How Mota Engil took over Malawi ports

November 17, 2012 • National News • Written by :

Mota Engil was in March this year given a 35-year concession to run all the four ports on Lake Malawi without due procurement process.

We have established that the concession—which allows Mota Engil to run Malawi’s ports of Chilumba, Nkhata Bay, Chipoka and Monkey Bay—did not go through competitive bidding procedures.

Instead, it was single sourced.

But while single-sourcing is an acceptable procurement method under the Public Procurement Act, Section 30 of the law only permits it on condition that

(a) the estimated value of the procurement does not exceed the amount set in the regulations

(b) when only one supplier has the technical capability or exclusive rights for the goods/services required

(c) when there is an emergency

(d) if the procurement entity already bought goods from a supplier and just wants to buy more.

But even assuming that these circumstances were met, the same section requires that the procuring entity—in this case the Ministry of Transport and Public Infrastructure—must seek ‘no objection’ from the Office of the Director of Public Procurement (ODPP) for him or her to review the necessitating factors and approve the deal before any agreement is signed. This was not done.

Said ODPP spokesperson Mary Mbekeani:  “We have not come across any record from the Ministry of Transport seeking this office’s ‘No Objection’ to single source this service.

“The Ministry of Transport is better placed to provide the details of this tender because it was the procuring entity in this case. However, we cannot speak on its behalf and as such, we advise you to check with them regarding this particular tender.”

The concession document in our possession was signed on March 14 2012 before most important annexes, including a business plan, were completed and attached.

Minister of Transport and Public Infrastructure Sidik Mia signed the concession on behalf of the Malawi Government, while Mota Engil chief executive officer for Africa, Gilberto Rodrigues, signed on behalf of the concessionaire.

We have also established that the two parties signed the concession agreement before they even agreed on concession fees.

But the Ministry of Transport has justified the move to single source without ODPP’s ‘No Objection’, saying no other firm was interested to run the ports.

 “Government’s plan was to concession out both lake services operations and ports management together. However, when calling for expression of interest, many companies were not interested in ports management, but only in the lake services operations,” said Transport Ministry public relations officer Joyce Malongo in an e-mailed response.

She added: “When Malawi Lake Services Company [owned by Mota Engil] won the tender for lake services operations, they expressed interest to manage the ports too; hence, government entered into a negotiation with them. Government could not have launched again a tender in operations where companies initially did not show interest.”

Malongo could not explain when and where the tenders were published; whether tender documents specifically mentioned that bidders should compete for both the ports and lake services. She could also not state whether the fact that Mota Engil’s interest to also manage ports apart from the company was enough ground for not seeking ‘No Objection.’

She referred these questions to Privatisation Commission executive director Jimmy Lipunga who said he was in a meeting and would revert to us. He has not.

Asked on the uncompleted documents that should be read with the concession, Malongo said government hopes all the documents will be completed in three months’ time. She said Mota Engil cannot start operations before then.

But in an interview last week, Rodrigues said they want to start operations by January 1 2013. Mota cannot start operating the ports before they develop a business plan, according to the Ministry of Transport.

Weekend Nation has established that it is only from October this year that government, through the Department of Marines and the mother ministry—Transport and Public Infrastructure—has started chasing papers to normalise the concession eight months after the signing.

However, Rodrigues blamed the delay on government’s slowness in assessing the ports to ascertain the present state of affairs.

According to the concession, government will be getting its cut from the ports business through concession fees to be paid based on annual profits which Rodrigues says may only begin trickling in after five years of operations.

“Government has also to resolve the issue of retrenchment of staff. We are currently negotiating entry fees the government may have to use to retrench the staff,” said the Mota Engil chief.

The concession document states that Mota Engil will have to employ some of the staff currently on the ports of Chilumba, Nkhata Bay and Chipoka.

Rodrigues confirmed this in an interview, saying “we will actually ensure we increase staff on each port to 200, which will mean employing 600 people at the end of the day.”

There are currently 110 employees across the three ports, according to Ministry of Transport’s Malongo.

Chilumba, Nkhata Bay and Chipoka ports have the following equipment, which Mota Engil will take over:

Chilumba Port: Gantry crane, the jetty (the concrete structure), tractors with trailers , fork lift trucks (small, medium, large), mobile cranes for standby generators, cargo shade, container storage space, mobile crane, firefighting equipment, liquid cargo storage facility, port offices and equipment, passenger waiting and recreation facility and passenger toilets.

Nkhata Bay: Floating jetty with its bridge, tractor with trailer, forklift trucks, firefighting equipment, and general cargo storage shade and passenger waiting room.

Chipoka: Gantry crane, the jetty (the concrete structure), mobile crane, tractors forklift trucks (small, medium, large), mobile cranes, railway track, four standby generators, cargo shade, container storage space, liquid cargo storage facility, port offices and equipment, passenger  waiting and recreation facility, passenger toilets and firefighting equipment.

Monkey Bay is the only port with a floating dock on Lake Malawi which also handles ships from Tanzania but it has no container handling equipment like Chipoka and Chilumba.

According to the concession, the Malawi Government is responsible for all the liabilities of Lake Malawi ports “as at the commencement date even if the liabilities are not identified at that date.”

This includes accumulated debt, accrued interest on loans; loans associated with cranes, pension obligations to Lake Malawi Ports employees, retrenchment payments to the staff, contractual agreements between Lake Malawi ports and third parties, accumulated environmental damage and liabilities and outstanding litigation against Lake Malawi ports.

Rodrigues said Mota Engil will invest K2 billion to ensure the ports come into full operation and make them a viable business.

The ports move comes about two years after Mota Engil won a tender to run Malawi Shipping Company which replaced Malawi Lake Services Company.

According to a November 14, 2011 letter from former Transport Ministry principal secretary Randson Mwadiwa to ODPP, government approached Mota Engil to rehabilitate the ports.

“…we have approached Mota Engil to consider rehabilitating the ports of Nkhata Bay, Likoma and Nkhotakota in partnership with government,” wrote Mwadiwa.

“Government will contribute the K130 million, in 2011/2012, K80 million in 2012/2013 and K80 million in 2013/2014. These are allocations that have been indicated for this project, Mota – Engil will pick the difference,” he said.

Initially, government was to do the job on its own at an estimated cost of K1 billion.

ODPP did not issue the requested ‘No Objection’, according to documents; hence, this contract could not start.

“We are unable to review your request because minutes of the lPC meeting in which they discussed this matter were not attached. We would like, therefore, to request your office to send us the required minutes for us to proceed with the review,” wrote a Arnold Chirwa, assistant director for monitoring and evaluation at ODPP on November 24 2011.

Rodrigues hopes that the current arrangement where Mota Engil will rehabilitate the ports is based on the fact that the ports should begin working on the basis of the March 14 2012 concession.

“We run the Malawi Shipping Company; therefore the ports are crucial to the efficiency of the process. We intend to invest K2 billion to bring the ports to international standards,” he said.

Asked how they got the concession without a tender, Rodrigues said “the move was from government.”

“They had a problem and found that we could be the solution,” he said.

Rodrigues parried suggestions that Mota Engil got the concession because government has a soft heart for them.

“I don’t see any soft heart, what I see is a company with the courage to invest. The ports were there for many, many years and nobody wanted to take them. For Mota Engil, the ports are important because we have a concept for a multi-model kind of transport,” said Rodrigues.

He defended the agreement that government’s cut will come from profits, arguing stakeholders will be given chance to check their books.

“We are [a listed company], so we are audited internationally and locally. Government will have access to our accounts. We cannot hide money,” he said, adding locals are also welcome to take 49 percent of the project.

“So far as consolidating business in Portugal is concerned, we have to have 51 percent. In all our businesses, we are able to offer 49 percent. Those willing to invest can come and join us,” Rodrigues said.

Mota Engil has been in Malawi for over 20 years, winning most of the construction work, particularly in the second democratic rule of Bingu wa Mutharika.

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