SMALL Business Development, Cooperatives and Marketing principal secretary, Tankiso Phapano, has accused controversial businessman, Yan Xie, of defrauding the government of M27 million through a shady business deal packaged as a private-public-partnership (PPP).
Mr Xie, popularly known as John, is former Prime Minister Thomas Thabane’s special envoy and trade advisor on the China-Asia Trade Network. He is said to have fled the country early this year to avoid possible prosecution for corruption in connection with other alleged crimes.
In this particular case, Mr Xie is said to have facilitated the awarding of three tenders worth M27 million to three companies which Mr Phapano alleges are closely linked to him. The tenders were awarded in April 2018.
Mr Phapano makes the allegations in his founding affidavit to his High Court application for the nullification of an October 2018 Memorandum of Understanding (MOU) between his ministry and Mr Xie for the establishment of an agro business venture between some Chinese and Basotho companies.
Three companies – Thabong Holdings, Bafani Construction and A-Pharma Lesotho – were awarded tenders totaling M27 million in April 2018 to supply the Ministry of Small Business with toothpicks, egg tray and duvet-inner line machines in 2018.
Thabong Holdings was awarded a M4 077 860 tender for the supply of a toothpick making machine while Bafani Construction was awarded a M15 585 341 tender for the supply and delivery of an egg tray making machine.
A-Pharma Lesotho was given a M7 490 810 contract to supply the ministry with duvet-inner line machine allegedly at the behest of Mr Xie.
The three machines were meant to be used in a controversial business deal born out of a MOU the ministry signed with Mr Xie on 30 October 2018. Former Small Business Development PS, Lerata Pekane, signed on behalf of the ministry.
Among others, the five-year partnership would lead to the establishment of piggery and chicken projects as well as “create some job opportunities” for Basotho. Under the deal, a Chinese Business Community and a Basotho Business Group would respectively hold 70 percent and 30 percent shares in the projects.
It is not clear why the Chinese Business Community would own a bigger stake when the government was the sole provider of capital to the tune of M27 020 073.
The Small Business ministry now wants to cancel the contract which it says shows the “depth of the stealth and chicanery that was employed in order to siphon public funds to the tune of M27 020 073”.
Mr Phapano accuses Mr Xie of siphoning public funds under the guise of a purported private-public-partnership (PPP) supposedly to benefit locals when it was a “brazen act of defrauding the government of Lesotho and innocent taxpayers”.
Apart from nullifying the MOU, Mr Phapano also wants the court to annul an 11 June 2019 PPP agreement between Mr Pekane and a company known as Afri Komforter for the transfer of skills of operating the duvet machine to the micro, small and medium enterprises. He also wants the court to nullify a sublease agreement between Small Business and Allowance Pharmaceutical Cooperation of Lesotho which was operating from the ministry’s premises which are not stated in the court papers.
Afri Komforter, Allowance Pharmaceutical Corporation of Lesotho and Bafani Construction are first to third respondents respectively in the application.
He says the objective of the October 2018 MOU between his ministry and Mr Xie was vaguely described as a measure aimed at creating a business partnership between the Lesotho government and the Chinese community residing in Lesotho.
Mr Phapano says it remains unclear how the agreement was crafted and whether it was a product of a legislative or executive endorsement in Lesotho.
“It (agreement) bears the signature of two government functionaries being my predecessor in the office (Mr Pekane) and John – a person described as a special envoy,” Mr Phapano states in his court papers.
“In terms of the MOU, and perhaps strangely if not curiously, the Ministry of Small Business is to pledge a budget of taxpayers’ funds which are meant to be used for the procurement of machinery, implements and equipment to run the businesses arising from the envisaged partnership.
“Significantly and perhaps curiously, the agreement provides that the Chinese Business shall hold 70 percent of the capital shares while the Basotho Business Group shall hold 30 percent of the businesses. It clearly defeats logic how and why the state institution would bear a lion’s share of the liabilities but expected to acquire barely 30 percent shareholding under the agreement.
“More importantly, it is legally untenable for the two officials to burden state funds without any legal instrument and or endorsement of either parliament or executive branch of government. It is further important to note that, effectively, in terms of the memorandum, the government of Lesotho was meant to undertake a large-scale expenditure by allocating funds to a project that would be owned largely by the Chinese Community aligned to John for at least a period of five years.”
Mr Phapano alleges that the agreement between Messrs Pekane and Xie was not even registered with the deeds registrar “and there is no evidence of how my predecessor, Lerata Pekane arrived at a decision to bind the state without following the prescriptive requirements of law especially on issues of procurement”.
“I aver that this agreement was reached without following of any tender processes or any other procedures dictated by the Public Procurement Regulations of 2007.
“This agreement was designed and modelled to benefit some benefactors of John to the exclusion of other competitors who would have an interest in the same business enterprise. It was and is ingeniously modelled in such a manner that gives a semblance of legitimacy as a Public Private Partnership between the government ministry and a Chinese Community,” Mr Phapano said.
He says the government awarded the tender to supply duvet-inner line machine to Bafani Construction and further made a provision for the provision of the premises for Bafani to produce items which would be supplied to the government.
He says the rentals were set at a paltry amount of M6700 and argues that this defeats logic and boggles the mind as the premises cover approximately 11 437 square meters and market rates for leasing of a factory of such a magnitude are clearly higher than that.
Mr Phapano argues that the so-called Chinese community aligned to Mr Xie was clearly unduly benefitting from the state at the expense of taxpayers.
He accuses Afri Komforter of utilising the duvet machine to make profits for itself instead of transferring skills to locals.