MINISTERS ILLEGALLY COMMIT E220M FOR FACTORY PROJECT

MBABANE – Two Cabinet ministers came under severe scrutiny from parliament in the past week for committing government funds without seeking approval from the House.

Minister of Finance Neal Rijkenberg and his colleague Manqoba Khumalo, the Minister of Commerce, Industry and Trade, committed an amount of E220 million towards the construction of a factory from which an international investor is expected to operate.

The name of the investor has been withheld to protect the investment that is coming to the country and the about 200 jobs the investment is anticipated to bring. Initially, the project was handed to the Industrial Development Corporation of Eswatini (IDCE) for financing but government, it has now been revealed, has since taken it over. This is said to have happened in November last year. 

Rijkenberg and Khumalo, by committing the government funds to the project, in essence, violated the Public Finance Management Act, which spells out clearly what processes need to be followed before such an undertaking could be made.

The Act, in Section 36, prohibits ministers from making commitments ‘that have financial commitments for the government budget or any local government budget that are not authorised by the annual budget, or an authority provided by the Act, or other legal authority.
The Act also states that ministers “shall not expend public money other than in accordance with authority under the annual budget, or an authority granted under an Act”. 

    
In Section 28 (1), it is provided that “government shall seek approval of parliament for making multi-year commitments by presenting the proposed multi-year commitments in the annual budget documents for approval by parliament and shall, in addition, provide information on the previously approved multi-year commitments and the current status of these commitments”.

‘Multi-year commitments’ include capital investments and related recurrent costs, obligations for government under public-private partnerships and other investment and financing arrangement.

Over E18m already spent

The Times SUNDAY spoke to two highly-placed and senior sources who said the two ministers, Rijkenberg and Khumalo, had a tough time trying to convince parliament not to stop the project because of the violation of the Act.

Parliament only became aware of the commitment made by the two ministers when Rijkenberg appeared before the Finance Sessional Committee and the Portfolio Committee on Finance for final deliberations before he tables the Appropriation Bill (National Budget) on Friday.

“We discovered that they have already spent over E18 million on the project. How do you spend so much money without parliament’s approval? The project shouldn’t have continued because it has violated all financial rules,” said an astute legislator who is privy to the discussions.

What saved the ministers, the legislator said, was a collective decision by the two committees to put the country’s image first before everything else. “At the end of the day, the project has to continue because, as MPs, we are not reckless and irresponsible. We decided to give the ministers the benefit of the doubt because we all want this project to continue,” said the MP.

The legislator said they decided to let the ministers face the Public Accounts Committee, when the time comes, where they will have to explain their reasons for deciding to ignore legal processes.

Another issue that is said to have come up was that since government had taken over the project, what would happen to the contractor who was already on site continuing with the job.

“The contractor was appointed by IDCE who have since pulled out of the project; so the fundamental issue now is since the project is now funded by government will it want to continue with this contractor who was not hired through government’s tender process? If there’s no re-tendering for the project, then it means you cannot use government funds,” said The MP.

But the legislator noted that this might be a catch-22 situation because the contractor is under contract and will demand payment; “but the question is who will they demand the payment from because IDCE pulled out?”
According to the MP, this is now a mystery that needs to be solved by government, IDCE and the Eswatini Investment Promotion Authority (EIPA).

Problems with project

 Meanwhile, a source who works closely with the Executive (Cabinet), said the project began experiencing problems under IDCE when the corporation had a fallout with its Chief Executive Officer (CEO), Phiwayinkhosi Ginindza, which resulted in the latter being suspended.
The impeccable source said IDCE then informed government that they were not in a position to fund the project and asked that alternative funding should be sought.
This was reportedly in November and by the time government concluded everything, parliament had already adjourned for the year 2019. “The alternative was to raise bonds that people could buy to raise funds for the project and that was agreed. This was supposed to go through parliament but then the House had already adjourned,” explained the source.
A decision was reportedly taken to go ahead with committing government funds for the project, with the assumption that a supplementary budget would be tabled in parliament once it opened in 2020.
“The problem was that when IDCE pulled out, work was already underway and the contractors had to be paid and government therefore had to inherit all the debts that came with the project,” elaborated the source.
However, the source said, when the two finance committees heard about this, they informed Rijkenberg and Khumalo that they had been misguided because ‘you do not request supplementary budget for an item or project that was not even in the budget initially’.
“The two ministers pleaded ignorance and apologised for the oversight. This was understood by the MPs, who gave them the benefit of the doubt because they were relatively still new in office. The MPs then took time to educate the ministers about the process,” stated the source.
Two other concerns were reportedly raised by the MPs; and these included the cost of the project, which was viewed to be high, and why the investor did not build the factory instead of government shouldering the responsibility.
But with these two concerns, there was reportedly a lot of disinformation that had been spread around the project. “For instance, there was information to the effect that government does not construct factory shells for companies but they do these themselves. This was pure lies because there are more than 15 companies that are operating from factory shells constructed by government,” said the source.
investor’s pre-condition
According to the source, the two ministers also explained that it was the investor’s pre-condition that government should construct the factory for them and they would rent it with the option to buy it after three to five years.
This is reportedly part of the Memorandum of Understanding entered into with the investor. “The MPs understood this and agreed with what the ministers were saying,” stated the source.
Regarding the cost, the ministers are said to have told the MPs that the calculations were based on the money that was spent in constructing two other factory shells in Matsapha about five years ago.
“These factories were each built on 3 000 square metre land at a cost of E30 million. The current project is being built on 18 000 square metre land, which, in other words, is six times bigger than the other ones. When you do your mathematics, you come to E180 million. But this was five years later and the cost of things has gone up, which is why the budget is at E220 million, and this makes sense,” further explained the source.
The ministers are said to have also explained that the issue of the contractor would not be tampered with because the proper procurement process was followed when the service provider was engaged.     
“The ministers said they found no reason to tamper with the tendering process because government was literally continuing with an already existing project. They said there were just unforeseen circumstances that arose along the way, that have nothing to do with the contractor and how they were selected,” stated the source.
He said ministers told the MPs that they were cognisant to look at whether there were previously any problems that were encountered when the contractor was engaged and found that there were none.
“They explained that starting the ender process afresh was not necessary and was going to waste time and there was just no motivation to terminate the services of the current contractors. The MPs appeared satisfied with the explanation,” added the source  
A reputable forensic audit firm is said to have also found the tendering process to have been without controversy.
IDCE Chairman Dumisani Kunene confirmed that they were no longer part of the project. “This has always been a government project, we were just asked to participate in terms of financing it. Government then had other options and decided to continue with the project on its own,” he said.
He said IDCE leaving the project had nothing to do with the corporation’s fallout with its CEO.
“Government just had urgency that we could not meet on the project in terms of timelines. We had committed some funds to the project management cost but were still going to engage government in terms of the timeline; whether they were going to accept our timelines. Eventually they had an urgency to complete and their urgency was far before our timelines. In that case we couldn’t actually assist them,” Kunene said.    
‘budget speech to shed light’
Minister Rijkenberg said he could not talk about the project because that would give away part of what he would say when delivering his budget speech on Friday. “It would be wrong for me to reveal at this stage what is in the budget and what is not. The factory is being built by EIPA, please check with them. They did start the process with IDCE but they have now applied for a budget to complete it,” the minister said.
Minister Khumalo said he was currently out of the country and could only talk on his return. On the other hand, Chairperson of the Finance Sessional Committee MP Thandi Nxumalo said everything that they deliberated with the ministers would only be revealed on Friday when the finance minister tables the national budget.
“I cannot pinpoint a particular issue because we looked at the budget holistically. It is a norm that the minister sits down with the finance committees for deliberations before tabling the budget in the House. It’s not proper for me to divulge what we discussed with the minister. Friday is around the corner, you will hear what the budget contains,” she said.
Nxumalo said, anyway, the budget would still be debated by the House. 
   
        

 
     
 

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