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ARE WE SERIOUS ABOUT COUNTRY’S ECONOMY?

28/04/2024 18:16:00 Thobeka Manyathela

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This has to be said.

The awarding of contracts to foreign companies, at a huge cost, does not only deplete our reserves at the Central Bank of Eswatini but reverses efforts to empower local people to improve their own economy. It is worse when these companies are not in partnership with local companies for purposes of skills transfer and development. It is better when foreign reserves are intentionally and positively depleted to import equipment that will create profitable business and improved services in the country. However, awarding tenders worth billions of Emalangeni to foreign companies, for works that emaSwati are capable of executing, is a vote of no confidence on local expertise. The recent awarding of a tender to Chinese companies to construct the Mpakeni Dam at the value of E3 billion should not have excluded Swati companies.

I am aware that some people may view this analysis as ‘shutting the stable door after the horse has bolted’ but is imperative that we condemn the exclusion of local companies from the Mpakeni Dam construction so that similar actions are avoided in future. ESWADE cannot be proud of the fact that there is no active local participation in a project worth US$167 million. This is in terms of partnership or joint venture. It is disappointing that emaSwati are excluded from such projects yet they were involved in the construction of the Maguga Dam, the largest facility in comparison with the Mpakeni Dam which is under construction. It is also disturbing to see that the foreign companies awarded the Mpakeni Dam tender have, on several occasions, been called on to react to allegations of unfair labour practices. Granted, I understand that unfair labour practices are common in Eswatini but there is a mind boggling question that needs answers: “Does the project have a skills transfer programme?” If so, I would really love to see it. The idea to hire specialised skills from abroad was generated by large economies solely for knowledge sharing purposes.

Skills

You cannot refer to the subcontracted firms as being part of a skills transfer programme. These companies are mostly involved in work they do on a regular basis and throughout the year.
There is also no monitoring and evaluation of any skills transfer. In short, there is no assessment of knowledge acquisition in the Mpakeni Dam project. The argument that local companies did not qualify or were incapable of executing a project of this magnitude needs to be qualified with believable reasons. The Times SUNDAY wrote an article to the effect that external financiers support local participation in their funded projects, even though local participation is not mandatory. The AfDB, World Bank, European Bank, Exim Bank of the Republic of China on Taiwan and several others, have previously funded projects in the country which were executed by local companies. The local companies would sometimes form partnerships with their foreign counterparts. Therefore, it is incumbent on all public enterprises to help Eswatini companies comply with international standards.

Eswatini companies have built towns, the United Nations (UN) complex, network of roads, dams, shopping malls and other facilities. These are indications of capability, high work ethic and the expertise we have. Projects that may be a challenge to us as emaSwati, for now, include manufacturing vehicles, boats, aircraft and other locomotives. Otherwise, the construction industry has remarkably improved since we attained independence in 1968. We have to applaud tertiary institutions like the Eswatini College of Technology, VOCTIM, MITC and others for the role they played in developing vocational skills in the country. We have to ensure that these institutions are adequately resourced to enrich the job market. However, the Mpakeni Dam’s tender documents discouraged local participation, which was absolutely counterproductive and against the principle of entrepreneurship empowerment.

This is because each firm interested in the bid to build the dam was required to show a financial muscle of E8.1 billion. One analyst previously told this publication that the required amount of money was almost equivalent to the E8.35 billion the Government of the Kingdom of Eswatini received from the Southern African Customs Union (SACU) during the 2020/2021 financial year. Also, the firm or company should have met this financial capacity requirement before it was considered for the E2.6 billion tender. Mind you, the average construction turnover for any firm interested in the tender was fixed at E1.71 billion.

management

This was to be calculated as total ‘certified’ payments received for contracts in progress and/or within the last five years, divided by five years construction contracts in the role of prime contractor, JV member, sub-contractor or management contractor for at least 15 years, beginning January 1, 2008. I am still surprised how or what actually might have led the AfDB to approve these conditions. This, I say, because Article 5.2 of the Bank’s Procurement Policy (Procurement Policy for Bank Group Funded Operations, 2015) appears to be flexible and accommodative as recently pointed out by our analysis. According to the article 5.2 of the AfDB’s Procurement Policy, the bank does not permit a borrower to deny participation in a procurement process or award to an eligible bidder or disqualify any such bidder for reasons unrelated to its capability and resources to successfully perform the contract. Article 1.3 of the Policy, the bank encourages and promotes “sound, fair, transparent and well performing” procurement systems in Regional Member Countries (RMCs). Eswatini is one of the 54 RMCs.
This principle is reportedly meant to ensure that financing is applied in ways that adequately secure the bank’s mandate while maximising development effectiveness.

Due to what the local companies described as difficult bidding conditions, not even one firm from Eswatini submitted the bid for the Mpakeni Dam tender. That was totally unfair to say the least. Eventually, two companies from China formed a joint venture styled Sakhalive, which was awarded the tender. The JV is already on site undertaking the project. I am pretty sure Manqoba Khumalo, the Minister of Commerce, Industry and Trade, was not happy with the manner in which local participation was disadvantaged, to the detriment of the entire economy. I checked the documents and found that the large chunk of the money came as a requirement for contract management experience, wherein the bidder should demonstrate three contracts it managed, each with a minimum of value of E2.034 billion. This is a small economy. Why were the requirements crafted as if Eswatini is a developed country? Why was money necessary?

realistically

What if the work done for E2.034 billion could realistically cost less if another evaluation were to be considered? It is clear Eswatini companies were not needed but the big question is why? Will we ever know the answer? The bidding firm was also given an option of submitting one managed contract with a minimum of US$339 million, the equivalent of about E6.1 billion. This is odd when considering the country’s gross domestic product (GDP). There was another option to submit two contracts valued at US$170 million, the equivalent of E6.12 billion. Neither Inyatsi Construction (Pty) Ltd nor Stefanutti Stocks Eswatini made an attempt to submit the bid. Stefanutti Stocks South Africa and WBHO formed a joint venture and participated in the tender which was won finally the Chinese JV. Okay, are we supposed to believe that Stefanutti Stocks, which has a presence in Eswatini and WBHO, would have failed to build the dam?Do you think a partnership of Inyatsi, Stefanutti Stocks and WBHO would have failed to deliver? Of course not. Noteworthy, the AfDB, which finances the construction of the Mpakeni Dam, promotes local participation in its funded projects.

Article 5.8 of the Procurement Policy for Bank Group Funded Operations issued August 2015, which is normally cited by public enterprises during tendering processes, is clear on what should happen where there is a question of local participation. Some of the country’s public enterprises claimed their tendering standards, which local companies could not meet, were in line with AfDB and World Bank procurement policies. I discovered that policies for these two well known financial entities promote engagement of qualified and capable local firms.
I have noted that the procurement policy for the AfDB states that it (bank) does not normally accept conditions of bidding that require mandatory joint ventures or other forms of mandatory association between firms.The bank states that it does “encourage associations with qualified national and/or regional firms.” In my research, I discovered that the bank, for the purpose of the development of local capacity or other considerations of equity, agree with borrowers that, under special circumstances and conditions, the following should occur –
* A degree of preference be granted to associations that include a national firm holding a share in the association above a predetermined level;
* Specialised nominated national sub-contractors be used in works contracts; or
A minimum number of national key experts be proposed by consulting firms;

It follows, therefore, that EWADE should have used to ensure there was local participation in the construction of the Mpakeni Dam. Article 8.1 states that the bank’s objective is to increase reliance on the borrower procurement system, essential to sustained and effective development and consistent with its fiduciary and development effectiveness mandate.
It is stipulated in the policy that the bank will agree to the use, by the borrower, of its national procurement system for its specific financed transactions. This shall happen if the bank determines that, for these transactions, the principles of this policy are substantially met.

comprehensive

This will be done based on a comprehensive assessment of the borrower’s procurement systems conducted by the bank, and this process is often done in collaboration with other donors and stakeholders. For those transactions where the bank determines that the fiduciary risks in the use of borrower’s systems are high, the provisions of this policy will apply. In such cases, a roadmap may be agreed with the borrower for strengthening its procurement systems to ensure their acceptability in future. In addition, the AfDB states that the borrower (for instance, Eswatini) may require a transfer of knowledge or transfer of technology as a key component of an assignment or of the scope of works or services according to procedures acceptable to the bank. In all such cases, the bank will have to be satisfied that such provisions do not adversely affect the key requirements of efficiency, economy and competitiveness. It is clear here that the bank needs to be only satisfied that these provisions are consistent with the national laws of the borrowing country. Article 8.10 states that the AfDB may consider, under special circumstances and conditions, accepting provisions of RMCs’ national procurement regulations.

RMCs are the bank’s regional member countries. The AfDB is a multilateral institution whose objective is to contribute to the sustainable economic development and social progress of the African countries that make up its RMCs, of which Eswatini is a member. In conclusion, I wish to reiterate that what happened at Mpakeni should never happen again, if we are serious about developing our country’s economy and empowering ordinary emaSwati.