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Escom spends K3 billion on led bulbs

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CHITOSI—Contracts have terms on contract performance

Eleven days before the court ordered presidential election, Electricity Supply Corporation of Malawi (Escom) spent $3,288,750.00 which is about K2, 450,118,750.00 purchasing Light Emitting Diode (Led) bulbs.

The whole contract is worth $4,385,000.00, which is about K3,266,825,000.00 billion and was awarded to Lilyeck General Trading LLC and Teligenta Limited companies based in Dubai and Mauritius respectively.

However, Escom’s Public Relations Manager Innocent Chitosi justified the purchase, saying it is under a project of replacing fluorescent tubes, whose aim is to free some energy that is being consumed through the use of tubes that do not save energy.

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“Escom conducted an energy efficient lighting survey in 2016 and it revealed that around 80% of all industrial, commercial and public institution customers in Malawi use incandescent fluorescent tubes for lighting. The most common fitting sizes of such tubes are rated between 48 Watts to 26 Watts,” he said.

Invoices from Teligenta Limited and Lilypeck General Trading LLC that we have seen indicate that Teligenta will supply 290,000 bulbs while Lilypeck will supply 125,000 bulbs.

All invoices indicate that the terms of payment are 25 percent advance and 75 percent through irrevocable Letters of Credit.

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An invoice from Teligenta indicates that out of 290,000 Led tubes, 80,000 are 2 feet Led tubes at $780,000 and 210,000 are 4 feet Led tubes at $2,205,000.

“…to be delivered to Central Stores, Blantyre…The first 50% consignment to be delivered within 8 to 12 weeks, following the approval of the samples. The second 50% consignment to be shipped immediately upon the delivery of the first 50% consignment,” reads part of the invoice.

Documents in our possession indicate that the corporation’s management on June, 12, 2020 sought irrevocable Letters of Credit, through FDH Bank, to pay Teligenta Limited and Lilypeck General Trading LLC for 75% of the contracts awarded to each of the companies.

“Could you please arrange to establish an irrevocable Letter of Credit with cash cover for USD2,238,750.00 (Two Million Hundred Thirty-Eight Thousand Seven Hundred and Fifty United States) in favour of Teligenta Limited, being 75% of the contract sum of USD2,985,000.00

for the supply of Led Tubes through our Account number 1850000006243,” reads a letter, signed by Escom’s Acting Director of Finance Brian Ndisale and Allesxon Chiwaya, Chief Executive Officer.

On the other hand, Lilypeck General Trading LLC is expected to supply 125,000 all 5 feet Led tubes amounting to $1,400,000.

“25% advance, 75% to be paid through irrevocable letter of credit,” reads the invoice from Lilypeck General Trading LLC.

“Could you please arrange to establish an irrevocable Letter of Credit with cash cover for USD1,050,000.00 (One Million and Fifty Thousand United States Dollars) in favour of Lilypect General Trading LLC, being 75% of the contract sum of USD1,400,000.00 for the supply of Led Tubes through our Account Number 1850000006243,” reads a letter signed by Chiwaya and Ndisale.

Meanwhile, the newly elected government, led by President Lazarus Chakwera and Vice President Saulos Chilima, announced in the week that they have halted all contracts between the government and service providers for verification.

In a notice dated June 30, 2020 that was signed by recently appointed Chief Secretary to the Government, Zangazanga Chikhosi, the immediate suspension has been effected to pave way for a quick audit for transparency and credibility of processes and procedures

In an interview Friday, Chikhosi could not comment on this particular procurement but was quick to say government is looking at all contracts.

“Madam, I am currently in a meeting but we are looking at all contracts and every procurement aspect in the government,” he said.

Anti-Corruption Bureau (ACB) Director General Reyneck Matemba said they are not aware of the contract.

“We are not aware of the contract but we will make follow ups,” he said.

According to Chitosi, Escom’s analysis showed that the project will be able to redeem some 10 Mega Watts which can be used to mitigate effects of inadequate energy.

“In its analysis, Escom found out that replacing these fluorescent tubes with more efficient LED tubes rated at 18 watts and below can provide significant savings on demand. Considering the power situation in the country and the rate at which Escom is connecting new customers while there is little additional power being generated, Escom considered it fit to replace the fluorescent tubes with LED tubes which will result in a saving of not less than 10MW of power. This is part of the demand side management project being implemented after the LED bulbs,” he said.

In regards to the advance payment before the goods are sampled, Chitosi said a Letter of Credit remains a mode of payment through the bank, which guarantees the supplier that the procuring entity has the capacity to pay.

“Contracts have terms on contract performance which are binding between the two parties. And the contract provides for terms of resolving the issues if one party fails to perform. Failure to supply the required quality of goods is deemed as non-performance of the Contract. The samples of the tubes were sent to Malawi and the quality has been certified by Escom engineers. The tubes that will be delivered will be inspected to ensure the quality matches with the samples,” he said.

Chitosi said there was a call for bidding and the procurement method that was used was restricted tender and six firms were shortlisted to participate in the tender and out of the six firms four submitted their bids.

In 2017, Escom was found in a mess to pay K8.3 billion to suppliers for contracts which were entered into behind management’s back and mostly for goods the organisation did not need.

it was discovered that, out of the merchandise worth K8.3 billion, the users (departments) only needed K3.2 billion worth of items and equipment, rendering K5.1 billion worth of items unwanted by users.

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