Zimbabwe Parliament report on ZINARA 2017-2018 audit- Part 5

Makoni Rural District Council (Makoni RDC)

278. On 31 January 2011, Makoni RDC entered into a contract with MADZ contractors for the rehabilitation of Wensleydale/Chirarangwe Road covering 44 km for a contract value of USD 1 345 349.52. The scope of the contract covered regraveling of the roads and a total reconstruction of drainage structures.
279. However, the winning bidder was Joystone Investments (Pvt) Ltd, who responded to the bid request together with Lavigold Investments and Tencraft Contractors. MADZ Contractors did not submit a bid document for the rehabilitation works nor was it part of the bid analysis carried out by the Council in 2010.
280. Makoni RDC CEO, Mr. E. Pise represented that MADZ contractors was appointed by ZINARA and the council drafted the contract together with the contractor, although it was subject to approval by ZINARA.
281. There was no evidence that Makoni RDC followed the tendering process prior to awarding the contract to MADZ.
282. MADZ was awarded the contract with a price of USD 1 345 349.52 which was higher than the bid price of USD 1 167 050.09 quoted by Joystone who had initially been awarded the tender.
283. The project commenced on 21 March 2011 and was to last for twenty four weeks. The contractor failed to meet the deadline, and as at 12 October 2011, the contractor had only compacted and graveled 11km out of the 44km.
284. MADZ contractors requested for an extension of the project to December 2011, but however did not state the reasons for the delay and failure to meet the contractual date. The contract was extended and MADZ contractor was made to pay a penalty charge of USD 10 000.
285. On 20 February 2012, Mr. Edmore Chidembo wrote to the ZINARA CEO stating that the rehabilitatation of Mufuruse (Wensleydale) C118/Chirarangwe S34 road was now complete but had exceeded the initial allocation by USD 206 284.86 VAT inclusive. He also stated that the road length was exceeded by 3.5km.
286. However, the auditors noted that the project had not yet been completed, with a running balance of USD 2 450.
287. The auditors noted that Makoni RDC certified IPCs that exceed the contract value by USD 471 464, but there was no evidence regarding the approval of works and price variations from SPB and ZINARA.
288. Payments were directly made to MADZ contractors by ZINARA. The total payment was approximately USD 1 833 746. The auditors noted that ZINARA may have overpaid MADZ contractors by USD 16 932.
289. On the 13 June 2012, MADZ managing director Mr. CH Madzingira wrote a letter to ZINARA in which he requested compensation in the sum of US$ 3, 5 million dollars. The rational and justification of this payment was explained as follows in his letter under discussion.”
290. The letter also stated that,

• “As explained in our earlier letter, we made commitments anticipating a project value of $18 million and the value has since been reduced to about half that amount, and still coming down, and we therefore not going to recover the large plant, labour and material costs that we had committed into this project.
• As an indigeneous company, we are therefore asking you as the client to compensate us for these losses which are in the region of about $3.5 million. This is so that we can at least break even on this project.
• We are therefore asking you to convene a an urgent meeting so that we can further explain this matter to you, as continued delay jeopardise our ability to deliver the project on time, as Group Five continue to delay our payments and cut down our work load due to their own internal procedures which require all issues pertaining to the contract to be approved in South Africa. We hope you will consider our request favourably.”

291. Pursuant to this and without board approval, ZINARA proceeded to pay the sum of US 3,650,000 and a further sum of ZAR 1,192,500
292. Before the Committee, Mr. Madzingira failed to justify the above payments, despite the Committee impressing upon him, the possibility of criminal charges arising and connected with these payments. He undertook to provide a written explanation within two weeks thereof. He never supplied an explanation.

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