THE Government has paid the French oil firm, Total Outre’Mer, US$5.5 million for the acquisition of the 50 per cent shares in Indeni Oil Refinery but still owes it $16.7 million in other obligations, Ministry of Energy and Water Development Permanent Secretary Teddy Kasonso has said.
Appearing before the Public Accounts Committee (PAC) Mr Kasonso said the Government paid $5.5million as at the end of November last year but still has to pay outstanding debts amounting to $16.7 million, which it owed the former shareholder.
He was, however, happy that after acquiring 100 per cent ownership in Indeni, the firm was now running more effectively.
Mr Kasonso, who was accompanied by Director of Energy at the ministry Oscar Kalumiana, Indeni Oil Refinery managing director Maybin Noole and finance director Thompson Chikumbi however said, he regretted that there were numerous financial irregularities at the firm.[quote]
Mbabala Member of Parliament (MP) Emmanuel Hachipuka (UPND) chaired the parliamentary committee.
Mr Kasonso appeared before the committee to explain the financial irregularities as highlighted in the Auditor General’s report for the financial year ending 31 December 2007.
“The Government paid US$5.5 million for the shares and we still owe Total US$16.7 million,” Mr Kasonso said.
But Luena MP Charles Milupi (independent) questioned how the Government arrived at US$5.5 million to which Mr Kalumiana said independent auditors carried out an audit of the firm before deciding on the amount.
Mr Kalumiana said that Price Water House Coopers was the auditing firm that was engaged and at one point Total indicated that it wanted US$8.5 million but the two parties had to reach a compromise.
“In fact, Total was asking for US$ 8.5million and the auditors had to talk to them and reach an agreement,” Mr Kalumiana said.
But Auditor General Anna Chifungula said it was wrong for the Government to have engaged Price Water House Coopers, as it was not the registered auditor for Indeni.
As such, Ms Chifungula said there was a likelihood of conflict of interest in the whole auditing process, an observation that was also acknowledged by Mr Hachipuka, Nchelenge MP Ben Mwila (NDF) and Isoka West MP Paul Sichamba (MMD).
She said the other financial irregularity at Indeni was the withdrawal of funds that the Government had given the firm for its recapitalisation process.
Ms Chifungula said on November 27, 2008 the Government injected K16 billion to recapitalise the refinery but a day later, the money was withdrawn from the account.
“The bank documents here show that the money was withdrawn on November 28 and used to purchase US$4 million which was remitted to Total,” Ms Chifungula said.
During the period under review, Mr Kasonso said Indeni got its funding mainly from the sale of refined oil, light gases and crude oil processing fees.
Further, he said the Government injected K29 billion in installments for recapitalisation.
Mr Kasonso, however, agreed that one of the financial irregularities that Indeni experienced during the year under review was the payment of K91.950 billion towards recapitalisation as agreed in the Memorandum of Understanding (MoU) signed with the shareholder but instead ended up paying K97.750 billion resulting in an overpayment of K5.8 billion.
As of December 2008, Mr Kasonso said the money had not been refunded to the Government.
On failure to follow tender procedures, the committee said Indeni procured various goods and services amounting to K84, 262,186,109 from Fluor SA, ZAMEFA, and Fancraft among others.
Mr Kasonso however, argued that it was a normal practice for refineries to contract rehabilitation works to specialised project managing companies without tendering.
He said for instance, the engagement of Fluor was discussed at the shareholder level considering that Fluor was a specialised and internationally recognised firm.
[Times of Zambia]
hahaha, this is why indeni is looking like the civic centre now, that place is now finished.
Iwe kasusu wali lyamo
Every time the auditor general presents a report from government departments,its full of irregularities but no one has ever been prosecuted for the same,,why bother,,,uyo Salasini, senior citizens boss,he stole money and the report is still with the minister,(shikapwasha),nothing is going to happen to him,the story will just die a natural death
BA NO. 1
YOU TAKE TIME TO VISIT INDENI YOU WILL LIKE TOURING IT IF YOU WILL MANAGE TO PASS THROUGH THE GATE BY SECURITY.
THE PLANT IS FEEDING YOU BUT YOU ARE CHEATING PEOPLE. INDENI IS INDEED VIABLE.
I want to agree with no. 4 that Indeni is one of the factors that matter most to the zambian economy apart from the mines. I wish to that the government for its efforts to recapitalise the plant to ensure normal operations. I know some people just come up to critise Indeni and efforts made by the govt without any workable solutions. The country has imburked exploration of oil in North Western province and the Govt efforts to maintain Indeni should be support by everyone coz every citizen benefit from this Refinery including those who issue negative,selfish and jelous statements which will not take them anywhere and will not change anything.:)>-:)>-:)>-
People of Zambia, let’s be very careful.
Why did Total quit Indeni? Total owns and runs refineries all over the world. Why would they quit Indeni then?
Secondly, Indeni’s competence is refining. Zimoil, then later ZNOC, imported crude oil. They contracted Tazama Pipelines to pump it and contracted Indeni Refinery to refine it.
Total combined crude importation and financing with refining thru Indeni. They have gone. Now the Zambian govt is financing crude oil imports, thru Tazama Pipelines, last time I heard.
I suppose with 100% ownership, the Govt will use Indeni again to shoulder crude oil importation. But this is an exercise that requires competence and hands-off by Govt. Besides Indeni has it’s own problems re recapitalisation & operations. It is a very old plant.
#6 contd
The Zambian govt has never been good at running companies. Look at Zamtel, UBZ, etc. One would fear for Indeni. The earlier the govt sells their stake the better. They will just politicise Indeni and cripple it. By remaining 100% owners, the country is putting all the eggs in one big basket. And the govt will not disclose how much money we are losing thru Indeni, for political reasons. This money could be used for other developmental projects, or even to recapitalise Indeni.
Think about it, if Indeni 50% was worth $5m, how did the Govt end up owing Total Int $16m extra? By implication, this is the magnitude of losses the govt is exposed to thru Indeni. And that exposure is probably going on right now, ie the nation is leaking money.