ZPC in $20m legal services bill scandal

Published: 20 July 2018

The Zimbabwe Power Company (ZPC) is engulfed in a $20 million legal-payment row amid revelations that the Zesa Holdings subsidiary might have flouted procurement regulations by awarding such a hefty contract to Harare lawyer Sheila Mugugu without going to tender.

In recent months, the energy firm has been under the spotlight for a number of governance issues, including its handling of the 100 megawatt Gwanda solar project and thus resulting in a hue and cry from parliament, and other quarters.

While the company's managing director Patrick Chivaura has declined to comment on the issue, government insiders said ZPC company secretary Norah Tsomondo was at the centre of the storm in which she is "accused of unilaterally hiring a law firm headed by an ex-colleague" and which has now caused serious consternation at the beleaguered company.

"At the former's instigation, Mugugu helped the Zesa special purpose vehicle Hesco to register a nine-page cession for the $1,1 billion Hwange 7 and 8 power project with the register of deeds as required by China Exim Bank for an initial fee or figure of $19,5 million," said a source, adding the two were former co-workers at the Harare magistrates court.

"After serious protestations and concerns from other executives that the hefty contract was awarded without a tender, the fee was mysteriously reduced to $4,5 million. And as the team remains under pressure, especially after President Emmerson Mnangagwa's calls for Zesa to exercise financial discipline in these deals, Tsomondo and her holding company allies, including Saidi Sangula, have a new headache in that the ZPC board wants a $100 000 payment, yet the lawyer has a valid contract for a higher figure," they said.

When approached for comment this week, Mugugu refused to shed more light on the issue citing client confidentiality.

"Yes I was contracted for my services, but I am bound by lawyer-client privilege and I cannot discuss this with you. I am sure this is a code you are well aware of. You could approach ZPC and ask them for their side and they, at their discretion, will engage and answer all the questions you have," she said.

While it is standard practice that government services above $300 000 should be put to tender, questions linger as to why the legal services job was not put out for the Procurement Regulatory Authority of Zimbabwe (PRAZ)'s approval.

Chivaura, who has replaced Noah Gwariro in the aftermath of other issues that have troubled ZPC, did not have much to say.

"I cannot comment on that. Please get in touch with Fullard Gwasira (Zesa spokesperson), he will give you more details," he said.

And as pressure mounts on the ZPC team, it is understood company finance director Hubert Chiwara had contacted the Criminal Investigations Department's serious fraud squad to look into the matter.

- Financial Gazette

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