The $144 million loan between the City of Harare and China Exim Bank to rehabilitate Harare’s water and sewage infrastructure has been in the news a lot lately. First it was the fact of the loan – and the hopes that the deal would restore water to our taps. Then there were reports of fund mismanagement, including the purchasing of luxury vehicles for city managers with project funds. Most recently, project equipment was being held at the border (despite being duty free) allegedly in exchange for the city settling some of its outstanding debt with ZIMRA.
A special committee to review the spending and management of the water rehabilitation loan was established, and their report came out 18 July.
Regarding the luxury motor vehicle purchases, the report notes that while the cost of the luxury cars in question is nominal in comparison with the total loan, there was no explanation or justification on why project team vehicles were prioritised over service vehicles for the project, why expensive, luxury vehicles were purchased, and why these vehicles have been allocated for team members who do more meeting in their work days than they do service visits or field work. The report also raises questions about the costing, procurement procedure and oversight of the vehicle purchase.
But more important, the report raises a number of concerns about the spending and management of the water project as a whole, among them:
- The agreement between the City of Harare and the China National Machinery and Equipment Import and Export Corporation (CMEC) to rehabilitate the water and sewage works was signed in 2009. The loan to finance this contract was signed between the Government of Zimbabwe and the Export and Import Bank of China (Exim Bank) in 2011. And the loan facility was ratified and approved in 2013. So it’s taken four years just to get the ball rolling. In the mean time, Harare’s water provision has worsened, and increasingly residents do not receive water in their taps. This reality doesn’t seem to have given much sense of urgency to the city, however.
- The team implementing the water rehabilitation project are existing, full time, City of Harare employees. Their duties, responsibilities and deliverables in connection with the water rehabilitation project have not been specifically outlined.
- Some project team members lack the required competencies and experience to delivery on the project, in particular the legal adviser and logistics management.
- There is inadequate legal, commercial, contract management, logistics, procurement and project finance skills.
- There is not a strong system to motivate employees to deliver on this project specifically.
- About six months into the project, it is at least 25 days behind schedule.
- Time, price and quality issues stand in the way of successful implementation of the project.
- The contract was not negotiated very well, and has a number of unclear clauses, overstated prices, and terms which are in favour of the contractor and open to abusive interpretation.
- Of the $144m loan, $84m has been disbursed, and $5.5m worth of goods and services have been delivered and/or rendered to date. So, about 58% of the loan has been disbursed to CMEC, but no substantive works on water rehabilitation has begun.
- It would appear there is no project accounting report or internal audit reports for the project. This makes it hard to track and identify both errors and mistakes and willful misstatements of accounting. It would also help the project team hold the contractor to account.
- An estimated $8 million in savings is possible now that the project has been granted National Project Status, but the project team members don’t seem to be aware of this possible savings. The savings needs to be reported to reduce the risk it is misused.
- The labour charge for the project is $28 million, being 38% of the value of fitted equipment. This is three times the industry norm for a refurbishment contract. In the absence of any explanation for these figures, there is an implication of overcharging for labour around $20 million.
- A number of existing pumps were removed or decommissioned before their replacements were to hand. This has resulted in a significant loss of water production capacity, and a related loss of would-be water revenue to the city. This is effectively a cost of the project which should be accounted for in the project implementation.