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How corruption, politics threw Lesotho into jumping China debt

CNQC

Text by Sechaba Mokhethi, Pascalinah Kabi and Billy Ntaote

Photos by Sechaba Mokhethi

Data visualisations by Han Mu


In a desperate bid to win the 2017 elections, former Prime Minister Pakalitha Mosisili ordered the Ministry of Finance to disregard due procedure and swiftly take M1.3-billion Chinese loan that would see a 91-km road built in his home constituency, Tsoelike, which he also represents in parliament, MNN Centre for Investigative Journalism can reveal.

Mosisili is alleged to have abused ‘limited’ powers of a caretaker prime minister as he ordered that Lesotho should take a rushed China loan for construction of Mpiti to Sehlabathebe road after the dissolution of parliament and was leading the country to early polls, having lost a vote of no confidence.

Prompted to explain his decisions, Mosisili flatly declined. 

His order came in sharp contrast with decisions of the Ministry of Finance and Office of the Attorney General that Lesotho should not sign a contract that exposed its property and military hardware to possible seizure by China.

Mosisili ignored our written questions and after several attempts to reach him over a phone call, he picked up. As he had already seen the questions, he interjected our reporter’s introductions saying: “Hold it right there, I cannot entertain being disrespected…stop bothering me (hanging up)”.

LISTEN: Former Prime Minister Pakalitha Mosisili speaks to our reporter

The damning revelations against Mosisili were made by Public Debt Director Khotso Moleleki as he disclosed that the loan contract for Sehlabathebe road, that cuts through Tsoelike constituency, “attached [undisclosed] military hardware and other state properties” as surety in the event Lesotho defaulted on its financial obligations to China.

Moleleki’s revelations were corroborated by former Minister of Finance, Tlohang Sekhamane in a separate interview. 

According to Moleleki, Lesotho owes the Chinese government around M2-billion ($126-million). This amount is built on Mpiti to Sehlabathebe road, Ramarothole Solar Generation Farm, National Convention Centre renovation and two loans taken on behalf of Econet Telecom Lesotho.

“Because we are implementing two projects [Mpiti to Sehlabathebe Road and Ramarothole Solar Generation Farm], this debt is likely to grow further as we claim more funds from China,” Moleleki said.

For Mpiti to Sehlabethe road, Lesotho borrowed M1.3-billion ($82 million) and for phase 1 of the Ramarothole 70-megawatt solar power generation farm, it borrowed M2.8-billion ($177-million) all from the Exim Bank of China.

MNN can reveal that the public debt management office negotiated these two projects under immense pressure from politicians with Mosisili pushing for road construction in his constituency ahead of elections while former Minister of Energy Mokoto Hloaele was behind the cost-inflated solar farm.  

Before the road construction loan was signed, Moleleki said as Finance, they were considering abandoning the project as it had stalled for four years with its cost escalating from M1.1-billion to M1.8-billion due to inflation but politicians forced the office into signing it.

“One morning in May, as we headed for [June 3] 2017 elections, I and Ntate Sekhamane were summoned by Ntate Mosisili,” Moleleki told MNN. Sekhamane confirmed that Mosisili summoned them to several meetings as he exerted pressure for the signing of this project. 

In that meeting, Moleleki claims Mosisili asked them why Mpiti to Sehlabathebe road was not funded and went further to instruct them to be in China once his spit dried on the ground (promptly).

Moleleki and Sekhamane succumbed to pressure and did as they were ordered despite serious reservations on one particular clause in the contract that the Exim Bank of China notoriously puts in its agreements with African governments. According to former Attorney General, Hae Phoofolo, this clause is illegal in Lesotho,

Moleleki and Sekhamane had initially stalled the signing of the contract because Exim Bank attached Lesotho property including its military hardware to the agreement and they wanted that clause removed. 

“We could not attach property of this country against its constitution in that agreement,” Moleleki said. Also, he said, the agreement was imposing a Chinese contractor on the project and the Ministry of Public Works wanted that changed.

Moleleki said a legal opinion of the office of Attorney General clearly showed the country’s military hardware and equipment that included helicopters cannot be attached in the loan agreement’s sovereign immunity clauses. 

Although Sekhamane has forgotten details of the Mpiti to Sehlabathebe road loan agreement, he confirmed there was a clause a finance ministry was very uncomfortable with, “we did not understand its relevance in that agreement and wanted it removed”.

While Sekhamane does not remember if that controversial clause was finally removed, Moleleki insists it was not. “Because we account to politicians, we went to China and took the loan to avoid being accused of holding the project hostage. At some point all the attack was directed towards me,” Moleleki said. 

However, Moleleki is quick to stress that “we believed that we’ll service the loan to finality”. 

Among other things, Sekhamane understood the pressure from Mosisili was inspired by narrow ambitions to develop his constituency, Tsoelike. 

“It would be a major failure on his part to have prevailed over that constituency for over 20 years yet there was no single tarred road in that constituency having constructed many across the country,” said Sekhamane.

Despite his call for the signing of Mpiti to Sehlabathebe road loan agreement, Mosisili’s Democratic Congress (DC) lost elections to its main coalition partner, All Basotho Convention (ABC). 

The ABC, along with its three other partners, appointed Phoofolo as Attorney General whose contract ended last year. 

In an interview with MNN, Phoofolo said his advice to Cabinet was that Lesotho cannot have its property attached within its jurisdiction, “I told them it is wrong and it must change in all agreements”.

Phoofolo argues that Government Proceedings and Contracts Act No 4 of 1965 section 5 prohibits the execution of attachment of government property.

Section 5 reads “No execution or attachment or process in the nature thereof shall be issued against the nominal defendant or respondent in any action or other proceedings against Her Majesty in Her Government of Basutoland or against any property of Her Majesty; but the  nominal defendant or respondent may cause to be paid out of the revenue of Basutoland such money as may, by a judgement or order of the court, be awarded to the plaintiff, the applicant or the petitioner (as the case may be).” 

Phoofolo said the Cabinet took his advice and “negotiated removal of such clauses in new agreements under negotiation and future ones”.

Two Econet loan agreements also have the same clause that Lesotho property and military hardware would be seized in the event Lesotho fails to successfully repay this debt. 

Moleleki does not know who was responsible for their signing “because I was not yet in office”. 

The government signed Econet’s loans with the Exim Bank of China on May 9 2008 and December 14 2011 to finance Telekom National Network Phases I and II.

In her report on the consolidated financial statements of the government for the year ended March 31, 2019, Acting Auditor General Monica Besetsa raises concerns that “Telekom [Econet] has defaulted for three years since 2016/2017 and once again it is in arrears of the principal and interest totalling M101, 664, 945 and M103,799, 388 for its two projects respectively as at the end of 2018/2019”.

Besetsa further raised concerns that Econet had arrears of M121, 352,960 on principal repayments and interest charges as at 31 March 2019. 

In another report, for the year ended 31 March 2020, Besetsa said Econet’s situation had changed for the better after repayment of M8,733,333 was made reducing the owed arrears for both repayments of loans and interest charges to M92,931,612. 

“After these projects, we had to negotiate with the bank to remove this clause [that attached Lesotho’s property and military hardware] and submitted our request to the China Ministry of Commerce; they agreed, so the Ramarothole Solar farm agreement doesn’t have it,” Moleleki said.

Inflated prices and kickbacks

However, the Ramarothole solar farm is at the centre of allegations that its M2.8-billion Chinese loan is grossly inflated to accommodate kickbacks to politicians who push these deals from inside the government.

In November 2020, Chief Accounting Officer ‘Mathabo Mahahabisa told Lesotho Times “the government will pay US$70-million for Phase I of the project which is expected to produce only 30 MW of electricity”. 

In neighbouring South Africa, a 40 MW solar project will cost that country’s taxpayers only M660-million, far less than the M1.1 billion Lesotho is spending on a smaller scale project of 30 MW. 

Ministry of Energy Principal Secretary Themba Sopeng defends the price tag, saying the Ramarothole project comprises four major components of 30MW solar power plant, expansion of substations at Ramarothole and Mazenod, 55km, 132kV transmission line from Ramarothole to Mazenod, and Operation and Maintenance of the plant for a period of three years by the contractor.

“It is prudent to understand these project components as the USD 70 million that you refer to covers all these components and not just the power plant. It would be interesting to know what the M660 million South African project comprises, but I suspect it may not have all the components as Ramarothole and therefore would be unjust to compare the two,” Sopeng said.

Sinoma Tbea Consortium, contracted to implement this project, allegedly made underhand payments to then Energy and Meteorology Minister, Mokoto Hloaele, who facilitated the deal. 

Former First Lady ‘Maesaiah Thabane is also said to have been part of the underhanded action, owing to her connections to one David Chen, who was fronting the project as well as former Lesotho Electricity Company (LEC) chairman, Refiloe Matekane.

Hloaele and Matekane hotly deny the allegations.

Instead, Hloaele argues he knew about the project while serving as a Development Planning Minister and facilitated its approval by the Public Sector Investment Committee during Prime Minister Mosisili’s tenure.

Hloaele says current Development Planning Minister Selibe Mochoboroane was then the energy minister who initiated the Ramarothole Solar power project.

“I only got into the Ministry of Energy after Prime Minister Mosisili’s government collapsed and after elections, I was appointed. On my desk, as energy minister, I discovered the project now had a Draft Engineering Procurement and Construction agreement. 

“I reported this to Prime Minister Thomas Thabane led cabinet and sought permission to revise the draft EPC agreement, which I was granted. Then I asked the Attorney General to point out salient points for renegotiation with China. Thereafter we went to China with a large delegation of various ministries to renegotiate the EPC agreement and sign,” said Hloaele.

Hloaele says he never received any bribes from the project, claiming that he was actually the one who questioned the project’s costs. 

“I was shocked by the project’s costs and raised questions on its costs, but my questions were baseless as I had not done any analysis or research and had no knowledge on the subject matter. I was just a Mosotho man shocked by the project costs and my fears were allayed by those who had expertise. They explained why such a high cost, looking at import costs and many other things,” Hloaele said.

Matekane conceded that the project is one of the most expensive projects for Lesotho, adding while he was the chairman of the Lesotho Electricity Company board, the company was unpopular for holding a view that the country should instead opt to contract independent power producers.

 “My view was that independent power producers would be best placed to help Basotho take part in the power generation business instead of a project that we do not have skills to run. I feared the solar farm could end up being handed to politically linked people after the Chinese hand over the project to be run by the government,” said Matekane.

He further said “there are suspicions that the project has been inflated to make room for bribes to politicians and argued the project costs far exceeds that of a similar project being constructed by an independent power producer – One Power.  

Moleleki argues that the responsibility to ensure prices were not inflated lies with the Ministry of Energy, particularly the Department of Energy. 

“Irrespective of who funds the project, it must have leadership from the line ministry in particular from the affected department,” Moleleki said, adding “the concerned department director has a responsibility to ensure that the costing of the project is correct”. 

According to government procedure, the Ministry of Finance gets involved in a project when it has already been designed by the line ministry and appraised by the Ministry of Development Planning. 

Moleleki argues that “any weakness that may arise in the system is because the line ministry itself is weak”. 

Sopeng says “as this was the first project of its kind in the country, there were a number of gaps that were identified and challenges that were experienced in modelling the project”. 

He further indicates that different stakeholders and relevant government ministries worked together in modelling the project, “with the Ministry of Development Planning and Ministry of Finance being the key ministries”.

“Energy officials reiterated the rule of thumb that I saw on Lesotho Times. They were saying the Rule of thumb says 1 megawatt should cost M1-million,” Moleleki said, indirectly confirming allegations that the Ramathole price tag was grossly inflated.

What also raises eyebrows is that Moleleki was left behind when Hloaele and officials from the Lesotho Electricity Company went to China for this deal yet only the Ministry of Finance is allowed to negotiate and sign financial deals on behalf of the government. 

In response to questions about why Moleleki was left behind, Hloaele told MNN he had invited all relevant ministries to join his delegation to China as he went to renegotiate terms of a draft Engineering, Procurement and Construction document but he learned finance took its time to decide who would join the delegation.

“I could not decide for the finance Ministry who should attend, indeed a representative of the Ministry of Finance arrived a day later, but he arrived and took part in the deliberations accordingly. I invited everyone to ensure that they are all abreast of the project developments,” Hloaele said. 

Moleleki said he only joined the Lesotho delegation after “‘M’e PS (Nthoateng) Lebona instructed me to leave for China with immediate effect as the Energy delegation was already at the airport at around 1pm”. 

“I left the following day. Upon arrival, I found Director Energy Ntate [Thabang] Phuroe, Ntate Letsie and Ntate Lefa Motlalane from LEC already in China with Minister Hloaele”.

Contacted for comment Motlalane said “Please note that currently, I am not contractually under the employ of LEC, as such, I am not at liberty to discuss anything concerning LEC given time elapsed since leaving the institution”. 

The Ministry of Finance had always had a lingering question of “how did this project costing get approved and what did they do?”

“Before taking this loan, the ministry of energy failed to produce a sustainability and plant maintenance plan, it went on to take this loan without addressing the nitty-gritty of how planning and management were to be done”.

If Prime Minister Moeketsi Majoro did not step in, then as Minister of Finance, Lesotho would have rushed into this project without addressing issues of revenue collection and the entity responsible for this assignment.

“At some point they wanted it run by the rural electrification department, later they changed and said LEC and when asked tough questions, they said the Lesotho Highlands Development Authority was best suited because it was already running ‘Muela Power Station. It was actually the PM who advised that they set up a new entity altogether.”

“Their only interest was the project and its costing. As finance, we only agreed to go to China because it is the only Minister of Finance who can borrow on behalf of this country.” 

Sopeng defended his subordinates, saying “the Ministry’s technical staff did play their role in as far as the project preparations are concerned”. He is however quick to admit that the government was caught napping at the early implementation stages, with no state consultant or supervisor on site. 

“It is true that the project was launched with no project manager and/or consultant in place on the government side. However, that was not an oversight in its entirety as the ministry’s staff were earmarked to perform that function. Currently, project manager and other key technical personnel have been recruited to oversee the government of Lesotho interests in the project,” Sopeng said. 

The CNQC camp by the side of Mpiti to Sehlabathebe road at Ha Ramats’eliso in Qacha’s Nek

This article was developed with support from the Africa-China Reporting Project.

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One thought on “How corruption, politics threw Lesotho into jumping China debt

  1. Former PM Pakalitha Mosisili has to be held to account about his role in this messy, corrupt deal. So should everyone involved in saddling Basotho taxpayers with this unjust debt. It doesn’t matter how long it’ll take but they should all be investigated to pay back the money.

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