CEO leaves RCC bleeding

17 October 2014 Author  

Front Haihambo 17 OctOUTGOING Roads Contractors Company (RCC) CEO is leaving the roads parastatal in financial turmoil after the company was slapped with a US$10 million lawsuit following a series of bad investments by the company’s Zambian subsidiary.

RCC recently announced that Haihambo, who has held the position of CEO since March 2010, had resigned from the company and will officially step down in February next year.

Haihambo was previously head of the Zambian unit before his elevation to the CEO role of the parent company.

Bad investment decisions under Haihambo’s leadership has now seen the RCC’s subsidiary in neighbouring Zambia being hit by a US$10 million lawsuit in a case that has dragged on since 2007.

Officials at RCC remained tight-lipped this week over the lawsuit, but should the court find RCC liable, Haihambo will likely escape any responsibility in the deals he allegedly entered the company into – leaving his successor and inevitably Government to clean up the financial mess.

In 2005, the road construction parastatal appointed Haihambo GM of RCC International – a division of RCC under which the Zambia project fell.

The division was put in place to establish RCC’s international operations. Haihambo was later appointed MD of RCC Zambia in 2006.

According to inside sources close to the matter, Haihambo, through RCC, made a verbal agreement with Zambian consultancy Abantu Consulting Limited around late 2005 and early 2006.

According to the agreement, the consultancy would secure large projects in Zambia for RCC to develop and construct.

RCC later incorporated RCC Zambia as a subsidiary and Abantu Consulting Limited was contracted to manage RCC Zambia’s establishment.

The two parties remained on good terms during 2006 before relations soured after the consultancy secured a deal for RCC to construct the Eagle Park Development.

According to the deal, RCC would first build a show house as a demonstration unit and then later commence with the construction of 2,000 units under the proposed project development.

However, sources claim the deal fell through after RCC did a “sub-standard” job.

Despite that, Abantu Consultancy still billed RCC US$42,440 for consulting services rendered, which the latter allegedly did not honour – presumably because of its frustration with the loss of the tender.

“Haihambo refused to pay, saying that RCC did not owe the consultancy, and it did not pay out commissions,” the source said.

While this storm was brewing, RCC won a massive tender to build the so-called Maluba Precinct Development, at a cost of US$175 million.

However, political issues surrounding the deal caused the Zambian Government to withdraw the tender from RCC based on it “not being reputable”, and subsequently gave the development to another company in Zambia, according to sources.

Insiders claim that the Zambian media documented these high-level accusations against RCC, but it proved impossible to establish through internet records before the time of going to print.

Abantu Consulting had apparently secured the Maluba Precinct deal in times when the relationship between the two parties was more cordial.

As agreed between the two parties, RCC then had to pay the consultancy 5 percent of the project value, as confirmed in a final invoice made out to the company in 2006.

As a result, Abantu Consulting decided to sue the Namibian state-owned enterprise for over N$100 million in unpaid consulting fees, including 17.5 percent VAT.

The consultancy claims that RCC owes it fees for the services rendered, despite the actual project outcome.

The sources expect the case, which the Zambian High Court in Lusaka heard most recently on August 11 to end in 2015.

Other sources with key information regarding the matter say that RCC, which has changed its defence three times, has denied that it had any relationship with the consultancy.

Documents and invoices in the possession of the Windhoek Observer, however, show that RCC made several payments to Abantu before relations soured in 2006 – an indication that some form of agreement existed between the two companies.

RCC made at least three payments of US$5,724, US$7,592 and US$10,045 to the consultancy.

Approached for comment, a consultant for Abantu Consulting Nakubandwa Chivuno could only confirm that the case was still ongoing and referred this reporter to the company’s lawyer in Zambia.

Speaking from Lusaka, Marcus Achiume, the lawyer representing the consultancy, confirmed that the claim arose out of an agreement negotiated by Chivuno and Haihambo whereby the former would source projects in Zambia for the latter.

“Abantu did work on several projects and rendered invoices to the [value of US$10,324,414] but [RCC] refused to pay hence the court action. The case went to mediation, but this effort failed.

“The case is still to be concluded in the Zambian High Court. Should Abantu be successful there may be possibilities of seeking relief from the parent company in Namibia,” Achiume stated.

Sources claimed that when the Ministry of Works and Transport was approached on the matter, Haihambo downplayed the issue and deemed it not to be of major concern to the shareholder.

Ministry of Works PS Peter Mwatile had no comment on the matter, saying that RCC was a company on its own while the RCC declined to comment on the allegations, saying the matter was sub judice.

RCC opened its Zambian branch in 2006 with a view to expand road maintenance, rehabilitation and construction projects into SADC.

The company closed the branch in 2009 but continued to pay a few workers who were looking after its assets.

RCC stated in media reports that the subsidiary closed for business reasons, but that it did not regret setting up operations in Zambia.

RCC reportedly received N$18 million from Cabinet three years ago to settle its debts, but the company declined to give comment to local media about how it had disbursed taxpayers’ money.

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The Windhoek Observer is an English-language weekly newspaper, published in Namibia by Paragon Investment Holding. It is the country's oldest and largest circulating weekly.

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