaires from 25 to 50 years, with no clear benefit to the perennially cash-strapped institution.

A News Diggers investigation has revealed that the University of Zambia Council extended the land lease agreement to the East Park Mall developers in Lusaka, from 25 to 50 years, against the provisions of the Public Procurement Act and the Public Private Partnership regulations.

According to a letter from State House Permanent Secretary Christah Kalulu to the University of Zambia Vice-Chancellor dated September 5, 2017, the Attorney General opposed the amendment of the the concession and further ordered the University of Zambia Council to pay back the US$ 3 million advance that it received from the land developers.

“Kindly be be advised that the PPP unit had written to the Attorney General seeking a legal opinion as regards some of the concerns raised in relation to this project. The Attorney General made the following observations:

1. The Council, or the University of Zambia signed two addenda with the concessionaire. The first addendum extended the concession period for a further 25 years and the second addendum reconfirmed the the extension and made amendments to the special conditions. The University of Zambia availed additional land to the concessionaire for an upfront payment of US$3 million. The Council made the forgoing amendments to the terms and conditions of the concession agreement without prior approval of the PPP Council which has overriding authority to give directions regarding the implementation of any project,” Kalulu stated.

“The Attorney General noted that none of the circumstances prescribed under Section 57 of the PPP Act had prevailed at the material time to warrant the extension of the concession duration or the transfer of additional land… The opinion of the Attorney General was that the restatement of lease agreement and the second addendum signed were in contravention of the provision of the PPP Act and the Public Procurement Act.”

She added that because the University Council acted outside the provisions of the law, the agreement was thus null and void.

“With respect to the US$3 million upfront cash payment, the Attorney General advised that the Council of the University of Zambia must repay the concessionaires because the amendment to the terms and conditions of the agreement was entered into without the prior approval of the PPP Council and the Attorney General. Therefore, the amendment is null and void. The matter has since been handed over to the Auditor General’s office that is is currently undertaking an audit of the financial operations of the University of Zambia,” stated Kalulu.

And in his article dubbed “The UNZA-East Park Mall Concession: Did Something Fishy Take Place?” Chipimo also wondered how the University of Zambia used the US$3 million loan which it obtained from the land lease agreement, which is shrouded in controversy.

“In 2010, the University of Zambia (UNZA) Council signed a contract (the original contract) with Graduare Property Development Limited (Graduare) for the purposes of developing the area that is now called East Park Mall. The contract is essentially a Build Operate and Transfer (BOT) contract for a period of 25 years. A BOT arrangement is essentially a financing mechanism under which the parties agree that a developer will lease land from a land owner and secure their own resources and take on the full risk to develop and use the property,” Chipimo explained.

“It is expected that the developer will recover the cost of the development and make some profit on top from the use of the property they have developed during the period of the lease (which in this case was 25 years as already stated). Upon expiry of the lease period, the property is then handed back to the owner at no cost (other than purely administrative costs) and the owner is then free to use the development as they see fit. The original contract required the developer to pay UNZA an annual fee of no more than 5 per cent of gross annual revenue from the development as soon as it was generating revenue. However, in 2011 there was an initial request for possible concession extension by another 25 years although it is not clear what the value to UNZA would be for this extension.”

Chipimo noted that the concession agreement had been changed under unclear terms and without the public’s attention.

“In 2013, there was a first addendum to the original contract which essentially fixed the concession date and gave UNZA a seat on the board of Graduate. In 2016, a second addendum was signed which accomplished four main things: (i) it gave the developer additional land for development which was larger in size than the original land; (ii) it granted a loan to UNZA (in cash or in kind) for the development of a lecture and graduation hall; (iii) it provided for the setting-off of this loan/development against the proceeds from the 6% gross revenue due to UNZA for the operation of the new development area granted under the second addendum; and (iv) it gave the right for the developer to have the lease automatically extended by an additional 25 years upon request,” he observed.

“This is a matter that was not sufficiently brought to the public’s attention and there are issues around whether the appropriate regulatory approvals were obtained by UNZA Council although this issue will be determined by the evidence available and what the law on procurement and approvals was at the time the various transactions were being concluded.”

He challenged the University Council to explain how the lease agreement was changed and how the loan obtained from the concession agreement was used.

“However, there are three troubling questions that need to be answered: 1. Did either the PPP Unit or ZPPA provide the requisite approvals for the extension of the concession period from 25 to 50 years? 2. What value did UNZA derive for granting the property developers an additional 25 years? 3. What did UNZA do with the $3million loan?” asked Chipimo.

“It is concerning that UNZA gave up additional land (larger in size than the original land that was handed over for development under the original contract) and increased the concession period by 100 per cent to 50 years (covering both properties), in exchange only for a US$3 million loan and an increase in the annual fee by 1 per cent in respect of the newly transferred area. For a severely cash-strapped organisation like UNZA to hand over a concession for a period of 50 years and to double the land under lease in exchange for a 3 million dollar loan seems – to put it bluntly – crazy. We need answers.”

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