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South Africa Signs Agreement With Russia for Nuclear Power


Bloomberg News

Paul Burkhardt

September 22, 2014

South Africa signed a partnership agreement with Russia’s state-owned nuclear company that may see Rosatom Corp. build reactors in Africa’s second-biggest economy.

“The agreement lays the foundation for the large-scale nuclear power plants procurement and development program” using Russian VVER reactors with installed capacity of about 9,600 megawatts, or as many as eight nuclear units, Rosatom and the South African government said in an e-mailed statement today. The country also has a draft nuclear cooperation pact with China.

South Africa’s integrated resources plan envisions 9,600 megawatts of nuclear energy being added to the national grid to help reduce reliance on coal, which utility Eskom Holdings SOC Ltd. uses to generate 80 percent of the country’s electricity. The state-owned company is struggling to meet power demand,

The National Treasury said in February 2013 that a 300 billion-rand ($27 billion) nuclear program was in the final stages of study.

Areva SA (AREVA), EDF SA (EDF), Toshiba Corp. (6502)’s Westinghouse Electric Corp., China Guangdong Nuclear Power Holding Corp., Rosatom and Korea Electric Power Corp. (015760) have expressed interest in building the plants.

Local Procurement

“This agreement opens up the door for South Africa to access Russian technologies, funding, infrastructure, and provides a proper and solid platform for future extensive collaboration,” South African Energy Minister Tina Joemat-Pettersson said in the statement. It will allow the country to implement its plan to create more nuclear capacity by 2030, she said.

The collaboration will result in orders worth at least $10 billion to local industrial companies, Rosatom Director General Sergei Kirienko said in the statement.

In addition to building the nuclear units, the agreement provides for partnerships including the construction of a Russian technology-based research reactor, assistance in the development of South African nuclear infrastructure and education of specialists at Russian universities, the parties said in the statement.

Rosatom currently holds projects for the construction of 29 nuclear power plants, including 19 foreign commissions in countries including India, China, Turkey, Vietnam, Finland and Hungary.

Financial Implications

Eskom operates a 1,800-megawatt nuclear facility at Koeberg, near Cape Town. In December, the Energy Ministry published a revised 20-year energy plan, which projected that new nuclear power won’t be required until at least 2025.

If finalized, the deal may have significant financial risks and implications for electricity prices in South Africa, said Anne Fruhauf, an analyst at New York-based consultants Teneo Intelligence.

South Africa’s energy regulator last month approved a power-tariff increase that could amount to 5 percentage points on top of the above-inflation 8 percent previously agreed, and prices may have to rise even further for Eskom, which supplies 95 percent of the country’s electricity needs, to plug a 225 billion-rand funding gap.

“The million-dollar question will be the financing details and equity ownership,” Fruhauf said in an e-mailed response to questions. “We don’t have the details yet but it could be one of the biggest public procurement programs on which South Africa has ever embarked.”

To contact the reporter on this story: Paul Burkhardt in Johannesburg atpburkhardt@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.netAna Monteiro, John Bowker

Kenya: Youths, Women, PWDs to Benefit From New Procurement Rules


AllAfrica.com

By Capt. (RTD) Collins Wanderi

OPINION

On 18th June 2013 the Cabinet Secretary for the National Treasury published the Public Procurement (Preference & Reservations) (Amendment) Regulations 2013.

The objective of these regulations is to accord the youth and other disadvantaged groups in Kenya preference in the supply of goods and services to the government. This is in line with one of the key promises of the Jubilee government to give the youth, persons with disability (PWDS) and women at least 30 percent of all supply contracts to the government.

The significance of these regulations is that the National Treasury and all the Treasuries in the 47 county governments shall be required to register and maintain a database for all Small or Micro-Enterprises (SME) or disadvantaged groups that wish to participate in public procurement.

The regulations also seek to favour local businesses by granting exclusive preference to local contractors who supply motor vehicles, electrical goods, furniture and other items which are fully assembled or manufactured in Kenya. Road works and electrical installations of below Sh1 billion, other public works of below Sh500 million and supply of goods and services of below Sh100 million and Sh50 million respectively are now exclusively reserved for Kenyans.

When these regulations come into effect the government and all its agencies will inevitably become the largest promoters of the motto, “buy Kenyan, build Kenya”.

The regulations also make it possible for procuring entities to divide supplies in lots of goods, works and services into practicable quantities which the youth, SMEs and other disadvantaged groups can afford. A new Regulation 31 enjoins the National, County governments and other agencies of government to allocate at least 30 percent of their procurement to the youth, SMEs and other disadvantaged groups.

To enhance compliance with this regulation these procuring entities will now be required to make budgets, issue tender notices and award contracts with at least 30pc participation by the youth, SMEs and other disadvantaged groups. They will also be required to submit quarterly reports to the Public Procurement Oversight Authority for compliance audits.

To participate in the new preferred and reserved public procurement scheme, the youth, women, persons with disability, SMEs and other disadvantaged groups are required to register their enterprises with the relevant government body e.g Registrar of Companies, Business Names, CBOs, NGOs etc.

The membership of such registered bodies may have 30 percent members at most who are not youth, women or PWD but their leadership must be 100 percent youth, women or PWD. Procuring entities will be required to pay for supplies made under this scheme within 30 days. A delay beyond 30 days requires the entity to make 50 percent part-payment and explain the delay in writing.

Regulation 33 which deals with financing is of great importance. While young people often have the benefit of fresh ideas, energy and vigour they are seriously deprived while in competition with older people who have the advantage of time, experience and money. Procuring entities will be required to authenticate Tender Awards and Local Purchase or Service Orders (LPOs & LSOs) and enter into agreements with relevant financing institutions with an undertaking that the contracted enterprise will be paid through the account opened with the financier.

Banks, Deposit Taking Microfinance Institutions (DTMs) and other lenders licensed by the Central Bank of Kenya must also come up with very innovative ways to help the government, the youth, PWDs, Women and other disadvantaged groups achieve the objectives of the new regulations.

The youth, women and PWDs need these contracts but on the other hand government agencies require assurance that the contracted enterprises will perform their part of the bargain and with the requisite skill and expertise. One method to ensure satisfaction of reserved and preferred public procurement contracts may be through the doctrine of cession which is widely used in South Africa.

The law has created a new spectrum of proprietary rights for the youth, PWDs & women by dint of their status in society. These rights are exclusive, reserved and can be quantified in economic and monetary value once a procuring entity has authenticated a tender award and issued an LPO or LSO.

Once an enterprise owned by the youth, PWDs or women gets a contract to perform certain obligations for the procuring entity, such an enterprise acquires a right of claim for payment in anticipation by virtue of regulation 33. Consequently in terms of the doctrine of cession in anticipado, the future right to claim payment may be ceded. This way the youth, PWDs and Women owned enterprises (cedent) would retain ownership of the contractual rights but only surrender to a limited degree the ability to enforce those rights.

An agreement to cede would be in writing and a formal document known as the Instrument of Cession will have to be executed. A cession as opposed to delegation or sub-contracting would be the best method to facilitate access to finance and specialist expertise by the youth, women and PWDs who want to benefit from the preferred and reserved public procurement under the new regulations.

Wanderi is the chairman-Kenya Institute of Forensic Auditors (KeIFA)

99 percent of Ugandan contracts over budget


SupplyManagement

2 July 2013 | Adam Leach

Lack of attention to detail and poor market research by buyers are to blame for more than 99 out of every 100 public sector contracts in Uganda last year running over budget, according to the Inspector General of Government.

In its third annual report into corruption within government, the IGG found that the number of procurements that kept to budget had dropped to just 0.7 per cent of those let over the past year. It blamed purchasers for leading to unrealistic estimates of overall costs. The situation also appears to be deteriorating as in 2009, only half of contracts were found to have gone over their original budget.

The report said: “Price increase during execution, through change orders in specifications or cost, may be grounds for corruption. This is a significant red flag of a possible entry point of corruption and calls for integration of risk management into public procurement.”

The report, which covered contracts in 2012, also criticised public sector buyers for taking too long. It found that less than a third of procurements – 29 per cent – were completed when they were supposed to.

CORRUPTION WATCH:Procurement law must be simplified


Mar 31, 2013 | Corruption Watch

Is our government just really bad at procurement, or is there a deeper problem with the law that applies to tendering?

IT SEEMS that every other week there is a different scandal involving procurement. Most tenders seem to land up in court, with service providers squabbling over the spoils of government spending. Is our government just really bad at procurement, or is there a deeper problem with the law that applies to tendering? Perplexed

Dear Perplexed

We believe that it is a bit of both. While there is no denying that some of the bureaucrats responsible for procurement are corrupt (as are some of the private companies that bid for contracts), the law governing public procurement has become increasingly complicated.

In our view, procurement law has now become so complicated that it may be undermining service delivery. For example, many organs of state are unable to spend their budgets and infrastructure grants. The complexity of procurement law contributes to this problem by paralysing civil servants who become hyper-cautious in their desire to avoid infringing the law.

Part of the problem is that there are so many different levels of procurement law.

A well-intentioned and honest administrator will find that the following layers of law govern procurement:

Section 217 of the constitution expressly deals with government procurement. It provides that when an organ of state contracts for goods or services, it must do so “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.

The award of a tender constitutes administrative action in terms of the constitution. As such, the award of tenders is subject to review under the Promotion of Administrative Justice Act.

Various pieces of legislation govern the budgeting process, internal controls and the requirement that people historically disadvantaged by unfair discrimination be favoured.

Each organ of state has its own supply chain management policy, which must be followed by its bureaucrats when engaging in procurement.

Any information held by an organ of state relating to the tender process is potentially affected by the Promotion of Access to Information Act, and may be the subject of requests for information by other affected parties.

The contract between the relevant organ of state and the service provider is governed by the common law of contract.

As a result, innumerable pitfalls await even the most well-intentioned administrator.

The competitive nature of tender processes and the enormous financial benefits to be gained from contracts for government procurement are a powerful incentive for unsuccessful parties to litigate, which they often do.

Their lawyers scrutinise every step in the process for compliance with the various laws and procedures, and pounce on every real or perceived irregularity. Very few administrative processes are entirely free from any misstep, and when one is found, litigation soon follows.

In addition, bureaucrats are required to account to government oversight bodies in respect of expenditure, including internal accounting officers and the Treasury. The procurement process may also be subjected to scrutiny by the auditor-general and the public protector.

Even where litigation by disgruntled parties fails, or investigations by other organs of state result in a clean bill of health, the effect of such litigation and investigation is to delay the provision of the service in question.

Procurement processes are often suspended while disputes are resolved, which can mean delays of years in service delivery.

We are therefore of the view that legal reforms to simplify and speed up procurement are justified. Any reform would have to ensure that accountability mechanisms remain in place, and that the law retains proper safeguards for detecting corruption and maladministration.

That would require careful balancing between swift, effective service provision and a functioning oversight mechanism.

* This article was first published in Sunday Times: Business Times

 

The Wheels of Corruption


News24

November29, 2012

Corruption is a lethal toxin that kills the spirit of free enterprise and public governance excellence in South Africa. It is a risk and reward game played by ruthless legal-wise people who seduce naïvely ambitious public officials and turn them into criminals.

According to an article published in the Economist in 2011, as much as 20-25% of annual state procurement expenditure in South Africa amounting to around R30 billion is wasted through overpayment and corruption. The auditor-general estimated that R26 billion is wasted or spent “irregularly” in a year. A third of government departments award contracts to officials and close family members, it was reckoned.

Many people in South Africa sacrificed for a free society and the jubilation that came with advent of democracy in 1994. Some of these people benefited handsomely from the fruits of their sacrifices and were rewarded for life, without the aid of corruption.  Some were not so fortunate though. Those who thought that free enterprise would take off without corruption and prejudice made a serious judgemental error. Their sacrifices did not transform into lifetime rewards. They became the first victims of early bouts of the plague of corruption that is now taking its toll in South Africa.

Corruption is the pursuit by dishonest people in devious partnerships and networks with the goal to acquire undue wealth and benefits for members who are prepared to partake in illicit and dodgy behaviour. Corruption is usually taken to mean dishonest or fraudulent conduct by people in positions with influence and power.

Imagine the following scenario from more than a decade ago. A senior black consultant teamed up with a white entrepreneur skilled in program management to start a legitimate program management firm to facilitate the rolling out of much needed municipal services and local economic development in poor communities. Initially the firm succeeds in winning small projects. With repeated successful delivery the scope and value of projects increase to a point where executives in contracting organizations hint that contract benefits must be shared and that firms they hold shares in must also benefit through projects. When one such a senior executive of a public enterprise, which contracted the firm to program manage its market development strategy, stopped payment on a contract to enhance the performance of a municipality, the wheels of corruption revealed itself.

The affected firm lodged a complaint over non-payment with the chief executive of the public enterprise and after an investigation he agreed to institute a process of arbitration. This was when things started to get interesting. It was established that a firm in which the senior public enterprise executive had been given a shareholding was awarded an infrastructure development contract in the same municipality. The project was connected to the scope and budget of the program management contract and payments were made from the budget set aside for the program management firm. It was when this budget ran out that the payments to the program management firm were stopped.

The legal department of the public enterprise engaged a law firm to handle the arbitration process. The arbitration costs would be for the account of the public enterprise. The firm of attorneys engaged by the public enterprise appointed a senior advocate as arbitrator who had previously handled cases for the public enterprise. At the start of the arbitration proceedings the arbitrator offered to withdraw from the case because the public enterprise had been his client in several previous cases. The directors of the aggrieved firm, wary of possible prejudice, accepted his offer. It was agreed that the process would be repeated with a new arbitrator.

The process to appoint a new arbitrator started and after several weeks a new lawyer was appointed as arbitrator by the law firm of the public enterprise. This time the directors of the aggrieved firm were required to foot the bill of the arbitrator and the fees of a lawyer to represent the aggrieved firm as required by Supreme Court rules. These extra costs and the non-payment of contract fees placed the aggrieved firm in financial dire straits.

Several weeks had passed after the hearing when the arbitrator demanded payment from the directors of the aggrieved firm before publishing his ruling. He had to be paid before he would reveal his ruling. When he released his ruling after payment, he had ruled in favour of the public enterprise. After the ruling the distraught directors of the aggrieved firm learnt that the arbitrator had his offices in the same building as the law firm that had appointed him. They then understood the intimate resonance they sensed between the arbitrator and the legal representatives of the public enterprise during the hearings.

The directors of the aggrieved firm felt shattered and decided to close down their firm because of the ruling, the unpredictability of payment by the public sector and the enterprise-unfriendly legal environment.

The set of wheels which moved the corruption to its destructive conclusion comprised of an ineffective procurement leadership structure operating without a policy that prohibits public enterprise officials from taking up shareholding in private firms that deal with the public enterprise; a greedy official with shares in a predatory firm; the owners of the predatory firm who colluded with the official; and a network of legal experts familiar with the arguments, precedent rulings, court rules, contract laws and pressures that are needed to protect the felonious officials of a contracting public enterprise from the claims of cocky entrepreneurs and the victims of corruption.

The appearance of Public Protector Thuli Madonsela who understands the dynamics and networks that drive corruption so well had become the saviour and fountain of hope for entrepreneurs. She has brought closure and redemption to many of those castigated emotionally and financially by corruption. She had become the quiet and gentle enforcer of procurement discipline and public servant ethics. The people salute her and trust that she will continue to be the enemy of corruption and the flame of governance excellence and that she will succeed in removing evil from our society. She has truly become the people’s trusted chucker-out of corruption, fraud, mal-administration and improper enrichment at the expense of the state.

Corruption Watch queries R13m tender


www.oil.co.za  Business Report

By SAPA

June 21, 2012

A Corruption Watch probe has found irregularities in a R13 million tender awarded by the department of transport (DOT), the civil society organisation said on Thursday.

The department had awarded a tender to a company which had not fulfilled all the necessary requirements, and overpaid for services by R10 million, it said in a statement.

Global Interface Consultancy won a tender to manage conference and communication services for the department of transport’s international investor conference in June last year.

It had submitted a bid for R13.5 million.

Losing bidder Indigo Design and Event Marketing bid R3.837 million – about one-quarter of the winning bid.

Indigo Design, a BEE-accredited company, lodged complaints with the department, the Public Protector, and Corruption Watch (CW).

“CW’s further investigation into the DOT tender award revealed gross irregularities in the tender process,” Corruption Watch said.

Corruption Watch had handed over its findings, as well as two cases involving irregular public tenders, to the Public Protector for further investigation.

It was in the process of formalising a working relationship with the Protector.

“We will closely monitor the cases that we hand over to the Public Protector and we will assist her office with further evidence and information gathered from the public,” said executive director David Lewis.

“It should be stressed that this case and each of the serious acts of corruption that we are investigating were reported by alert members of the public.”

Comment from the department could not be immediately obtained. – Sapa

‘Contract monitoring coalition’ kicks off with World Bank support


After a year-long incubation process supported by the World Bank Institute, 19 Ugandan civil society organisations this week formally established a ‘contract monitoring coalition’ that aims to involve local communities in the oversight of government-funded projects—including those related to oil—awarded to private sector contractors.

“There have in the past been incidents of alleged collusion between contract parties,” Gilbert Sendugwa, who chaired the coalition in its formative stages, told Oil in Uganda. “Our coming on board is going to minimise that possibility and also improve the flow of information.  The coalition will provide a mechanism to bring communities on board, so that they understand the contract, they supervise it and, when the contractors leave, the communities know about the project and are able to sustain it.”

Mr. Sendugwa, who is also Coordinator of the pan-African Africa Freedom of Information Centre, went on to explain that community monitors would be trained to play an oversight role.  For example, he said, the government is funding the construction of 200 schools across the country, and community monitors could play a crucial role in ensuring that the selected contractors complete the work on time and to the agreed quality.

The coalition, Mr. Sendugwa stressed, is committed to a “multi-stakeholder approach,” and will wherever possible work collaboratively with the government and contractors.  Disputes often arise between government inspectors and contractors, he said, and third party monitors could help to resolve these. “A contract that performs is good for the client—in this case, the government—and is good for the contractor. Therefore the involvement of civil society can be very useful for the government and very useful for the private sector.” Read me.

Ghana: Kufuor Govt Disregarded Public Procurement Law – Waterville


GhanaWeb

By Tawiah, Benjamin Kwame

March 13, 2012

In a press statement issued today, Waterville says it has become necessary to address the statements being circulated about the alleged wrongdoing by Waterville Holdings (BVI) Limited (“Waterville”) in the contracts awarded by the Government of the Republic of Ghana (“GoG”) for the rehabilitation of the Ohene Djan, El Wak and Baba Yara sports stadia for the hosting of the 26th Cup of African Nations tournament in Ghana in the year 2008 (“CAN 2008”).

It is our aim to lay before the public in a clear and succinct manner the full facts as follows:

1. Waterville, through an open, fair and international bidding process and in compliance with Ghana’s public procurement law won a contract to construct two (2) new stadia, rehabilitate two (2) more. The construction of a third stadium was added to the scope.

2. In spite of Waterville being given approval for the award of all five (5) stadia the government decided to award two out of the five stadia already awarded to Waterville to Shanghai Construction (Group) General Corporation. The procurement process for the two (2) stadia awarded to Shanghai Construction (Group) General Corporation was not done in compliance with Ghana’s public procurement law.

3. On the strength of MoU’s signed with the government in November 2005 and subsequent contracts signed on 26th April 2006, and given the very tight time frames to complete the stadia in time for the CAN 2008 Football games, Waterville proceeded to prefinance and start the rehabilitation of the three stadia.

4. After the majority of the procurement process of materials and equipment was completed by Waterville and substantial progress made by Waterville in progressing the rehabilitation of the three stadia, the government decided to cancel its contract obligations with Waterville, on August 2006.

5. As a consequence of expenditures already made by Waterville at the time of the government’s cancellation of the contract, Waterville made an immediate claim for reimbursement of the amounts it had already spent towards its execution of the contract. It has to be noted that the Government’s Consultant verified and certified the value of works provided by Waterville to be a total of Euros 21,569,946.71.

6. Waterville asked the Government to advance some funds from its certified certificates of works so to pay the subcontractors and allowing them to continue the works to achieve the target of October 2007 with no delay.

7. It was only through a mediation process, referenced within the contract that Waterville got paid after several years by the government an amount of Euros 25,000,000 to cover the balance of reimbursement owed, late payment interest and penalties against losses incurred by Waterville.

On the issue of the double payment which is being alleged by all sorts of people, note that, part payment of Waterville certificate was paid directly to the sub-contractors to enable them continue with the contract to achieve the target of October 2007 with no delay., Waterville has pursued the government of the Republic of Ghana since 2006 for the outstanding balance which had remained unpaid…Read more.

Related articles

South Africa: Transnet finds R6bn in irregular pipeline spending


Mail&Guardian Online

By Lynne Donnely

March 16, 2012

Irregular expenditure on contracts relating to Transnet’s new multi-product pipeline amounted to an estimated R6.2-billion, it was revealed in Parliament this week. 

At a hearing by Parliament’s standing committee on public accounts (Scopa) the parastatal revealed that two contracts for engineering, procurement and contract management services on the controversial pipeline contributed a major share of the total of R8.3-billion of irregular expenditure disclosed in the company’s 2011 annual report.
The pipeline has been fraught with controversy because of delays and cost escalations, which increased from the originally budgeted R9.5-billion in 2006 to R23.4-billion now.
Full completion was intended for the first quarter of 2011 but was delayed until 2013, although certain sections have since become operational.
Rising costs and time delays prompted Public Enterprises Minister Malusi Gigaba to launch an independent review of the project.
The review, which is expected to be released next week, included three independent reports on the governance, engineering and project management aspects of the pipeline, as well as an independent legal opinion.

Pipeline tariffs affect petrol prices
The increases have also had an impact on pipeline tariffs as costs for the infrastructure are recouped. This in turn has an impact on petrol prices for South African commuters.
On Thursday the National Energy Regulator of South Africa announced a 22% increase in the pipeline tariff, which is expected to cause a 4c per litre hike in the petrol price.
The company’s acting chief financial officer, Anoj Singh, told Scopa that three contracts for procurement and management services totalling R6.57-billion were deemed irregular.Of these, one contract for services valued at about R300-million was unrelated to the pipeline. The contracts had been concluded in 2004-2005 and 2006-2007.

He said, however, that in all three cases Transnet had received value for money on the contracts, even though procurement procedures had not been complied with.

For this reason, the contracts were not classified as fruitless or wasteful expenditure.

Contracts awarded without following procedure
The first contract for the pipeline was awarded after an individual without the delegated authority signed the agreement. The second was deemed irregular after it was found that internal policies and procedures had not been followed because internal controls in awarding the contract were not applied. But this was in the first stages of the pipeline project, said Singh, and contributed the smallest amount to the combined pipeline irregular-expenditure total of R6.57-billion. He could not tell the committee the individual worth of pipeline-related contracts…Read more.

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