Corruption leaks into the Lesotho Highlands Project

By Helgard Muller

Water experts warn that water shortages are imminent because this project has already been delayed for five years, with delivery of water from Phase II now scheduled only for the end of 2024.

Recent articles in the media have mentioned another threat: allegations of corruption in awarding contracts for Lesotho Highlands Water Project Phase 2 (LHWP II). See the article entitled “Nomvula Mokonyane’s Watergate”that appeared in the City Press on 10 July 2016. This prompted me to Google details of the corruption trials following Phase 1 of the LHWP. It was an interesting exercise.

Court cases following corruption in LHWP I drew widespread international attention for involving government officials receiving the bribes and private sector companies providing the bribing funds. Private sector companies included large engineering consultancies such as Acres (Canada) and Lahmeyer (Germany), as well as the well-known international construction company of Spie Batignolles (France) and an Italian construction firm. To hide the transfer of illegal funds to officials, individuals from Lesotho and South Africa played a key role as intermediaries.

The LHWP I corruption trials were the subject of a paper delivered by researchers Anton Earle and Tony Turton at the Stockholm Water Week in 2005. Notes from their presentation revealed that the chief executive of the Lesotho Highlands Development Authority (LHDA), Masupha Sole, was the key accused in the corruption trials. Sole served in a position of great power and responsibility. Questions about his handling of staff appointments and finances led to an audit of LHDA affairs.

These investigations resulted in Sole’s dismissal and it became evident that he incurred substantial additional costs on the project through improperly awarding two specific contracts. During the civil action trial, Sole’s bank records were exposed, showing movement of substantial amounts of money. His bank manager testified that he had an undeclared bank account in South Africa. This account reflected large, regular payments from a Swiss bank account also believed to be Sole’s.

With the assistance of the Swiss authorities, the Lesotho prosecution team gained access to the Swiss banking accounts early in 1999. This was a breakthrough in the case and in October 1999, the court ruled that Sole should pay damages of more than R8-million to the LHDA. This ruling led him to being criminally tried for the common law offence of bribery. At the criminal trials in July 1999, several charges of bribery and fraud were brought against 19 accused individuals and companies — the latter group included some international engineering firms. During the trials it became evident that payments were typically made from a company to a representative agent (intermediary) and then to Sole. PwC conducted a forensic audit of the accused’s accounts, which showed movements of funds from the companies to the agents, promptly followed by another transfer, this time to Sole’s accounts.

Sole was sentenced to 18 years in prison that was later, after appeal, reduced to 15 years. Acres International Limited (Canada) was found guilty of bribing a public official and subsequently fined close to R15-million. This was the first multinational company to be successfully tried outside of its home country for bribery. Lahmeyer consultants were also sentenced and fined. Following the successful prosecution of Acres, the company was debarred in July 2004 for a period of three years from tendering for World Bank contracts. The LHDA has demanded that the bribes be paid back into the project funds.

The valuable lessons learned from these trials led to amendments of the original treaty signed in 1986 between Lesotho and South Africa for the Lesotho Highlands Water Project. Furthermore, an anti-corruption policy had to be adopted by the LHDA. Research into LHWP I concluded that much can be achieved when the political will to fight corruption is in place.

Only time will tell if those involved in the implementation of LHWP II will have the same guts to root out fraud.

Reference: “Corruption on the Lesotho Highlands Water Project – a case study” by Anton Earle and Tony Turton, researchers at the African Water Issues Research Unit at the University of Pretoria.

 

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