Bribe comes before a fall in Mauritius

2020-09-14

Hardly a week after Mauritius was placed on the European Union’s blacklist for money laundering and terrorism financing, another scandal came back to bite. On 8 June the African Development Bank (AfDB) announced that there was evidence that an energy project it had financed in Mauritius executed by Burmeister & Wain Scandinavian Contractor (BWSC) was marred by procurement corruption.

The AfDB also debarred the company for 21 months for engaging in ‘sanctionable practices’ which included ‘financially rewarding members of the Mauritian administration and others, through the intermediary of third parties to access confidential tender-related information’. In other words they bribed their way into obtaining insider information to give them advantage in the pre-tender procurement phase.

This episode not only highlights the vulnerability in the energy sector with regards to corruption, but also the most common type of procurement fraud. A 2019 Eastern and Southern Africa Anti-Money Laundering Group report identified the energy sector as one of the most vulnerable sectors to procurement corruption.

The incident also forms part of corruption scandals that have plagued the country for the past decade, thus negatively impacting on investor confidence and its image as a model of clean governance.

It all began in 2014 when the Central Electricity Board issued a procurement notice for its Saint Louis Power Station which would be funded by the AfDB. The successful bidder would be responsible for the design, supply, installation and commissioning of a diesel power plant of 60MW +/-10% capacity. The bid also noted that the unit size of each turbine should not exceed 15MW – a clause which would later become the cause of controversy. After the closing date of the bid, the Central Procurement Board received only one bid – from BWSC.

The corruption scandals that have plagued the country for the past decade negatively impact on investor confidence

A few weeks later, the bidding exercise was cancelled. The reason provided by the Bid Evaluation Committee was that BWSC’s bid was ‘found to be non‐responsive to the requirements laid down in the bidding documents’. In other words, the application did not comply with all the mandatory requirements and contained material deviations on the technical requirements of the tender. BWSC launched an appeal soon after.

The tender was re-advertised in 2015 which BWSC duly challenged with the Independent Review Panel. In its decision the panel ruled that the advertised tender did in fact offer an advantage to BWSC and set aside the latter’s application. Despite this setback, BWSC successfully outbid its rivals to win the contract with an estimated budget of US$129.7 million.

The company would complete the project in 19 months (originally planned for 18 months) in October 2017 with the total cost at around US$119.14m. A completion report by the African Development Bank in 2019 praised the BWSC’s performance as highly satisfactory in the company’s execution of the project.

However, after a tip-off from a whistleblower in 2018, BWSC conducted an investigation into the claim which concluded in 2019 that a ‘small group of employees, in connection with sale of projects in Africa, had acted against our company’s policies’. Furthermore, the investigation revealed that criminal actions including bribery had taken place. After dismissing five employees and reporting two others to law enforcement, the company approached the bank which resulted in the debarment of BWSC this year.

This has had a ripple effect on Mauritius. After the issue was raised in the Mauritian Parliament in June 2020, the management board of the Central Electricity Board stepped down and was replaced. At the upper end of the echelon, Prime Minister Pravind Jugnauth dismissed his deputy, Ivan Collendavelloo, who was also energy and public utilities minister, as Collendavelloo was named in the investigation.

A brief examination of BWSC past dealings would have revealed the company’s involvement in questionable deals worldwide

Public procurement corruption in the energy sector in Mauritius isn’t new. In almost a replica of the current scandal, in 1994 the then energy minister was forced to resign after irregularities in a tender process for the purchase of turbines for a power station were discovered.

Furthermore, a brief examination of BWSC past dealings would have revealed the company’s involvement in questionable deals around the world – from a reported bribery scandal in the Philippines to irregularities in contracts in Malta and scandals in the Bahamas.

Given the high risk of procurement corruption in such large contracts, it is concerning that these warning signs were ignored – deliberately or otherwise. This is often due to the fact that emphasis is placed more on corruption in the public sector than in the private sector.

Corruption by corporates in their interaction with the state has a negative impact on societies and economies such as eroding confidence in public institutions and prevents equal access to resources. The negative consequences include inflated prices on public and private contracts in turn affecting consumer goods prices. Other consequences include tax avoidance and illicit flows.

Public procurement corruption in the energy sector in Mauritius isn’t new

Moving forward, it is important that actors involved in public procurement be aware of these challenges and how to address them. For example, there is a need for greater transparency within the procurement process. The public should have access to the bidding documents as far as legally possible. In the present situation, were it not for unsuccessful bidders challenging the awarding of the contract to BWSC, the public would not have had access to some of the bidding information.

Controls and mechanisms in the procurement process should also be enhanced. In addition to providing training and capacity building to the public officials involved in the procurement process, civil society organisations could be called on to play a monitoring role in the process under the establishment of a civilian oversight committee mechanism. In turn, the procurement process could be monitored by other external actors through the review of the committee’s minutes and audits.

An additional step could be put in place regarding tender over a certain threshold amount. For example, an ad hoc committee comprising external actors could be established specifically for a particular tender.

There is little doubt that Mauritius’s image of clean governance has taken a knock due to corruption scandals that keep plaguing the country. Unless processes are put in place to address the risks of corruption and holding the culprits accountable, the country may find itself on a slippery slope down the corruption hill.

Richard Chelin, Researcher, ENACT, ISS Pretoria

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