The Harare municipality is set to repay a $72 million water and sewer plants upgrade loan from China after being denied the full amount of $144 million and with hardly any results to show for what it used, an investigation by the Standard in collaboration with Information for Development Trust (IDT) has revealed.
Harare, like other urban parts in Zimbabwe, has experienced acute water shortages for decades due to dilapidated infrastructure and acute shortages of water treatment chemicals against a rapidly rising population.
This has made the towns and cities particularly vulnerable to water-borne diseases, with the 2008 cholera outbreak that killed more than 4,000 people representing the darkest period since independence in 1980.
Pipe dream deal
Backed by a government guarantee, the loan was signed for by then Town Clerk, Tendai Mahachi, former mayor, Muchadeyi Masunda and China National Machinery and Equipment Import and Export Corporation (CMEC) general manager, Yang Yinan, in 2010.
Former vice president, Joice Mujuru, subsequently signed the $144 million loan agreement for the upgrading of water works and sewers so as to improve reticulation and boost water supplies to Harare on behalf of the government on March 21, 2011.
The loan facility was meant to rehabilitate, replace, install and commission equipment at Morton Jaffray and Prince Edward water treatment plants as well as the Crowborough and Firle sewer works.
In addition, the loan would also finance the construction of three new dams and an additional water treatment plant.
A total of $44 million dollars would be spent on rehabilitating Morton Jaffray, the biggest water reticulation plant some 30km to the west of Harare, $17 million on the Crowborough and Firle sewage plants, while $4.5 million was designated for information technology and automated billing.
Pump stations at Warren Control, Alexandra Park and Letombo would costs $16 million while $7 million would be used for water treatment chemicals.
Part of the loan was for the construction of a laboratory and purchase as well as installation of pressure valves, pre-paid meters covering 500,000 households and necessary works materials.
The deal, which council ratified in 2013 and was supposed to be through within 36 months, was envisaged to increase water pumping capacity at Morton Jaffray to 614 mega litres (ML) a day from a paltry 400 ML
This would increase the supply of potable water and significantly bring down the incidence of water-borne diseases.
On average, water and sewer reticulation equipment has 15-year life spans but the water supply infrastructure in Harare had been last upgraded in 1994 when the city’s population was estimated at 1.5 million but has since risen to some 4.5 million people.
Harare City would not handle any cash from the loan while CMEC, an engineering consultant, would procure necessary equipment and refurbish the works as required.
Not adding up
Investigations showed that there were inconsistencies in the budget allocations and the funds purported to have been spent.
Officials figures obtained by The Standard showed that design and management cost $ 7,485 417, Morton Jaffray ($50 291 842), distribution network $530 097, workshop equipment $687 272, laboratory equipment $1 million, ICT equipment $3 521 178, construction equipment $5 084 189, plant vehicles and equipment $3 million and water chemicals $1.4million.
That means there are several variances that include an over-expenditure of more than $6 million on Morton Jaffray and under-expenditure of more than $5 million on water chemicals while almost $1 million less was used on ICTs.
No satisfactory answer could be obtained from the local authority and project implementers on why they decided to save on water treatment chemicals despite admitting their shortage was hampering adequate production and distribution of water from Morton Jaffray.
The acting water manager, Tapiwa Kunyadini, indicated that the city was producing 450 ML of water a day against Morton Jaffray’s capacity to pump 614 ML given adequate supplies of chemicals and with all the other factors constant.
The $72 million that has been used so far on Morton Jaffray and other sub-projects under the loan has therefore managed to increase water supplies after the commencement of the works by a paltry 50 ML.
“With the rehabilitation done so far, we can produce 520 million litres a day, but we are producing 450 million litres due to logistics in chemicals supply,” he said. “If we manage to get a constant supply of chemicals, we can run 520 million litres a day.”
But his figures contradict the ones given by Chideme, who claimed pumping capacity had in fact risen to 520 ML.
“Most of the equipment for Morton Jaffray has been delivered and installed and this has resulted in increased production capacity from 400 to 520 million litres a day,” said Chideme in a written response.
The city supplies Harare, Norton, Chitungwiza, Epworth and Ruwa against a combined daily demand of 800 ML.
Inconsistencies in expenditure, which raise questions on the accountability of the loan project implementation and the competence of local authority officials and the implementers, are also reflected in previous official reports.
A June 2014 audit report gleaned by The standard and done by a special council committee indicated that 58 percent of the loan—over $84 million—had been disbursed, contrary to the new official figures putting the figure at $72 million.
Mystery surrounds the remainder of the loan which Harare City has been struggling to get from China’s Eximbank, stalling project implementation in the process.
“We are now left with works that are supposed to be covered by the US$72 million that is still to be disbursed. The delay in the disbursement of the second tranche has affected completion timelines which have now been adjusted,” Michael Chideme, the munipality’s public relations manager, told The Standard.
In December 2017, China extended a new loan and grants to the Emmerson Mnangagwa administration totalling $213 million for the upgrading of the Robert Mugabe International Airport as well as the construction of a new parliament building and a high performance computer centre at the University of Zimbabwe.
Nothing was said about the outstanding water and sewer loan.
Efforts to get convincing explanations on why the financier is withholding the remaining loan drew blanks as the Chinese embassy in Harare would not comment on the government-to-government loan despite promising to do so while no responses could be obtained from CMEC, local authority representatives and the ministries of Finance and Local Government.
Controversy that could have spooked Eximbank and other financiers dogged the loan agreement from prior to the commencement of the refurbishment projects covered by the loan.
In December 2013, Peter Morris, an engineer who was hired under the Zimbabwe Multi-Donor Trust Fund administered by the African Development Bank’s Urgent water Supply and Sewage Rehabilitation Project noted in a report that there were anomalies in prices of equipment.
In some cases, the prices quoted by CMEC, which also had the responsibility to manufacture some of the equipment, were five times higher than the actual prices on the market.
Morris also questioned the allocation of $500,000 for the purchase of electoral cables, pipes and fittings and noted that the deal had allocated $8 million for the handling and clearing of equipment even though it was supposed to be duty free.
And the capital’s municipality did not help matters.
In 2014, the former chairperson of Harare’s finance committee, Norman Markham, a councillor, resigned in frustration over what he said was double dipping on the part of council.
Part of his resignation letter read: “I shudder at the water rehabilitation deal that has been signed. Information technology equipment is covered in this contract, which I have not seen, to the tune of over $1 million. Yet in the Harare City Council budget, we also had a similar budget placed for similar equipment.”
According to a council investigation in 2014, Harare City did not have a project bank account for the project and all payments were made offshore by CMEC.
“The investigation failed to inspect project bank accounts and payment documents to enable it to establish whether there was any abuse of the project funds,” read the committee report.
This made it difficult for the city to audit the project and trace payments made to date since there were no bank accounts.
“These reports are key when tracking budgeted costs and actual costs, variance analysis reports, project cash flows, fixed assets tracking, errors of commission and omission, project deliverables, negligent and willful misstatements, among other things,” said the committee.
The investigation raised the possibility of kickbacks around the water project.
Chideme, however, dismissed the allegations of possible corruption.
According to the report, labour costs gobbled almost 38 percent or $28 million of the amount, three times the industry norm for a refurbishment contract.
Part of the money was also used to procure 21 top-of-the-range vehicles, among them an Amarok and a Discovery, by city officials but the cost, make, type and model of the vehicles did not match project requirements.
The council’s proposed budget for 2018 indicates that, despite the failure by council to procure the remaining amount, it must start repaying the loan soon.
But that is posing a big headache to the council because it has not completed the projects and will thus find it difficult to source the revenue to service the debt at a time most residents are defaulting on rates payments.
“Repayment for the principal debt is now due and payable at $7 million biannually. A number of works such as Crowborough Sewer Treatment Works, the Firle and Borrowdale Brook Pump station are still outstanding rendering the city unable to comfortably service the debt,” read part of the budget statement.
Harare Mayor, Bernard Manyenyeni said: “If we had drawn down everything we would be paying for that but we are only paying for what we took”.
The Harare municipality has approached the Zimbabwean government seeking to defer the loan repayment, said Chideme, but even if it succeeds, that will still attract a heavy fine.
“As you may be aware the loan facility is a Government to Government agreement and the delay in the release of the remainder is being handled by the Ministry of Finance. Council has made submissions to Government to have the repayment deferred until completion of the project,” he said.
Harare, like other cities and towns, has faced acute water shortages for more than a decade, with some suburbs such as parts of Mabvuku and Tafara having gone for years without running water.
Combined Harare Residents Trust director Mfundo Mlilo said the capital still faced a water crisis.
“The water situation in Harare remains a major cause for concern. It is the reason why we rejected the 2018 budget because it did not put sufficient measures to address both water issues and outbreaks of diahorreal diseases. As there are no plans to increase water purification capacity in Harare, these problems will continue,” said Mlilo.
This article was originally published by our media partner, the Standard (Zimbabwe)