Frazer saga: heads to roll?

25 days ago

By ‘Majirata Latela

Calls are mounting for punitive action to be taken against officials involved in the ill-fated and dubious solar energy agreement, which has resulted in the impending seizure of Lesotho’s assets abroad after the government reportedly reneged on the deal.

Lesotho is facing the loss of revenue from water and power sales to South Africa and may see its share of an undersea communications cable seized after it breached the terms of a contract with solar power company Frazer Solar GmbH.

Under a global enforcement order, following the award of 50 million euros in damages in an arbitration case in South Africa, Frazer said it had taken legal action to seize royalties that would be paid to Lesotho’s government by the Trans-Caledon Tunnel Authority SOC as well as payments for power from Eskom Holdings SOC Ltd.

It has also had Lesotho’s share in the Mauritius-based West Indian Ocean Cable Co. provisionally seized.

According to reports, Frazer Solar GmbH was awarded the R855 million after the Lesotho government reneged on the contract, which was to be funded by the German government, as part of a wider programme to turn Lesotho into a net exporter of electricity.

South African media outlets reported that a binding agreement was sealed in 2018 between Frazer Solar and Lesotho for the provision of up to 40 000 solar water heating systems, 20MW of solar photovoltaic capacity, one million LED lights and 350 000 solar lanterns nationwide.

In a statement issued by Withers Worldwide, the lawyers acting for Frazer Solar, it seems the project stalled in October 2018 when Lesotho’s Ministry of Finance refused to finalise and execute the project’s financial agreements. “Following this breach, Frazer Solar commenced arbitration proceedings in South Africa. No explanation for this refusal (to execute the agreements) has been provided to Frazer Solar by the government of Lesotho, but the resulting legal action concluded that a competing project had been prioritised.”

The government of Lesotho was given an outstanding opportunity to transform access to clean, renewable energy and to eradicate the use of damaging, polluting alternatives nationwide,” says Hussein Haeri, partner and co-head of International Arbitration at Withers LLP.

In a statement issued last week, Frazer Solar “contended that the Government of Lesotho failed to fulfil its contractual obligations under the supply agreement, and in July 2019 gave notice to [the government of Lesotho] concerning the commencement of arbitration proceedings, in line with the dispute resolution mechanism agreed by both parties.

“The government of Lesotho has been formally notified of these legal proceedings on 25 separate occasions over a period of 25 months since 2019.”

Local lawyer Ernest Mahase believes no one should walk away scot free from this debacle and that an array of criminal charges should be brought against all involved. 

“The charges included, but are not limited to, breach of duty to act in manner expected of their office; dereliction of duties; official gross negligence; bringing the country’s integrity and credibility into disrepute. There can be so many charges.

“All those who were directly involved and those who could not pass the buck. These include for former finance minister, former Prime Minister and former minister in the PM’s office. (The latter is widely believed to have signed the contract behind the finance minister’s back on September 24 2018.) The legal officers of the ministries involved in the project (finance and energy) and the Attorney General have to show cause why they may not be criminally charged.”

Mahase pointed out that, contrary to popular sentiment, the company acted within its rights to take the matter up with the South African courts, adding there was nothing un-procedural or illegal about this move.

“There are two parties in this litigation: one is resident in Lesotho and the other in South Africa. The courts of both countries have jurisdiction in this instance of a civil nature. Other factors contributing thereto are that the process involved both areas of jurisdiction, namely request of proposal or proposal, offer and acceptance, and others.  

“There’s also the possibility of a clause in the ‘contract’ indicating how and where, in case of a dispute, the same would be resolved.”

In the midst of all this brouhaha, Prime Minister Moeketsi Majoro has come under the spotlight for his silence, save for a government statement assuring Basotho that the country’s assets are safe and that government would investigate the matter.

However, Buda Moseme, the press attaché in the office of the Prime Minister told media outlets this week the matter was receiving considerable attention as the government was intending to consult with relevant stakeholders within the ministry of foreign affairs to look into the matter,

This has not gone unnoticed, with local accountant and governance expert Robert Likhang firing a broadside at government, and weighing in on the implications of the case on both government operations and service delivery.

“I don’t have a response of government on these issues. In the event that government has no reasonable defence, this would be a negligence on the side of government, unfortunately eroding national assets. It may not be common with countries in relation to good governance, but in the corporate environment, boards would have a robust risk management system for detection of such risks and their mitigation.

“The size of losses, if real, is so huge both in the short term and long term impact. From management point of view, errors of this nature may reflect poor planning, coordination, control and decision making, and that could lead to state failure/collapse. I think if those are true, we need to visit the issue of assistance from somewhere else, a bilateral diplomatic relationship such as France and Monaco to be incubated, because there has been so much recklessness and hatred that without strategic assistance we will continue and end in hades.

“The powers of ministers are too much; one minister with power to make lose-win contracts, tax concessions, lower royalties, and so on. The Cabinet should make decisions even being informed by national laws and responsible institutions. We are still awaiting government response here, therefore we can’t make fast conclusions till then.”

His sentiments were echoed by economist Majakathata Mokoena, who said: “You will notice that the issue is more about mis-governance than it is legal. Normally projects of this size have to be sponsored by the relevant ministry, placed before an evaluating panel in the ministry of development planning, discussed in the Cabinet where approval is sought. When granted, the minister of finance makes plans for budget, then execution follows. 

“Regarding this particular deal, none of the above happened. The deal was discussed in Tom Thabane’s Prime Minister’s Office (where jurisdiction does not reside), and signed by a minister without portfolio without any knowledge of the relevant ministry. 

“The other thing is that the government did not respond to the arbitrator’s summons, not the merits of the matter.”