Monday, April 22, 2024
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Maseru

Chinese-owned firms under fire in Lesotho

Business

…unpaid claims and unethical practices prompt public outcry

Staff Reporter

In a bold and unprecedented move, three influential local businessmen, Toloane Matekane of Tim Plant Hire (PTY) LTD, Joang Molapo, and Andre J. Bothma of Mafika a Lisiu (PTY) Ltd and LSP Construction, respectively, have unleashed a powerful outcry against what they perceive as unethical conduct by Chinese-owned enterprises operating within Lesotho.

The trio’s courageous stance was articulated through a formal letter directed to the Chinese Ambassador to Lesotho, Lei Kezhong, thrusting the spotlight on the contentious practices prevalent within Lesotho’s construction and civil works realm, largely orchestrated by Chinese-owned corporations.

In this gripping missive, the trio did not mince words as they detailed their deep-seated concerns regarding the modus operandi of these Chinese conglomerates.

Matekane, Molapo, and Bothma vehemently accused these Chinese entities of failing to uphold their end of the bargain, blatantly disregarding contractual agreements, and shirking their financial responsibilities.

Such actions, the trio asserted, have inflicted dire consequences upon Basotho-owned enterprises, pushing many to the precipice of financial ruin.

 “Chinese-owned companies have become a formidable player in Lesotho’s construction and civil works sector, competing and winning large lucrative deals from the government and other client bodies in Lesotho.

They candidly acknowledged the inherent challenges accompanying this paradigm shift, notably the persistent failure of Chinese-owned enterprises to uphold their contractual commitments and fulfill financial obligations.

“The net effect of this has been to cause grievous financial hard to Basotho-owned businesses, leaving most at the brink of bankruptcy,” they lamented.

Clarifying their roles as representatives of Basotho-owned businesses, they underscored the imperative of voicing their concerns.

“We are but a small sample of companies bearing the brunt of Chinese-owned enterprises’ actions,” they clarified.

Furthermore, they highlighted the grave allegations of unfair labour practices levied against Chinese-owned entities by labour unions, warning of the potential for a volatile situation if left unaddressed.

Among the litany of grievances laid out by the three businessmen against Chinese-owned businesses, the most glaring are the alleged unpaid claims and unethical business conduct.

Unpaid Claims

A. Tim Plant Hire (PTY) LTD

They allege that in 2019, Tim Plant Hire entered into a sub-contract with CNQC (A Chinese-owned company), for the construction of the Mpiti-Sehlabathebe road in Qacha’s Nek. At the on-set CNQC negotiated from the original figure of M 190,000,000 to M109, 000, 000.

Subsequent to the conclusion of the contract, CNQC failed to honour payments to the tune of M 40,158,965.16 which was due to Tim Plant Hire.

Tim Plant Hire further entered into a Joint Venture with Shanxi Construction Investment Group Co. LTD (SCIG) and Shanxi Mechanization Construction Group Co. Ltd (SMCG), which are both Chinese-owned companies. In August 2021, the JV entered into a contract with the Maseru City Council (MCC) for the upgrading of Mpilo Boulevard Intersections worth M 379,036,817.98.

An internal agreement reached herein was that Tim Plant Hire’s 30 percent share would be bought out of the contract for M7,500,000 and Tim Plant Hire would further construct one Zone (Zone 4) exclusively and hence derive the monetary benefit therein.

This arrangement was however not honoured as Tim Plant Hire was only paid M 4,000, 000 from the agreed M 7,500,000 while work done on the designated Zone was also not paid.

B. LSP Construction

On July 2021, LSP Construction entered into a labour only sub-contract with Tuwana Construction Lesotho (Chinese-owned company) which in turn was sub-contracted to TBEA, Sinoma Energy Conservation Ltd consortium for the construction of:

  • 30MW Solar Farm at Ramarothole, Mafeteng
  • Substation expansion at Ramarothole, Mafeteng
  • 132kV transmission line from Ramarothole to Ha Mofoka

The Contract with LSP was valued at M69,155,238 LSP Construction managed to complete the work, despite the numerous hurdles placed in its path by Tuwana, which included delayed delivery of material and a lack of proof of financing of the project.

Tuwana failed to honour LSP claims with regards to work done, as well as claims due to delays and extension of time.

Unethical Business Conduct

In their scathing critique of the alleged unethical conduct by certain Chinese-owned businesses in Lesotho, Matekane, Molapo, and Bothma detailed a series of grievances under the umbrella of non-adherence to signed agreements and unethical business practices.

“His Excellency will appreciate, from reading this portion, that there are grounds for overall international pressure that China must play by rules in business dealing in host countries,” they said.

They delineated the alleged unethical business conduct into two distinct themes: non-adherence to signed agreements and non-adherence to dispute resolution mechanisms.

Non-adherence to signed agreements

“Non-adherence with signed agreements has become synonymous with Chinese-owned companies,” the three businessman wrote.

They explained that in a supplementary agreement between Tim Plant Hire and SCIG and SMCG, it was stated that the Joint Venture would pay 12 x M500,000 installments monthly without any regard to contract performance.

It is however regrettable to note that just six months into the contract, SCIG and SMCG unilaterally decided to ignore that contract and stopped payments to Tim Plant Hire.

Moreover, with regard to CNQC, Tim Plant Hire did not receive a completion certificate, upon contract completion.

They said in the case of LSP Construction, no Take over certificates were issued despite formal contractual requests to Tuwana.

On the other hand, they added, Mafika a Lisiu (PTY) Ltd participated on the Lesotho Highlands Water Project (LHWP) Phase II as a Tier 4 subcontractor on both the Kopano Ke Matla Joint Venture which is responsible for the construction of the Polihali Tunnel as well as with the SUN Joint Venture which is responsible for the construction of the Polihali Dam.

“Mafika a Lisiu interacted with the other joint venture partners and supplied rates and other key information during the tender phase. Upon the successful award of the two contracts to the respective consortia, the expectation was that as a co-bidder and named sub-contractor, Mafika a Lisiu would following internal discussions be awarded a portion of the work commensurate to its technical capacity as outlined in the bid,” the letter reads.

“Instead it has been relegated to the role of a labour broker with no status different from any other service provider. Where construction or engineering services are required in line with the technical expertise of Mafika a Lisiu, it is required to tender for the work in the same manner as companies that are not part of the joint ventures,” it adds.

Matekane, Molapo, and Bothma further explained to the ambassador that the company profile and key staff members of Mafika a Lisiu were utilised by the joint venture to strengthen the overall bids and meet the contractual requirement for participation by Lesotho companies.

They said Mafika a Lisiu was deemed satisfactory by the client but post award, it has been ignored or sidelined to a very secondary role.

“At the present moment, which is a year after the tender award, Mafika a Lisiu has still been unable to meet with or agree on any level of participation with SUN Joint Venture.

“Kopano Ke Matla, on the other hand, has at the minimum interacted with Mafika a Lisiu. They insisted that as a company, Mafika a Lisiu lacks the key personnel or technical expertise to undertake the drill and blast work on the tunnels and portals yet they have deployed Mafika a Lisiu staff under the banner of their company to oversee and supervise the execution of exactly that component of the works,” they said.

The letter further stated that the legitimate expectation for meaningful participation borne from the relationships established at pre-tender stage had not been met.

Further, the overall contractual relationship, most especially the component of capacity building, that was clearly articulated in the contract document had been ignored and engagement around it stifled.

Non-adherence to dispute resolution mechanisms.

Matekane, Molapo, and Bothma also stated in the letter that in a bid to quell and manage disputes in contracts, a dispute resolution clause is inserted in business agreements.

They mentioned that this is further done to avoid the delays which may occur in mainstream litigation.

“It is however regrettable to note that Chinese-owned companies have failed to honour such, which can be demonstrated by the experience of LSP Construction while transacting with Tuwana,” they said.

They narrated that when LSP filed a claim which was rejected by Tuwana, a dispute was declared and referred to a Dispute Adjudication Board (DAB) as per the contract.

“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,” they said.

They indicated that when Tim Plant Hire experienced difficulties with SCIG and SMCG, the client (MCC), called the parties to a meeting led by the Minister of Local Government.

The meeting, according to the three businessmen, came to a resolution ordering SCIG/SMCG to pay Tim Plant Hire which SCIG/SMCG agreed to. They said there was also a discussion and resolution for a session agreement to be signed by the parties.

However, to date SCIG/SMCG has not complied with any of these directives.

“The Minister of Natural Resource in the case of LSP and Tuwana ordered and directed that Tuwana make payments to LSP, but Tuwana through written correspondence stated that the Minister in making such directive acted outside the scope of his work and as such there would be no compliance on their side.

Furthermore, SCIG refused to sign, a session agreement with Tim Plant Hire, despite having made an undertaking to sign it, in the presence of the Minister responsible for Local Government,” Matekane, Molapo, and Bothma said.

They indicated that all these occurrences signaled the highest level of disrespect for Lesotho and Basotho, and further showed an attitude of being a law unto ones-self, which they found concerning.

“We are of the view that as the Representative of the People’s Republic of China in Lesotho, one of your responsibilities is to ensure that all Chinese in the country show the highest level of respect to the national authorities, as a token of watering and preserving diplomatic ties,” they said.

“We hold a strong belief which we hope Your Excellency will only reinforce, that China is here to help Lesotho unlock its potential and not to dampen its prospects of being independent both in governance and financially,” they added.

They said a strong, vibrant and functioning private sector is key for any country’s development.

“We beseech your good office to join hands with us and ensure that a few Chinese companies do not ruin a legacy that has been built and molded for over 30 years between China and Lesotho, by conducting business in a manner reflecting a Chinese capitalist imperialism geared towards crippling Basotho-owned businesses.”

They also explained that they had undertaken different approaches, all aimed at resolving the 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 country-wide conflict between Basotho-owned businesses and Chinese-owned businesses operating in Lesotho,” the letter, dated January 24, 2024, concluded, expressing their hope for a peaceful resolution.

When Kezhong did not respond, the three businessmen penned another letter on Monday this week.

They stated: “The letter we had written to your excellency requested a response and resolution to our concerns within 14 days of receipt of that letter. The 14 days have since lapsed without any communication from those entities attempting to discuss a way forward.

“We, therefore, find it inescapable to draw an inference that, your excellency indeed engaged the individual Chinese owned companies, as he alluded in the meeting that he will, with a view to strike a resolution but like other efforts employed before, this was also not successful and the said companies decided to continue in their quest to frustrate our businesses through stifling our cash flows.”

They said their latest letter served to convey their heartfelt gratitude for the ambassador’s efforts and draw his attention to the fact that he has now experienced first-hand, the concern they had conveyed to him of the unwillingness by the said Chinese-owned companies to adhere to any attempt geared towards dispute resolution.

“We believe that Your Excellency now sees what we see that these Chinese-owned companies are not willing to cooperate and they are implementing a much bigger plan of bankrupting Basotho-owned businesses to ensure that they thrive in the absence of Basotho-owned business,” Matekane, Molapo, and Bothma said.

“Your Excellency, as we had indicated in our previous letter, two Ministers of His Majesty’s Cabinet had attempted to mediate the disputes, namely the Minister of Natural Resources and the Minister responsible for Local Government and they both met resistance from the said Chinese-owned companies.

“We believe Your Excellency now falls in the category of authorities who have met disrespect from the said Chinese-owned companies and hence became unsuccessful in the attempt to pave way for a workable solution. Despite the absence of success, we are thankful to you Your Excellency.”


Disclaimer:
This story has been published based on the public interest surrounding the matter at hand. Comments from the mentioned companies and the Chinese Embassy have not been included in this publication. Efforts to obtain comments from these entities will be pursued and included in subsequent publications for a comprehensive and balanced coverage of the issue.

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