Lesotho’s M855  million mess

Lesotho’s M855 million mess

MASERU – FORMER Minister Temeki Tšolo played a central role in negotiating and signing the M1.6 billion solar deal that has soured and could see Lesotho losing its international assets after violating the contract.
There are fresh details on how Tšolo committed the government to a staggering contract – without cabinet approval or following procedure – and then repeatedly ignored clear legal warnings that his decision was leading Lesotho into a monumental disaster.

Now Lesotho has lost an arbitration and three cases as Frazer Solar, the German company, goes after its international assets.
The German company is claiming M855 million from Lesotho and has been winning court cases across the world.

Last week the company applied to a United States court, seeking an order to enforce its right to confiscate Lesotho’s assets in that country.
In South Africa, Frazer Solar has been granted an order to take the royalties Lesotho receives for water exports under the Lesotho Highlands Water Project. Also, the debt that Eskom owes to Lesotho has been garnished to pay Frazer Solar.

In Mauritius, the company has been granted permission to take control of Lesotho’s five percent stake in the West Indian Ocean Cable Company (WIOCC), a broadband company based in that country. Lesotho’s shares in WIOCC, which supplies broadband to Lesotho and other regional countries, are owned through the Lesotho Communications Authority.
There is also another order allowing Frazer Solar to seize Lesotho’s assets in the United Kingdom.

Those assets include the ambassador’s official residence.
But while the hunt for more assets continues and the government claims to be investigating what happened, Tšolo, whose signature is alleged to be on the contract, is pleading ignorance.
He tells thepost he never signed the contract and claims his signature could have been forged.

“What is happening here is fraud. It’s a lie,” Tšolo says.
He describes Robert Frazer, the director and shareholder of Frazer Solar, as a “conman out to fleece Lesotho”.
“It is true that I had several meetings with the man (Robert) but I never signed anything with him. Never!” he says.
“I only facilitated negotiations and meetings but there was never anything signed. I swear I never signed that contract or any other document.”
Robert Frazer’s media team refused to comment on those allegations.

Tšolo’s emphatic denials have added to the mystery and confusion surrounding the debacle.
A brief statement last week revealed that the government too was miffed by Frazer Solar’s claim and the turn of events.
But despite calling for calm, the statement has done little to allay fears that the government did sleep on the job and that Lesotho’s international assets are safe. Instead, the public is outraged and counter-accusations are being traded within a government that appears to have been caught unawares and is scouring for explanations while national assets after being plucked one by one.

Until the government has a handle on the issues surrounding the contract and Tšolo proves that he is not culpable, the answers can only be found in the arbitrator’s report and Frazer Solar’s court documents.
These tell a story of a minister who willingly signed a contract with an international company and a government that reneged on its obligations.

They paint a picture of a minister and civil servants who then ignored warning letters, court notices and failed to defend the country’s interests.
So, how did we end up here?
The genesis, according to the documents, appears to be the Lesotho Energy Policy 2015-2025 which sought to reduce the country’s power import bill, increase the use of renewable energy and promote universal access to electricity.

Robert Frazer, who worked for Rheem, an Australian-based solar company, got his hands on that policy and it fitted squarely with a strategy he had earlier pitched to his bosses. Together with senior managers at Rheem, Frazer developed what was called the Solarhart Business Strategy whose main thrust was to market Rheem’s large-scale renewable energy directly to African countries. The projects were to be funded by the Australian government’s Export Finance and Insurance Corporation (EFIC).

Frazer started marketing Rheem’s products in Southern Africa, beginning with meetings with government officials in South Africa and Lesotho. He claims to have come to Lesotho at the invitation of one Seqhebolla Letsie.
Frazer arrived in Lesotho in January 2016 and started peddling the Solarhart project to several government departments and officials. But he had barely made much progress when Rheem relocated to Vietnam and closed Solarhart, meaning the project could no longer be funded by the Australian government.

Frazer however plodded on with the idea and roped in KBB Kollektobau, a German solar energy company that bought shares in his Frazer Solar. To fill that void left by the EFIC, Frazer struck a deal with German’s KfW IPEX-Bank which agreed to fund African countries that bought KBB’s products.
The Arbitrator Vincent Maleka’s report says in August 2017 Frazer met Tšolo who allegedly assured him that the then Prime Minister Thomas Thabane and the government were interested in the project.

Meetings and letters between Frazer and government officials followed.
This is where Tšolo allegedly became a central figure in the deal that got Lesotho on the hook for M855 million.
In October of the same year, Tšolo invited KfW to submit a proposal to fund the €100 million (M1.6 billion at that time) project with Frazer Solar.

According to procurement regulations, Tsolo did not have the authority to solicit funding from any local or international financial companies. That was the responsibility of the Finance Minister who was Dr Moeketsi Majoro at that time.

The Ministry of Energy, which should have initiated and implemented the project, was not involved.
Yet despite this obvious deviation from the procedures, Tšolo also went on to sign a Memorandum of Understanding with Frazer Solar in November 2017.

This too was an anomaly because the project was not under his ministry and ministers are not allowed to sign MOUs on the government’s behalf without cabinet approval.
The Attorney General’s office, which is supposed to scrutinise such legal documents, also did not see the MOU. It is not clear who Tšolo had consulted before signing.

But those internal procedures did not matter to Frazer Solar and KfW, who quickly moved to turn that non-binding MOU into a concrete agreement. After all, the MOU stated that Frazer Solar and Tšolo were going to get the government’s approval for the project in March 2018 following a final proposal Frazer was to submit three months earlier (January 2018).
Based on the MOU and Tšolo’s invitation in October, KfW wrote to Majoro in December 2017 expressing interest to fund the project. And as if to seal the deal, Frazer organised a workshop where he sold the project to several government officials.

By March 2018, KfW was piling pressure on Majoro to approve their funding proposal.
But when Majoro supposedly ignored their letters, the company turned back to Tšolo with a letter reiterating its intention to fund the project.
Despite lacking the authority to discuss such matters, Tšolo obliged and requested KfW to provide a breakdown of the interest rates, duration of the loan and guarantees. KfW responded with another letter, giving the details as Tšolo requested.

Tšolo continued on this unprocedural path in August 2018 when he told Frazer, in a letter, that the government had agreed to proceed with the project. He is alleged to have told Frazer to prepare the loan and export contracts for signing. He also said the project will be included in the budget but the government would not sign the contract until it had received the financial offer from KfW through the Development Bank of Southern Africa (DBSA).

The letter however had a curious caveat which could indicate he wanted to keep the deal in the Prime Minister’s Office. The Arbitrator’s report says Tšolo’s letter “expressly” indicated that the Prime Minister’s Office will be the primary point of contact to ensure “effective and efficient communication between the parties”.

This too was incorrect because only the Ministry of Finance has the authority to discuss the government’s financial contracts. Seven days after that letter Frazer met Tšolo and Thabane to discuss the project. It was soon after that meeting that Frazer handed the draft agreement to Tšolo who allegedly suggested minor changes and signed it on September 24, 2018.

“According to Frazer, Minister Tšolo informed him that the financial agreement with the financiers would be signed by the Government of Lesotho through the Ministry of Finance,” says the arbitrator’s report.
A few things are worth pointing out here. The first is that Tšolo was committing the government and the country, by extension, to a M1.6 billion contract that would be financed through a 10-year loan facility.

This was at a time when the government was pleading poverty and Majoro had warned of the ballooning debt.
Second, this was a deal borne out of an unsolicited proposal that had not been scrutinised by the Ministry of Energy.
Third, Tšolo did not have the authority to sign the contract or discuss the financing agreement. He did not have the cabinet’s approval and the Ministry of Energy was not informed about the deal. Even if the Ministry of Energy had been informed, it was not Tšolo’s role to sign the contract.

The correct procedure would have been for Frazer to approach the Ministry of Energy which would then conduct a feasibility study, a needs analysis and the financing model. The ministry would then submit its analysis to the Ministry of Development Planning for further scrutiny by the Public Sector Investment Appraisal Committee.

The next stage is for the two ministries to involve the Ministry of Finance before submitting the project to the Cabinet for approval. The cabinet would then approve the project and instruct the Ministry of Finance to start the negotiations on both the contract and the financial agreement.
Several sources told thepost that all this did not happen. The Arbitrator’s report also doesn’t indicate that this procedure was followed.

Tšolo himself narrates this procedure to prove that there was no way he could have signed the agreement without following it.
“I know the procedure, that is why I am saying I never signed any contract with that man and his company,” he says.
“Anyone who claims to the contrary should show me where I signed the contract. I want to see my signature.”
It is because of the lack of procedure that Majoro rejected KfW’s updated financial offer.

Three weeks after the contract was signed Frazer asked Majoro why the financial agreement was delayed. Majoro’s answer was to repeat the correct process that should have been followed. He told Frazer that the contract should have been led by the Ministry of Energy and approved by the cabinet.

Without Majoro’s signature on the financial agreement, the deal was now hanging by a thread.
The arbitrator’s report says Tšolo and Thabane did not understand why Majoro was refusing to sign off the deal because the government supported the project.

During the hearing, Frazer told the arbitrator he suspected Majoro stalled his project because he supported a similar project by China’s Exim Bank for M1.4 billion.
In November 2019 Harvest FM ran a programme where the project’s delay was discussed.

That programme would lead Frazer to leave the country in a huff after he allegedly received death threats and had been informed by colleagues that it was no longer safe for him to remain in the country.
The arbitrator says while Tšolo and Thabane wanted the project to proceed, Majoro “obstructed its implementation by refusing to conclude the relevant Finance Agreement despite the offer of financing communicated to him by KfW”.

In March 2019 Frazer Solar’s lawyers sent a letter of demand to Tšolo and the Prime Minister’s office, citing several breaches to the contract. The office acknowledged receiving the letter but did not respond.
The deal had unravelled and legal proceedings were about to start.

Staff Reporter

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