Sub-contractors take on ‘big sharks’

FamCast News
2 months ago

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By Neo Kolane

Local sub-contractors have accused giant Chinese-owned companies of elbowing them out of business and driving them towards bankruptcy by deliberately withholding their payments for works done through joint projects, running into millions of maloti.

They allege that the Chinese contractors had taken over the Lesotho construction industry and did not take them seriously, hence they delayed paying them.

The sub-contractors also claimed this was a way by the foreign companies of working towards ensuring that they continue to thrive in the absence of local businesses.

The foreign companies are also reportedly law unto themselves and do not respect the country’s contractual processes, they said.

The disgruntled local firms claim that they are owed millions of maloti, dating back to as far as 2019. The net effect of this non-payment has been grievous harm to most Basotho-owned businesses, they noted.

The sub-contractors said the situation in the sector was so bad that they have now turned to government and the Chinese Ambassador to Lesotho, Lei Kezhong, for intervention.

Investigations by this paper have revealed that two local companies, LSP construction and Tim Plant Hire, are reportedly owed a combined M94 814 375 by three Chinese-owned firms.  

Another local firm, Mafika a Lisiu PTY (Ltd), is crying foul that it was relegated to the role of labour broker on the Lesotho Highlands Water Project Phase 2 despite it winning two contracts as co-bidder and sub-contractor.

LSP Construction says it is owed M37 347 583 by Tuwana Construction Lesotho (TCL) in outstanding payment for work done inclusive of retention, extension of time claims for late delivery of sub-station equipment, extension of time claim for suspension of works, and extension of time claim for late delivery of tower material, inclusive of value added tax.

This is in relation to the construction of the 30MW Solar Farm and sub-station expansion at Ramarothole in Mafeteng, and 132kV transmission line from Ramarothole to Ha Mofoka.

According to the chief operating officer of LSP Construction, Sam Ntene, the M69 155 238 contract was signed in April 2021.

Ntene mentioned that LSP completed its sub-contracted work on time despite numerous hurdles caused by Tuwana, which included delays in delivering material and lack of proof of financing of the project.

“Tuwana failed to honour LSP’s claims with regards to work done, as well as claims due to delays and extension time. They currently owe LSP construction M37 347 583. 58,” he said.

He also explained that when LSP filed a claim which was rejected by Tuwana, a dispute was declared and referred to the Dispute Adjudication Board (DAB) as stipulated in the contract.

Ntene also indicated that after various tactics by Tuwana to frustrate the process, the DAB ruled in favour of LSP. However, Tuwana rejected this and raised a notice of dissatisfaction, requiring a new DAB member to be sought and appointed, “which was clearly another delaying tactic”, he alleged.

Frustrated by this, LSP approached the minister of natural resources, Mohlomi Moleko, and a meeting was held with Tuwana representatives on June 9, 2023 to discuss the matter.

The parties discussed LSP’s claims and agreed that Tuwana would pay the company M5 million on June 12, 2023 and share proof the same day.

It was also resolved that should the payment not be made on this day, the Chinese Embassy in Lesotho would be approached to intervene in the matter.

Minutes of the meeting also show that the parties agreed that LSP should issue a retention guarantee so that the retention money is released by Tuwana not later than June 30, 2023.

In a letter responding to LSP, one Mr Wei Ran from Tuwana said mediation efforts presided over by Moleko were not part of the contractual agreement between the two companies. Neither were they sanctioned under the International Federation of Consulting Engineers (FIDIC) guidelines.

Ran also warned that any proposed measure seeking an interdict before court would be highly undesirable and Tuwana Construction reserved the right to contest it.

“The measures were embarked upon a without prejudice basis and must not be interpreted as a waiver of rights available to TCL Pty. Ltd. This is not meant to undermine the efforts of the Honourable Minister (Moleko) to assist the parties to reach a compromise for the benefit of the government and the Basotho nation as a whole,” he noted.

Another local company, Tim Plant Hire (PTY) Ltd in 2019 entered into a sub-contract with a Chinese-owned firm, CNQC, for the construction of the Mpiti-Sehlabathebe road in Qacha’s Nek.

Speaking on behalf of the managing director of Tim Plant Hire (PTY) Ltd, Toloane Matekane, this week the company’s accountant, Sikubutele Nqosa, explained that at the onset CNQC negotiated with them from the original figure of M190 million to M109 million.

Nqosa said Tim Plant Hire was forced to suspend work after CNQC failed to honour an outstanding M40 158 965. 16 payment.

He disclosed that Tim Plant Hire were awarded a M379 036 817 joint contract by Maseru City Council together with Shanxi Construction Investment Group Co. Ltd (SCIG) and Shanxi Mechanization Construction Group for the Mpilo Boulevard Intersections and Links Project.

An internal agreement was then reached that Tim Plant Hire’s 30 percent share would be bought out of the contract for M7.5 million and the same company would further construct Zone 4 of the project exclusively.

“However, this arrangement was not honoured as we were only paid M4 million from the agreed amount; work on the designated zone was also not paid,” Nqosa pointed out.

Placed between a rock and a hard place, the three local companies – LSP Construction, Tim Plant Hire, and Mafika a Lisiu PTY (Ltd) – wrote to Ambassador Kezhong on January 23, 2024 to air their grievances and seek his intervention.

They told Kezhong their belief was that China is here to help Lesotho unlock its potential and not to dampen its prospects of being independent both in governance and financially.

“We have undertaken different approaches, all aimed at resolving our grievances in an amicable manner. We therefore, request a response and resolution from your good office within 14 days of receipt of this letter, failing which we will be left without a choice but to adopt other less diplomatic means.

“We believe you will work towards an amicable resolution with us, to avoid being at the centre of a drawn-out countrywide conflict between Basotho-owned businesses and Chinese-owned businesses operating in Lesotho,” the joint letter read.

On February 12, 2024, the companies sent a follow up letter to the ambassador stating that they hoped he had engaged the Chinese-owned companies as agreed in their meeting with Moleko with a view to striking a resolution but, like other efforts employed before, the situation has not changed.

The foreign companies had instead decided to continue in their quest to frustrate local businesses through stifling their cash flows, they noted.

Kezhong was not available for comment yesterday. His secretary’s mobile phone was not going through.

The three local firms also wrote a letter to the chairperson of the portfolio committee on natural resources, tourism and land cluster, Moeketsi Motṥoane, on February 14, 2024, asking the body to launch an enquiry into the conduct of Chinese businesses in the country.

They pleaded with the committee to force the foreign entities to honour their contractual obligations and legitimate claims by Basotho businesses.

“We ask of this honourable house to not only grant relief to ourselves, but to all Basotho business as these matters persist to the detriment of our business counterparts and pose a significant threat to the economy of this country,” the letter said.

Approached for comment, Motṥoane said he was advised by the Clerk of the National Assembly Fine Maema that, given the contents of the letters, the economic and development cluster was better placed to respond. However, Maema and the chairperson of the economic and development cluster, Sello Hakane, were yesterday not available to comment on the sub-contractors’ letter.

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