State-owned National Oil Company of Malawi (Nocma) recently courted controversy for awarding fuel supply contract to Tanzanian-based Lake Oil Company and IPG of Kuwait without proper procedure and its application to Malawi Energy Regulatory Authority (Mera) to allow it award contracts to two fuel suppliers from 23 bidders has been rejected.
The Lake Oil company is reported to have a questionable capacity to supply fuel.
According to the letter that Nyasa Times has seen signed by Petroleum Bulk Procurement Agency (PBA) executive director, Joyce Gachuma, Government of Republic of Tanzania on March 20, 2020, wrote management of Lake Oil reminding them on their failure to open Letter of Credit for their ordered products.
NOCMA failed to assess the company before award of the multibillion contract.
IPG (Independent Petroleum Group) is a group of companies headquartered in Kuwait.
Nocma wrote Mera to seek a “No objection” from the Public Procurement and Disposal of Public Assets Authority (PPDA) to award the two contracts for the required supply of 314 830 metric tonnes (MT) for the whole of 2020/21.
According to Nocma’s submission to Mera, IPG was allocated 86 559 MT for ex-tank and 66 707 MT for DDU (delivered duty unpaid totaling 153 266 MT) while Lake Oil was allocated 157 380 MT for DDU.
Mera acting chief executive officer Ishmael Chioko in a letter dated January 15 2021 to Nocma, wrote: “ I am therefore writing to inform Nocma that Mera has declined to approve Nocma’s applications.”
The energy regulator has since advised Nocma , which is operating without chief executive officer and there are some gaps in executive management, to among other things, transparently re-evaluate the 23 bidders as submitted by the various interested suppliers.
Mera also wants Nocma to ensure there is a clear link between the prices of fuel in the contracts and the prices that were announced when the bid were opened.
Sources close to the tender process indicated that there are set procedures followed when awarding such contracts. The procedures include advertising which is followed by evaluation of bids where possible suppliers are picked.
This is then followed by background checking of the companies, called due diligence stage where Nocma actually engages the Financial Intelligence Unit. After this process the successful bidders’ names are then shortlisted and sent to Mera for premium approval.
Further investigations into Lake Oil in Tanzania revealed that they are in debt with the Central Bank of Africa to the tune of 40 Million dollars and the bank has since filed for bankruptcy.
Fuel being a strategic commodity whose availability in adequate quantities in the country ought to be assured all the time, the award to Lake Oil was to risk the country to be on the edge of experiencing fuel shortage crisis if 2012 .
Nyasa Times was also made to understand that this is not the only debt they owe as Lake Oil is also owing other OIL Marketing Companies (OMCs) like Sahara Energies a debt they have failed to settle for the past five years.
“This clearly shows that Nocma failed to follow all these processes. Oil is one of the critical business in the country which requires that companies entering into the contracts, should have financial muscle and Lake Oil does not portray that,” said one official familiar with the bids.
Mera whose board chairperson is Leonard Chikadya has advised Nocma to re-tender and start the whole process all over again.
Both Nocma board chairperson Zangazanga Chikhosi (Secretary to President and Cabinet) and deputy CEO Hellen Buluma did not give comments to the matter.
Commentators say Nocma should sort its staff at the senior management level ensuring that there is a complete executive management in place to make the crucial decisions that inspire confidence in all stakeholders in the energy sector.
Meanwhile, Minister of Energy Newton Kambala has given an assurance of availability of fuel even if the awards of contracts is delayed.Follow and Subscribe Nyasa TV :