According to a News Diggers investigation, Intelligent Mobility Solutions (IMS), which is a joint venture between Lebanese plastic manufacturer “Lamise Trading” and an Austrian company “Kapsch” submitted an unsolicited proposal for what they called “an integrated tolling solution”.
Under the unsolicited proposed concession, IMS offered to invest US$38.3 million over a period of 17 years, to take over control of the existing toll plazas, upgrade, enhance and expand, as well as construct more plazas, in order to arrive at a total of 25 tolling facilities under the deal.
Currently, government through the Road Development Agency (RDA) has contracted the National Road Fund Agency (NRFA) to manage and collect revenue from toll plazas, but last Friday when Parliamentary Public Accounts Committee (PAC) chairperson Howard Kunda asked NRFA chief executive officer Wallace Mumba to clarify if it was true, and why government was considering entering into a concession with a private company to collect toll fees, the agency boss denied having any such plans.
“Chair, I would like to mention that as management of NRFA and including the board of NRFA, we do not have that kind of intention in place. Essentially as an agency, we have continued collecting the revenues,” responded Mumba.
However, an investigation has revealed that in fact, the deal was made through a single sourced procedure, and against the Road Development Agency’s proposal to subject the tender to competitive bidding.
“RDA received an unsolicited proposal from Messrs Lamise Trading Limited in association with Kapsch on August 21, 2017 for a Public Private Partnership (PPP) for an Advanced Road Safety Management and Tolling Solution and Related Services. Following a preliminary review of the proposal, RDA sought authority from the PPP Council to invite competing proposals as required under Clause 42 (6) of the PPP Act No. 14 of 2009,” read part of the negotiation agreement obtained by News Diggers!
Single sourcing was allowed on grounds that the company that sought to takeover the running of toll plazas needed to also be in charge of the vehicle registration under another concession with the Road Transport and Safety Agency (RTSA).
“It was, however, determined by the PPP Unit that no competing proposals would be invited as required under Clause 42 (6) of the Public-Private Partnership Act No. 14 of 2009 (hereinafter referred to as the “PPP Act”) as the services that the proponent was proposing were specialised and could only be fully realised if the proponent was managing the vehicle registration under the Road Transport and Safety Agency, while at the same time also in charge of the toll collection system under RDA. The said unsolicited proposal was approved by the 7th Special Meeting of the Public Private Partnership Council held on 17th August 2018, pursuant to section 7 (b) of the PPP Act; and procured without competitive procedures, pursuant to section 35 (d) of the PPP Act,” the agreement read.
“An inter-sectoral team comprising members from RDA, NRFA, PPP Unit, Zambia Revenue Authority (ZRA) and Zambia Development Agency (ZDA) engaged Lamise/Kapsch in good faith discussions in line with the provision of Clause 42 section 10 (c) of the PPP Act No. 14 of 2009 to get a full appreciation of the proposal prior to making a recommendation to the PPP Technical Committee. The PPP Council approved the negotiated Concession Agreement at its 8th Special Meeting held on October 5, 2018 for implementation. The Concession Agreement was subsequently submitted to the Office of the Attorney General for clearance prior to signature as prescribed by law.”
Further, the agreement was to the effect that once implemented, government would get 70 per cent revenue from the toll plazas in the first seven years while the investor would reclaim 30 percent; in year-eight to 12, government would get 72.5 leaving IMS with 27.4; and 75 to 25 respectively in the 13th to 17th year of the concession.
IMS DICTATING TERMS
When the approved agreement was circulated among stakeholders, technocrats raised concerns that the period was long and that the proposed investment was not in tandem with the status of existing tolling infrastructure.
The stakeholders further directed RDA to re-negotiate with IMS so that the number of toll plazas covered under the concession should be reduced from 25 to 11, which would have a combined average daily traffic record of 21, 795 vehicles per day.
“As directed, RDA re-engaged IMS on the above stated issues from 29th to 31st October 2018. IMS was informed of guidance to RDA to limit the concession period to a shorter Concession Period such as 7 years. In order to achieve a shorter concession period, RDA optimized the project scope with a view of limiting the required investment. Under the optimized scope of work, 14 toll sites in remote areas were removed from the scope of the project. The remaining eleven (11) sites have a combined ADT 5 of 21,795 vehicles per day which represents 87.2% of the traffic and thus the removal of the fourteen (14) sites does not compromise the commercial viability of the project,” read the negotiation agreement.
“The 11 toll plazas are Katuba, Manyumbi, Mumbwa, Kafulafuta, Chiwoko, Kamiza, Mkushi, Chilonga, Choma, Zimba-Livingstone and Kyabankaka (Solwezi Mutanda). Based on the assumptions reached in 2(a), the following matters were further clarified as follows: (1) The above stated 11 toll plazas have been constructed and only require technological enhancements. The total capital investment required to be made by the concessionaire was estimated at US$ 14 million. (2) Based on the above considerations, RDA determined that the concessionaire would break even within 6 years and therefore; a concession period of less than eight years was feasible. (3) Revenue Share -The revenue under the above consideration was determined to be 95 per cent to GRZ and 5 per cent to IMS.”
However, IMS rejected the counter proposal, saying it was not viable.
“Messrs IMS rejected the proposal by RDA to limit the scope of work to the eleven (11) toll plazas on grounds that the US$ 12 million investment required was too little and, therefore, unattractive. Further, they indicated that the harmonization and full integration that was envisaged under the project would not be achieved under the proposed limited scope and hence the benefits would diminish significantly. IMS contended that a concession period of Seven years was not feasible taking into account the investment amount and how long it would take to recoup it. According to Messrs. IMS’s determination, the minimum concession period that could be considered was 15 years. Messrs IMS further determined that reducing the concession period from 17 to 15 years profoundly reduced their return on investment from 13 per cent to around 9.5 per cent, which is the minimum return they were willing to accept on their investment,” read the negotiation agreement.
IMS and RDA have since agreed on all the terms in the “Integrated Tolling Solutions concession”, apart from the concession period and the investment amount. But this is contrary to the Ministry of Housing and Infrastructure Development position that the constructed toll plazas already have integrated data servers which are linked to the NRFA headquarters in Lusaka.
On November 5, 2018 when he was asked on the ZNBC Government Forum to explain why the Michael Chilufya Sata Toll Plaza cost US$4.3 million, Minister Ronald Chitotela said “is not just a toll plaza, it is coming with a back control, a system engagement, a back control room where everything that is happening on all our toll plazas now are linked to the main server at National Road Fund Agency.”
According to records at the Patents and Companies Registration Agency (PACRA), IMS was registered on June 22, 2017, situated in Makeni. Its directors include two South African nationals: Douglas Graham Davey, holder of passport number M00093122 and Coenaraad Johannes, holder of passport number M00122928. Other directors are Lebanese Walid El Nahas, passport number RL0001100 and Ziad El Nahas of passport number RL3776058.
NRFA SOURCES EXPLAIN IMPLICATIONS
A source within NRFA told News Diggers! that express “go ahead” instructions on the said concession were coming from State House.
“This is another example of a transactions, where the Zambian Government, is selling off strategic assets or handing over control of strategic assets using concession agreements and Private public partnership. The problem is when these opaque deals are examined, they prove to be terrible deals for the tax payers. For this deal, the logic and business arguments make no sense and defy all rational reasoning. And when we question our superiors on why this deal is occurring, when it is so bad for government and its tax payers. We are told that the instructions to make this deal go through are coming directly from the State House,” source explained.
The source explained that once implemented IMS would not spend anything in essence because the company would be taking over existing income generating toll facilities.
“So far 10 Toll Plazas have already been constructed at great cost with another 19 currently under construction at various stages. These plazas are already revenue generating with GRZ reporting that all tolls (inland and borders) generated K670 million in 2017 when only three key plazas were operational; and they estimated to make over K1 billion in 2018. So we can roughly estimate that the Toll Plazas are going to be generating US$100 million a year in 2019 and keep growing based on the current infrastructure and the addition of more plazas,” explained sources.
“As things stand, GRZ receives 100 per cent of the toll revenue at over US$100 million a year, though 10 per cent is plowed back into administration and operations., But from the already existing toll plazas, IMS will receive at least US$90 million over three years, yet they are only required to invest US$38.3 million over three years for a 30 per cent share of the revenue over 17 years. How? In short they don’t have to spend $1 of their own money, and even if they do, their return on investment will be absurd, just from the fact they are taking over plazas with an existing revenue stream.”