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EEC’S ‘IRREGULAR’ E6.9M PAYMENTS TO SUPPLIER

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MBABANE – An investigation into allegations of theft, fraud and/or corruption at power utility EEC uncovered a number of questionable advance payments that were made to suppliers.

South African company, Prodogy SA (PTY) Limited, which conducted the investigation, looked at, among other things, advance payments in order to determine whether these were existed and if any were made to suppliers before delivery. During the investigation, Prodogy reportedly requested details of Eswatini Electricity Company’s (EEC) policy or procedure regarding advance payments but were not provided with any. Ransford Quaynor, EEC former Manager Financial Account, is said to have informed the investigators that during his employ at the power utility, there was never any such policy or procedure in place.

interchangeably

He is said to have further stated that the terms ‘advanced’ and ‘upfront’ were used interchangeably and to his knowledge had the same meaning. The investigators said they then extracted a list of transactions from the payment data file and found 41 upfront/advance payments made totalling E13 241 180.11. During the course of the investigation, the investigators said they confirmed that EEC made six advance payments to a company called Euro-Swazi, and five of these payments were each in excess of E1 million and together they totalled E6.9 million.
“In respect of Euro-Swazi Investments, there is no contract which could be provided. These payments appear to be irregular and not duly authorised by the MD,” reads the report by Prodogy. The investigators further found that there was no written agreement that existed between EEC and any supplier in respect of the advance payments made. “The payment policy refers to a 2.5 per cent settlement discount on early payment. In respect of these advance payments, the 2.5 per cent discount was not taken by EEC,” said the investigators.

Based on the documentation they were provided with and electronic listings detailing payments, the investigators then summarised the advance payments made to Euro-Swazi. The first advance payment was for E1.4 million and was reportedly requested by a Euro-Swazi Director, identified as Mr. Patel, who wrote a letter to EEC’s financial manager(Quaynor) on May 18, 2016, requesting that the advance be deducted from the actual invoice. “Mr. Quaynor, on May 23, 2016, signed the letter approving the advance payment stating that it was ‘to be deducted from the final delivery and invoice accordingly’. The amount was paid through EFT on May 24, 2016. The payment was authorised by Mr Quaynor as a ‘B’ signatory and Mr Nsibandze as an ‘A’ signatory,” said the investigators. The Nsibandze being referred to is Lawrence Nsibandze, who was GM Finance at EEC at the time.

A pro-forma invoice and a final invoice was then issued to EEC by Euro-Swazi for 600 transformers for an amount of E9 903 600, which was at a unit cost of E16 506. A note on the pro-forma invoice (preliminary invoice sent to buyer before a sale is confirmed) written by erstwhile Senior Treasury Accountant at EEC Bongumenzi Mabuza, reportedly indicated that a second advance payment of E4.5 million was made out to Euro-Swazi further to the 600 transformers. “No request letter was located in the payment documentation provided to us. However, we found that this amount was paid to Euro-Swazi in June 2016 through EFT/cheque number A4019 (with payment on the remittance advice indicating it would be credited by June 30, 2016). In addition, we found, based on a listing of payments made to Euro-Swazi, that the balance on the invoice for an amount of E4 003 600 (total E9 903 600 less the E4 500 000 and the E1 400 000) was in fact paid on June 15, 2016 through EFT/cheque number A39945 (exhibit 20). After the advance payment in May, the entire invoice was cleared to nil in June 2016 and the advance payment was properly deducted,” said the investigators.

In the second advance payment, an amount of E1.1 million was reportedly requested by Patel in a letter addressed to the financial manager on August 11, 2016 and further requested that the advance be deducted from the actual invoice. Both Quaynor and Nsibandze, on August 12, 2016, reportedly signed the letter approving the advance payment and the former stated that ‘remaining balance will wait for our 30-day policy’. “This amount was paid to Euro-Swazi in August 2016 with payment on the remittance advice indicating it would be credited by August 19, 2016. No EFT confirmation was provided to us,” reported the investigators. A pro-forma invoice was issued to EEC by Euro-Swazi for 300 16KVA transformers at a unit cost of E16 506 for a total amount of E4 851 800.

A note on the invoice written by Mabuza reportedly indicated that he approved the advance on August 18, 2016, stating that the balance was ‘to be paid on delivery of the invoice’. “Upon final payment, an amount of E1 400 000 (and not E1 100 000) was incorrectly deducted from the total invoice amount resulting in a payment of E3 551 800 (E300 000 short) paid to Euro-Swazi in October 2016 through cheque number A41932 (with payment on the remittance advice indicating it would be credited by August 14, 2016). No EFT confirmation was provided to us,” said the investigators. The balance of E300 000 was reportedly paid to Euro-Swazi in October 2016 through cheque number A42246 (with payment on the remittance advice indicating it would be credited by October 31, 2016). The EFT confirmation was reportedly signed by Nsibandze and Mabuza.

The third advance payment was for E1.4 million and Patel is said to have requested for it through a letter to Quaynor on April 13, 2017, while Nsibandze reportedly signed the letter approving the advance payment, stating that ‘please process approved’. “The amount was paid to Euro-Swazi in April 2017 through EFT/cheque number A44996 and was included in the total payment to Euro-Swazi of E3 875 900. Both Mr. Quaynor and Mr. Nsibandze authorised the EFT, which they signed on April 18, 2017,” reported Prodogy. Two invoices were reportedly issued by Euro-Swazi for various transformers and they totalled E5 896 680, made up of E3 467 600 and E2 429 080. A net payment of E4 496 680 is said to have been made to Euro-Swazi in May 2017, through EFT/cheque number A45388, which deducted the April 2017 advance payment of E1.4 million.

The fourth advance payment of E1.4 million was also reportedly requested by Patel in a letter addressed to Quaynor on May 22, 2018, and stated that a deduction would be made from the actual invoice. Quaynor reportedly signed the letter approving the advance payment, stating that ‘E1.4 million advance to clear the stick approved. To be recovered fully from the invoices that will be payable at the end of June 2017’. This advance amount was reportedly deducted from the payment made in June 2017 from invoices raised, which totalled E3 301 200; the net payment made was E1 901 200 through EFT cheque number A45830.

The fifth payment was for E1.6 million, again requested by Patel, who addressed a letter to Quaynor on June 8, 2017. Quaynor is said to have signed the letter, stating that ‘once approved, this E1.6 million is to be recovered from invoices for the June deliveries which are payable at the end of July 2017’ and Sibandze reportedly signed the letter, stating that ‘please process accordingly’. “This amount was paid to Euro-Swazi in June 2017 through EFT/cheque number A45980 together with an amount for invoice SEC 37/017 (E676 800), which totalled E2 276 800. The EFT payment was authorised and signed by Mr Quaynor and Mr Mathunjwa both on June 16, 2017. This advance amount was deducted from the payment made in July for invoices raised which totalled E3 459 000 (E3 002 000 and E457 000, respectively. The net payment made was E1 859 000 made pursuant to EFT/cheque number A46459 in July 2017,” the investigators reported. Interviews were reportedly conducted with both Nsibandze and Quaynor.

Nsibandze reportedly told the investigators that EEC was in arrears with Euro-Swazi at the time and was in a dire cash flow situation; hence an advance was requested by them to pay the duty in order to have the cargo of transformers released at Eswatini Railways (ESR). “He did not ask the MD for approval as he believes he acted in the best interest of the EEC by managing the legal risk of being sued by Euro-Swazi for the penalties on the containers not released. He stated that he recalls being told by the chairman of the board that as GMF he must take the initiative and he did exactly that. No settlement discount was taken and no written agreement was entered into as he did not deem it necessary,” said the investigators. The investigators said when they interviewed Quaynor next, they ascertained that his version differed materially to that of Nsibandze in respect of their reason for the advance payments to Euro-Swazi.     

“Mr Quaynor stated that at the date the requests for the advance payments were made by Euro-Swazi, payments of other invoices had been long outstanding and there was, therefore, no risk to the EEC. However, Mr Nsibandze stated that in addition to the reason cited by Mr Quaynor, Euro-Swazi was threatening to hold EEC responsible for the penalties of approximately E8 000 per container per day that the containers stood at the rail siding uncleared. Mr. Quaynor and Mr Nsibandze authored the payment,” the investigators said. According to the investigators, they were unable to interview Euro-Swazi.

Meanwhile, other than Euro-Swazi, the investigators reported identifying 35 other advance or upfront payments of under E1 million made to suppliers, and these totalled E6 341 180.11.
The investigators expressed concern that despite requesting all the documentation supporting these payments, they were not provided with the complete paperwork. Based on the limited documentation, the investigators said they noted that some payments were made due to the following: part of an approved tender award; from a payment certificate in terms of construction work procured; written agreement between EEC and supplier; supplier’s terms and conditions/quotation required and advance or full upfront payment; and supplier’s insisting on a part or full payment before goods were delivered because of a bad payment history experience with EEC.

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