Ha Belo substation scandal deepens

• M86 million becomes M129 million
• Government pays twice for equipment
• World Bank demands answers

Thoboloko Ntšonyane and Ntsoaki Motaung

The Belo Electrification Project, launched with great fanfare as a catalyst for industrial growth in Botha-Bothe, has become a textbook case of mismanagement, spiralling costs, and institutional failure.

Four years after construction began on November 5 2021, the 33/11kV substation and transmission lines remain incomplete, with no certainty on when power will finally reach the area.

What was meant to be an 18-month project ending in April 2023 has instead devolved into a costly and chaotic dispute between the Ministry of Energy and the contractor, Phaks Joint Venture (JV).

The delays have stalled the opening of completed factory shells and derailed economic prospects for the district.

The project consists of three components: the construction of a new substation, the installation of transmission lines from Hlotse to Belo, and additional lines from Ha-Mopeli to Belo. Its prolonged delays have significantly affected the opening of the Belo factory shells, which remain idle despite being fully built.

Costs have spiralled dramatically, from the original M86 million budget to M129 million already paid to the contractor. The overruns stem from multiple variations, extensions of time, and penalty fees incurred due to late payments.

The escalating costs and persistent delays have raised alarm among key stakeholders, including the government, the World Bank, Parliament, and communities surrounding the industrial area. The Ministry of Energy is implementing this World Bank–funded initiative under the Lesotho Renewable Energy and Energy Access Project (LREEAP).

Background

More than 1,200 households were expected to benefit from the Belo Industrial Area Electrification Project, initially valued at M86 million and funded by the World Bank. The project was launched by former Prime Minister Dr Moeketsi Majoro, who noted that the 16 factory shells built in the area were expected to create approximately 1,400 jobs.

At the time, Dr Majoro also highlighted interest from investors engaged by the Lesotho National Development Corporation (LNDC), pointing to the potential for rapid industrial growth in Botha-Bothe.

The project was expected to electrify 21 schools, including pre-schools, alongside a clinic, 11 businesses, and several government offices.

“Our electricity installation needs a powerful electrical power station since more factories or industries are yet to be established in this area. This is a huge project,” said then Minister of Energy Mohapi Mohapinyane.

Project Coordinator ’Mathapelo Silase noted that the World Bank-funded programme, totalling M900 million across three components, would extend the grid to areas such as the Tikoe Industrial Zone in Maseru, connect 30,000 households, and deliver mini-grids to remote regions.

“Under one of these components, the World Bank will bring electrical services to women-led businesses. It is high time women show their potential,” she said.

Former LNDC Interim CEO, Advocate Molise Ramaili, said the unveiling of the Belo Industrial Electrification Project was critical to completing the Belo Industrial Estate and represented a significant milestone for LNDC.

He added that the project forms part of LNDC’s broader Infrastructure Capital Programme, aligned with the National Strategic Development Plan II and implemented on behalf of the government.

“The supply of electricity in this area brings us one step closer to developing and completing the utility infrastructure required for the project. This phase, which was expected to be completed in December 2021, includes the construction of 16 factory shells and supporting infrastructure, forming part of a masterplan that envisages a total of 51 shells,” he said at the launch.

Several years later, the project that was expected to ignite economic activity in Botha-Bothe and surrounding areas remains unfinished. Its completion date is now uncertain, with no clear indication of when the electrification works will resume or be finalised.

Principal Secretary (PS) in the Ministry of Energy, Tankiso Phapano, told Parliament that government has already repaid M20 million to the World Bank for unjustified payments relating to the project.

He further disclosed that the Ministry has received correspondence from the World Bank demanding justification for an additional M45 million in cost overruns, failing which the government must repay the amount by year-end.

This week, the Natural Resources Cluster Committee visited the Belo Industrial Area, where completed factory shells stand empty because there is no electricity supply.

The visit followed a petition by the contractor, Phaks JV, which raised numerous concerns and asked Parliament to intervene.

In their petition, they called for an investigation into the handling of the project; alleged “value manipulation,” delays, and undisclosed dealings; the awarding of a new contract to one of their subcontractors who they claim has already been fully paid; accountability for public funds; allegations of corruption within the Ministry; and the basis for the termination of their contract.

Phapano told the committee that the ministry had evicted Phaks JV from the site, a claim the contractor disputes, insisting no meeting or communication ever took place to inform them of such a decision.

Phaks JV Finance Manager, Rapelang Sekatle, said the Ministry had never raised concerns about the company’s competence or workmanship.

“We have no letter from the client [Ministry of Energy] complaining about our work or indicating that it was substandard,” he said.

Sekatle explained that operations were halted solely due to non-payment, adding that the last payment was received in May 2024. The company has written repeatedly to the Ministry about outstanding fees, including letters dated 26 July 2022, 25 January 2023, April 2023, and 8 June 2023, addressed to both Phapano’s predecessors and to him.

Absence of designs stalled progress

A major cause of delays was the absence of approved designs. The contractor submitted both preliminary and detailed designs, seen by this publication, but these could not be implemented without an Environmental and Social Impact Assessment (ESIA), a mandatory requirement for all World Bank–funded projects.

The responsibility for conducting the ESIA lies with the ministry, and it was never carried out.

Addressing the Natural Resource Portfolio Committee, Phapano said he would not go into detail as aspects of the project are currently before the courts.

He indicated that the project began in 2020, funded by a World Bank initiative. Initially, it was structured as a Design and Construction project, which required a design phase, followed by construction, and ultimately handover to the client.

In this case, the contractor was responsible for designing the project and then submitting the design to the client, in this instance, the Ministry of Energy, for approval. Once approved, the contractor would return to the site to carry out construction, after which the project would be handed over to the Ministry.

“From 2021, after the contract was signed, I recall the project was advertised in 2020, but the contract was finalised in 2021, once work began, it no longer proceeded as a 10k project but was converted into a Bill of Quantities (BOQ) project. It remained in this format until I was informed that it stalled in 2023 and never resumed. When I arrived in January last year, I held several meetings about this project, trying to resolve the issues, but it remained unresolved,” he said.

The main problem identified was that after changing to this type of contract, no equipment had been paid for. Wires were purchased from China, monopoles from South Africa, and transformers from the company Actom.

In January 2024, after assessing the challenges, Phapano said he visited the site and found the situation unchanged. On the route to Mokhotlong, wires were still hanging, exactly as he had observed upon his arrival in 2024.

Despite numerous attempts to resolve the matter, he said it became clear that the issues would not resolve on their own.

He explained that the government had initially paid for the equipment, but because it had no direct relationship with the suppliers, having been communicating only through the contractor, it had to engage directly with the contractor to reclaim or pay for the equipment still held by suppliers.

Phapano noted that equipment previously paid for had effectively been paid for a second time. The project was originally budgeted at M86 million. However, during reconciliations with funders last year, it was revealed that M129 million had already been spent, exceeding the original budget by M43 million.

Further investigation showed that this amount had been paid to the contractor, indicating that the contingency fund had been used in the early stages, over the actual project cost. Contingency funds are intended to cover unexpected costs during construction, not to inflate the budget.

Regarding the equipment, he explained that the government had paid for items still overseas, and agreements were signed to have them transferred, as suppliers threatened to auction them.

The wires from China had already been fully paid for in the initial reconciliation but were not delivered; a subsequent payment was made, and they are now en route to Lesotho. The monopoles have arrived at LNDC, and transformers will be delivered once civil works are sufficiently advanced.

Even after agreements were signed, Phapano said the contractor was unable to continue work. The contract was reviewed, and termination was deemed necessary under the relevant clauses. The Attorney General pursued an eviction order in November, but the contractor did not comply, he said.

“The termination was amicable. The contractor was not blacklisted because they had facilitated supplier access, and the Ministry remained open to settling what was due and allowing them to participate in future procurement,” he said.

He added: “Before finalising payments, a trip was made with the DCEO to verify the purchased equipment.”

While Phaks JV claims another contractor has been engaged to complete the remaining work, Phapano said that the contract explicitly allows the client to remove the contractor.

Article 42.2.4 states: “The Client may enter the Site, expel the Contractor, and complete the Facilities itself or by employing any Third Party.”

Ministry pays for equipment sourced from supplier on behalf of the contractor

The Ministry of Energy has processed some payments for the equipment on behalf of the contractor. This according to PS Phapano was to prevent the supplier from auctioning such goods as they have been fully paid for but remains in supplier’s custody.

• The Ministry paid ACTOM High Voltage (Pty)Ltd, remaining sum of M2, 127, 479.73
• The Ministry settled outstanding M3, 144, 626.24 at Chinese company, Henan Qingzhou Cable CO.,Ltd
• The Ministry paid supplier, CIS Engineering (Pty) Ltd remining balance of M605, 229.87
• The Ministry paid the balance to ACTOM High Voltage (Pty) Ltd in the sum of M1, 111, 029.80

Meanwhile, Natural Resources Cluster Committee Chairperson Moeketsi Motšoane said the Committee contractor and will reflect on them and produce report to the parliament.

Contractor demands payments of settlement of contractual obligations

Phaks JV through their legal representatives, S.Phafane Chambers wrote a demand letter dated September 4, 2025, to the Ministry which this publication is in possession.

In that letter, the contractor wants payments following what they call “unlawful termination” of the contract. It should be noted that the Ministry had fired the contractor from the site but the contractor has resisted to vacate the premises and has since petition the court asking for the interdiction.

The demand the following fees:

• An outstanding payment of M20, 468, 018.09
• Payment for extension of time with associated costs in the sum of M11, 066, 266.21
• An interest accrued from delayed payments amounting to M6, 969, 019.45

“Our instructions are to further record  as we hereby do and this being on the without prejudice basis, clients reserving all their rights, that they are prepared to accept the termination… upon the following conditions being fully met; that in addition to the sums set out above, a payment retention fee in the sum of M7, 689, 040. 87 and damages for unlawful termination in the sum of M36, 765, 297.81 also to be paid immediately,” reads the letter.

In his response to these demands, Phapano wrote that: “We reject claims submitted by your client on that they lack a substantiated foundation in terms of the Contract. Nonetheless, your client is further requested to submit substantiated claims which will be subject to verification in terms of the Contract’s expended amounts, and subsequent payment where expedient.”

Phaks JV have secured a court order at the Northern Division of the High Court where Judge ‘Makampong Mokhoro ordered that the original contract remains binding on both parties and that the arbitration clause is still binding on the parties.  

Audit findings on Belo Industrial

The Auditor-General, ‘Mathabo Makenete’s report have pointed to many incomplete components of this project.

The audit finds the following:

• According to the report the compensation for Belo Industrial zone project affected persons (PAPs) is 95% done.
• Construction works for the Mopeli-Belo 33/11kV 8km line halted pending negotiations between the client and the contractor.
• Substation construction has been halted, however excavations, soil compaction, earth mat trenching and concrete tests for casting of plinths completed and 95% done.
• 11kV indoors Switchgear equipment has been manufactured and delivered to site, pending installation and commissioning at 50%.
• 33kV Indoors Switchgear is yet to be manufactured for both Belo and Hlotse substation- at 0%
• 33kV outdoor Switchgear yet to be delivered to site.
• 33kV HV steel structures installation halted at 50%.
• Factory Acceptance Test (FAT) of Power Transformers factory visit conducted and approved of specifications granted, transformers are yet to be delivered on site.
• Hlotse Belo 33kV Line pole planting at 84.7% (19/229 Structure total), whereas dressing at 24% (56/229) and stringing yet to begin.
• Mopeli Belo 33kV line wooden H Pole planting at 100% stringing and dressing at 100%.
• Mopeli Belo 33kV line Monopole installation at 0% with Excavation & Casting of Concrete footing of Monopole Structures – 60% (3/5 structures total).
• Hlotse Substation Bay extension works have not begun.

The contractor said their last work was towards the end of 2023 and they have not been working owing to non-payment. Their equipment remains on site.