‘Middlemen’ to feast on N$1,8bn railway tender

front Ministry of Works 2 sep 2016The Ministry of Works and Transport has been accused of putting itself at the mercy of unscrupulous local middlemen, by stating in a N$1,8 billion railway tender document that the contract will be awarded to a Namibian company, which in all likelihood would have to source the railway tracks from an overseas firm, at a highly inflated price.
The tender, which has effectively been split into three separate bids of N$600 million each, closed on 9 August.
It is for the supply of over 60,000 tons of rail, with 20,000 tons being for the Walvis Bay to Kranzberg line, 20,000 tons for the Kranzberg to Otjiwarongo line and 20,000 for the Otjiwarongo to Tsumeb line.
A well-placed government source, who refused to be named, said this week that the Works and Transport Ministry is basically inviting Namibian middlemen or tenderpreneurs, who will then source the products from Chinese or other producers.
“The price will therefore be inflated by these guys to cater for this,” the source said.
“The right way is to invite expression of interests directly from the manufacturers and purchase at cost price. To make it worse, an expert has said that it will take about 10 years to use this stockpile of equipment, which will be bought in one go.
“This comes at a time when government should prioritise expenditure and purchase what is needed for a specific phase and then repeat as you implement,” the source said.
He said restricting the tender to Namibian firms only, who cannot supply the railway tracks themselves, raises “serious suspicions”.
 “Another example may be if a new Boeing aircraft has to be purchased and we issue a tender for Namibian companies to supply the aircraft, while everyone knows that there is only one company producing the equipment. The right way is to simply invite the producer to express interest and supply the product directly.
“In the case of rail, simply request the same from the few producers of rail in the world and procure directly from them. Why involve a middleman?”
Concerns have also been raised about whether local companies have the capacity to provide the required 10 percent performance guarantee.
Political analyst and social commentator, Ndumba Kamwanyah, argued that there is no logic in what the Works and Transport Ministry is doing.
“That the ministry would put out a tender that stipulates that only Namibians should apply, while knowing that there is no company in Namibia that can manufacture or supply the needed goods or products, defeats my logic. 
“There is no other way to interpret this action other than saying that it is actually an indirect way of inviting middlemen to apply - a process that will inflate the cost.
“Why would the ministry want to inflate the cost through middlemen, especially in the presence of a clear directive from the president about the need for fiscal prudence? Is this an oversight on their part?” he asked.
“We can only speculate, but what you have here is (an example of) how a mafia-type system works.  They operate in such a way that they make use of loopholes in the law or policies to their own advantages.
“I would say that if you want to see how corrupt our tendering system in this country is, follow the middlemen, then you will understand how the process actually works and benefits certain individuals. Middlemen operate as a network to influence the process from within and outside, to their own advantage.
“I am not implying that this is the case in this situation, but merely stating that the tender system in this country is not working. This is because there are many loopholes that can be taken advantage of.
“We need to overhaul the current system and replace it with blind tendering mechanisms, where the people to decide on a tender are selected a day before they would seat to decide on a particular tender,” Kamwanyah said.
Works and Transport Permanent Secretary, Willem Goeieman, refused to be drawn into the matter.
“Yes, we know Namibia does not manufacture railway products, but the importation of these products will not inflate prices. I really do not want to talk about this tender. Let’s wait until the processing of the tender is completely finalised,” Goeieman said.
DTA Treasurer General, Nico Smit, said it is counterintuitive for the Ministry of Works and Transport (or any other ministry, public agency or public enterprise) to state that a certain tender is only open to Namibian companies, when it is common knowledge that no Namibian company provides that service or can meet the requirements alone. 
“It is these disingenuous artificial tender requirements which have created the ‘middleman’ phenomena, which has seen foreign companies (particularly Chinese) use Namibian middlemen to set up convenient shareholding mechanisms, which mean that for purposes of the tender the company qualifies as ‘Namibian-owned’, but the profit-sharing tells you that all profits are being shipped abroad,” Smit said.
He added that government should give special attention to the greedy, cash-hungry middlemen.
“Even if one were to assume that truly Namibian companies will succeed in their bids, the simple reality is that these Namibian companies will still have to source the goods from foreign manufacturers, and will thus still act as middlemen, who will have to add their own profit margin on top of the purchase price. Who bears the brunt of this cost? Government and indirectly the taxpayers and the Namibian people. 
“Government consistently does not get value for money in tender procurement, and partly this is due to the very design of the tender requirements, which make the need for greedy cash-hungry middlemen an indirect requirement, in order for a bid to be successful. This is an issue that needs serious and immediate attention.  “All this comes at a time when the Namibian government has been forced to cut down on expenditure in various critical fields, in order to align resources with identified priorities. Reducing spoilage and inflated pricing, when it comes to tender pricing, should also be a key priority, as this will go a long way towards freeing up scarce resources for urgent priorities like housing, drought, water shortages and others,” Smit added.