In 2016, the Ministry of Power through the Ministry of Finance made a payment of USD $36 million to L & R Investment and Trading Company Limited, for the supply of single-phase and three phase electric meters to ECG.
The total contract price for the supply of these meters were USD $39,999,566.44, to be supplied over a period of twenty-six (26) weeks. When the contract was signed, an advanced payment of USD $ 12 million was paid to L & R Investments plus a Letter of Credit (LC) of USD $24 million.
The Institute for Energy Policies and Research (INSTEPR) was doing an investigation into procurement lapses at the Electricity Company of Ghana (ECG) after the recently published Auditor-General report.
Electric meters procured for customers were found in the warehouse of ECG while customers across the country are in dire need of these meters. We learnt that not all the meters in the ECG warehouse are ready to be supplied to the customer, so we asked why?
The Background:
In September 2016, the Ministry of Power wrote to the Managing Director of ECG, informing him of a USD $80 million financing secured by the Government for the procurement of electric Meters.
The letter stated that local Ghanaian companies will be given USD $40 million and Messrs. L & R Investments and Trading Company whose local representatives are Messrs.
First Grace Limited, be given USD$40 million. The Ministry letter instructed the managing director of ECG to initiate discussion with the said suppliers with the view of entering into contract for the supply of these electric meters.
The Ministry also asked for immediate response to their letter to facilitate cabinet and parliamentary approval.
The Management of ECG on their part upon receipt of the Ministry letter engaged Messrs. L & R Investments and Six (6) local Ghanaian companies. After ECG had and evaluated the proposal from L & R Investment, a pre-contract meeting was held in October 2016, between the technical team of ECG and the Managing Director, in the name of Mr. Tao Wenhui for L & R Investment.
At this meeting, the Scope of Supply, Technical Classification, Due Diligence, Pilot Studies, Factory Acceptance Tests (FAT) and Training of ECG metering Staff were discussed and agreed. The two key conditions before the supply of the meters after signing the contract were the Pilot study to assess the meters for 2 months and the Factory Acceptance Tests (FAT).
After the contract was signed and L & R given an initial payment of USD $12 million, the meters that were to be provided as samples (200 electric meters) for the Pilot studies were not sent to ECG and the agreed travel of 3 representative from ECG to undertake the Factory Acceptance Tests in China before the manufacturing of the said meters did not take place.
Without any of these conditions being met, the management of ECG was sent shipping documents for containers of meters at Tema Port. ECG informed L & R Investment that they cannot accept the containers because they have not followed the process agreed to as per their contract.
After months of back and forth with L & R Investments, the containers of Meters were cleared from the Tema port to stop the accrual of demurrage. The meters in the containers were not the specification as per the supply contract.
INSTEPR was told that the said contract was terminated in 2017 after legal consultations on the non-performance by L & R Investment. This company after months of not conforming to the agreed conditions of their contract, went ahead to discount the USD $24 million Letter of Credit (LC) given to them under the contract.
We have sighted documents that state that on the 16th of August 2017 at a time when Capital Bank Limited had ceased to be a bank under the laws of Bank of Ghana, Capital Bank discounted the LC and made a payment of USD $22.5 million to L & R Investment.
INSTEPR conclusion and questions:
INSTEPR contacted the officials of ECG to ascertain further and better particulars on this transaction, we were informed that all documents relating to this transaction is with EOCO and National Security.
Our further checks revealed that EOCO and National Security have been investigating this transaction since 2017.
Our questions are very simple:
- Why has it taken 4 years for the State Security Agencies in investigating this transaction?
- Who are the people behind L & R Investment and Trading Company in Ghana?
- The initial USD $12 million was paid to First Grace Limited, who are the people behind this company?
- Why is the management of Capital Bank Limited not being prosecuted for the illegal discounting of the Letter of Credit?
We do not want to draw any conclusion since this matter is still under investigation, but I am sure every Ghanaian will agree with me that we need some answers and accountability now from our leaders on this fraudulent transaction.
There is no way this transaction was done by the average Joe on the street. INSTEPR is still probing various procurement breaches at ECG.
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The author, Kwadwo Poku is Executive Director for Institute for Energy Policy and Research.
Source: Kwadwo Poku
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