Zesa in $6m scandal

Published: 06 March 2014

AN executive with power utility, ZESA Holdings, is embroiled in a multi-million dollar scandal in which he allegedly authorised a company called Revma to supply a prepaid billing platform and meters without going to tender. Documents seen by the Financial Gazette show that Julian Chinembiri, the managing director of the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a subsidiary of ZESA, authorised a $6 million deal for Revma to supply the pre-paid billing platform and meters without the involvement of the State Procurement Board (SPB).

Although the ZETDC had bought Landis Gyr vending platform under a pilot project, it later said it wanted the new platform because Landis Gyr platform could not accommodate 1 000 000 meters. The Financial Gazette understands that sometime in 2012, Revma initially charged $560 000 for a vending platform software against about $1,2 million charged by other bidders.

Government resisted the move and former permanent secretary in the Ministry of Energy and Power Development, Justin Mupamhanga, ordered the tender to be cancelled. However, Revma later claimed it had a representative in South Africa called Itron who could supply 3E vending software, which would come with smart metering.

Smart metering of electricity is widely recognised as the "lowest hanging fruit solution" to the electricity deficit, high losses, billing inconsistencies and the current rampant theft of electricity through by-passing of simple prepaid meters. It is understood that while negotiations were still in progress, Chinembiri signed an order without going to tender. The order included the supply of pre-paid meters.

The SPB is understood to have expressed disquiet over the deal, but Revma argued that ZESA had given them the order in terms of the law. It was during negotiations that took place exclusively between Revma and ZETDC that Revma allegedly inflated its original price of $560 000 to $6 million.

ZETDC is then said to have unilaterally proceeded to buy the vending system which is currently in use and 20 000 prepaid meters each costing $112. The cost of the prepaid meters amounted to $2,5 million. This had not been put to tender, it is alleged. To justify the alleged breach of tender rules, ZETDC argued that the platform came with smart metering which sources said was incorrect. Instead, according to information gathered, Revma supplied traditional pre-paid meters. Investigations by the Financial Gazette revealed that the South African firm, Itron, is currently getting $0,62 for every transaction done through the pre-paid billing platform supplied by Revma to ZETDC.

It could not be immediately established how much Itron has so far received under this deal. Whereas other suppliers had indicated that they would supply and install the pre-paid meters, Revma was allowed to supply the gadgets without installing them. This forced ZESA to use its own technicians to install the traditional prepaid meters. In 2012, ZETDC was mandated by the Ministry of Energy and Power Development to procure the smart prepaid system. However, it acquired the traditional or simple STS prepaid vending system from Itron.

This resulted in ZETDC not having a Smart Meter Data Management Core System (SMDMCOS) that enables the concurrent management of both simple STS prepaid meters and dual mode smart prepaid/ post paid meters. To get the benefits of smart metering, ZETDC has to purchase the required SMDMCOS. The prepaid meters that have been installed so far have brought with them known challenges due to their outdated technology.

Sources said the power utility is losing more than $10 million monthly in potential revenue due to poor quality of the prepaid meters, which can easily be tempered with. The meters can switch on and off alone and can credit without payment. They can be manipulated to make them under register, effectively allowing power use without paying for it. Traditional prepaid meters don't detect tempering.

Contacted for comment yesterday, Chinembiri said the utility was given the green light by the SPB to engage Revma. "We had to engage them (Revma) since the original plan was to have the platform hosted in South Africa," said Chinembiri . "As a utility, we had the blessings of the SPB who gave us the green light to engage them without their involvement. We felt it was going to be expensive for us as a utility because we would have paid $0,65 per transaction. Now that the platform was to be in our control here in Zimbabwe, this resulted in the price shooting from $560 000 to about $6 million," Chinembiri said.

ZESA Holdings and its subsidiary companies have been plagued by high legacy debts in excess of $600 million, perennial under funding due to fiscal constraints, a non performing debtors book in excess of $800 million and total transmission and non-transmission losses reported to be above 20 percent of total electricity distribution.

But it would now appears that graft is also taking its toll on the company, which has been unable to supply enough electricity to both domestic and commercial users due to poor generation capacity and excessive overhead costs.
- fingaz

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