The Electricity Supply Corporation of Malawi (Escom) is going to pay K8.3 billion to suppliers for contracts which were entered into behind management’s back and mostly for goods the organisation does not need, Malawi News can reveal.
It has been discovered that, out of merchandise worth K8.3 billion, the users (departments) only needed K3.2 billion worth of items and equipment, rendering K5.1 billion worth of items unwanted by users.
After discovering the correspondence (between procurement department and potential suppliers) Escom management’s analysis established that, of the K3.2 billion requirement, K1.9 billion relates to price excess which would have been negotiated to about K1.2 billion.
We can also reveal that the organisation is caught up in this mess because its director of procurement, Fanuel Nkhono, entered into a contract with more than 18 companies without the knowledge of the then Chief Executive Officer (CEO) John Kandulu.
The Internal Procurement Committee (IPC) earlier observed that some of the suppliers’ prices were too high and that there was need for negotiations. The IPC resolved to hold the offer until they got written confirmation from other departments that they really needed more supplies.
But Nkhono (who was the secretary of IPC committee) went ahead to issue offer contracts to potential suppliers to supply various items and equipment in various categories in line with their respective bids without getting the written confirmation from the departments as resolved by the IPC.
The potential suppliers communicated their decision of acceptance to Nkhono’s office instead of the CEO’s office as per organisation’s standard procedure.
Upon learning of this development, Escom management sought the approval of the Office of Director of Public Procurement (ODPP) to negotiate the prices with the suppliers but the ODPP refused to grant the approval.
Caught in this mess, Escom then later sought legal opinion from Kalekeni Kaphale Lawyers to ascertain whether the contracts Nkhono entered into with the suppliers were valid.
According to the legal opinion which we have seen, Kalekeni Kaphale Lawyers have told Escom that all the contracts were valid despite the fact that the CEO was not involved.
“In the light of the (above) exposition of the law and analysis of the facts in the matter herein, Escom is advised not to cancel the contracts as that would amount to breach of contract for which Escom would be liable to pay for damages,” reads part of Kalekeni Kaphale Lawyers’ legal opinion.
The opinion document also notes that Escom is free to negotiate prices before binding itself to any contract since the Public Procurement Act does not apply to Escom as a limited liability company.
“If Escom wants to continue referring its procurement issues to the ODPP, it can only do so as a matter of practice and not as a matter of law,” says the legal interpretation document.
Lawyer Ted Loka of Kalekeni Kaphale Lawyers confirmed that his company handled the issue last month (June).
Escom Public Relations Manager, Kitty Chingota, said Escom has commenced negotiations with the suppliers and it is hopeful that the organisation will eventually pay reasonable prices.
“Actually the legal opinion stated that much as these are binding contracts, they can be negotiated. We have since commenced negotiations with the suppliers.”
“We are sure that eventually Escom will be paying reasonable prices and will get and pay for only the items which are required. The negotiations which have been conducted have so far been successful and we believe it will be the same with the rest of the suppliers with whom we will be negotiating in the next two weeks,” she said in a written response to a questionnaire.
Chingota also disclosed that Nkhono is no longer in employment with Escom after his contract expired on March 31 2017 and it was not renewed.