By Staff Reporter
AN external audit has unearthed a massive scandal implicating a senior Zimbabwe Electricity Supply Authority (Zesa) executive who allegedly prejudiced the struggling power utility of millions of dollars through underhand dealings.
The audit by Price Waterhouse and Coopers (PWC) accuses Wilfred Shereni of failing to sign contract addendums, failure to perform periodic reconciliations regarding the procurement of prepaid a metres and approving payments for prepaid meter installations without adequate supporting documentation.
Shereni is a revenue assurance manager at the Zimbabwe Electricity Distribution and Transmission Company (ZETDC) – a Zesa subsidiary.
The total prejudice, the audit report says, amounts to US$6 108 275.
The pre-paid metering project involved three suppliers, namely Solar Hut, Finmark Energy and Nyamazela.
According to the audit report, Finmark and Nyamazela won lucrative tenders even without having to go through the formal tendering procedure.
After fishing out a possible prejudice on ZETDC revenues, PWC recommended that Shereni together with former managing director Julian Chinembiri and finance director Dhliwayo, face disciplinary action.
The report pointed out that Shereni, together with Chinembiri, was instrumental in the acquisition of pre-paid meters directly from suppliers without getting the required approval from State Procurement Board (SPB), now Procurement Regulatory Authority of Zimbabwe (PRAZ).
Auditors noted that the directive to circumvent the SPB was given by the directorate, who included the ZETDC Chinembiri but this could not be authenticated by meeting minutes.
This, according to the report, was in violation of Sections 26 and 28 of the Procurement Act.
PWC also noted a price difference between what was approved by SPB and what was then quoted on the orders and was paid to Finmark (single phase meters) and Nyamezela (three phase meters).
Auditors reported that Shereni had made an error in capturing the prices for SPB approval and no efforts were made by ZETDC to inform SPB of the price differentiation.
Proceeding with unapproved prices, auditors said, was a violation of Section 42 (3) of the Procurement Act 22:14 which stipulate that procuring entities should comply with directions issued by the SPB.
ZETDC Procurement Manager Chisango, according to the audit report, also violated Section 42 of the Procurement Act by raising orders which captured the unapproved prices.
“Further to this, it appears Shereni circumvented the Procurement Department in his communications with SPB. This potentially contributed to ZETDC violating SPB regulations,” reads the report.
It was further discovered that Shereni, along with ZETDC finance manager Thomas Chindindi, further violated Section 26 of the Procurement Regulations (S.I.171 of 2012) when they approved a purchase order which was not supported by the appropriate SPB approvals.
The report further noted that none of the contractors managed to supply the contracted quantities within the stipulated time frame and in this case, ZETDC was entitled to deduct liquidated damages from the contract price for each week of delay up to a maximum of 20%.
Liquidated damages as specified in the addendum were however not instituted against the contractors and based on PWC’s computations, the liquidated damages would have amounted to US$20 538 for Finmark, US$148 500 for Solahart and US$253 750 for Nyamezela.
The total amount of US$422 788 which was not claimed in liquidated damages presented actual financial prejudice to ZETDC and Shereni and ZETDC procurement manager Phillip Chisango should have effected the stipulated penalties when the suppliers failed to deliver.
There were also some payments which were made without adequate supporting documentation particularly inspection sheets.
According to the audit report Shereni together with other directors is alleged is to have exposed ZETDC to financial loss in all the cases where they approved payments which were not supported by sufficient documentation.
The report also noted that payment for labour costs on meters supplied by Solahart but installed by ZETDC Depot teams together with the agreement to pay Solahart 50% of the labour component resulted in prejudice to ZETDC amounting to US$103,275.
“This was wasteful expenditure as the service paid for had not been rendered as ZETDC staff had performed the installations,” read the report.
The audit further says Shereni, Dhliwayo , Enock Ncube (Commercial Director) and Chinembiri contravened Section 14 of the Public Finance and Management Act (PFMA) by failing to object to the said directives by former Energy Minister Elton Mangoma to select top retailer OK Zimbabwe to be the sole vendor for prepaid electricity metres without going to tender.
Mangoma was energy and power development minister during the five-year inclusive government which ended in 2013.
According to the report, by appointing OK Zimbabwe without going to tender, ZETDC may have suffered prejudice in the form of excessive commission.
ZETDC incurred irregular expenditure in the form of commission paid to OK Zimbabwe with a value of US$518 174.28 in relation to the unprocedural appointment of OK Zimbabwe.
“Consideration should be made to take action against the ZETDC board for failing to ensure compliance with the now repealed Procurement Act and appointing OK Zimbabwe un-procedurally.
“The ZETDC board should consider taking disciplinary action against Chinembiri, Dhliwayo, and Shereni for failing to comply with the PFMA and failing to raise objections to the former Minister Mangoma’s directives to appoint OK Zimbabwe without following procurement procedures,” the report further reads.
Contacted for comment this week, Shereni confirmed the allegations saying he has already gone through an internal disciplinary process and has been demoted by one grade.
“I went through hearing and I was demoted by one grade from my previous executive position. Reassignment was not going to happen because the project that I was in charge of when the allegations came about was completed,” Shereni said.
Reinstated ZESA Holdings executive chairman Sydney Gata refused to comment on the matter saying: “I don’t speak to the press through the phone.
ZETDC acting managing director Lovemore Chinaka was not answering calls on his mobile phone and did not respond to questions sent to him.