How cars and smartphones ‘inflated’ Huawei’s NetOne Zimbabwe upgrade deal
How cars and smartphones ‘inflated’ Huawei’s NetOne Zimbabwe upgrade deal
Cars, smartphones and solar powered cell towers were among items that inflated an initial price tag of Chinese telecommunications equipment firm Huawei’s controversial network upgrade deal for Zimbabwean state-owned mobile operator NetOne.
This is according to documents a source has provided to ITWeb Africa regarding the network upgrade deal, which is facing a court case in Harare amid allegations that the over $200 million contract was awarded illegally.
Zimbabwean-born Tafadzwa Muguti, who lives in South Africa, has taken NetOne, Zimbabwe’s State Procurement Board (SPB), Huawei and the Anti-Corruption Commission of Zimbabwe to Harare’s administrative court over the awarding of the $200 million contract.
The businessman, who is the chief executive officer of investment group Africapaciti, wants to find out how Huawei won the NetOne contract, even though the Chinese company did not go through an official tender process.
Because NetOne is a state-owned entity, it is obliged to adhere to Zimbabwe’s procurement laws with regard to the awarding of contracts, Muguti has argued.
Muguti also alleges the contract was awarded to Huawei despite Zimbabwe’s SPB having expressed concerns over an inflated price for the project. The SPB is the first respondent in Muguti’s court case.
And documents detailing the record of proceedings regarding the awarding of the deal, which are in the hands of ITWeb Africa, illustrate the SPB’s initial concerns about the Huawei deal.
In a July 2013 letter from NetOne to the SPB, in which the mobile operator addresses concerns about the Huawei deal to the SPB, an amount of $298.6 million is quoted for the upgrade, which hinged on a loan from China’s Exim Bank.
That figure was then dropped to $251 million, according to the documents, and ultimately -- as the documents later reveal -- this figure was cut to $218 million.
NetOne officials, in the document, argued that only Huawei could carry out the upgrade deal as the mobile network’s infrastructure is from the Chinese telecommunications firm.
But the State Procurement Board then raised the following issues, which are summarised below:
- “Members noted with concern that the Secretariat had failed to properly analyse the matter for logical presentation to the board.”
- “The presentation was jumbled up and comprised of disparate requirements including Upgrades, New Equipment and Construction of a Building.”
- “The matter was also hastily presented as an urgent item without adequate background and factual information.”
- “Background was inadequate and lazy.”
- “There was no clear justification why the current requirements should not go to tender, in light of the unclear relationships between the projects.”
The documents reveal that on 27 June 2013, the State Procurement Board deferred the pending of the contract to await further input.
The board also raised concerns about “the procurement of smartphones and tablets for resale to the public, which are not part of the network upgrade.”
Furthermore, the documents also highlight concerns that Huawei had quoted inflated prices for equipment that may not help with a widespread upgrade to next generation LTE.
Items that the deal was initially planned to include were as follows, according to the record of proceedings:
- Purchase of 1336 2.75G base stations
- Purchase of 600 3G base stations
- Purchase of 400 4G base station
- Supply of 500 diesel generators to serve as stand-by power at base station sites
NetOne in the documentation does argue that Huawei has quoted it at a lower price for base stations at $170,000 rather than the market price of $180,000.
In the documents, the Zimbabwe’s ministry for transport, communications and infrastructure development, did write to the SPB calling for the upgrade to be given to Huawei.
The ministry argued the deal could help NetOne boost its services, subscriber base and contribute to Zimbabwe’s ICT development.
But a letter from the Transport department then outlines how the project had been scaled down.
“Some of the key components that have either been scaled down or removed as a result, include Base station Towers that have been reduced by half, removal of four wheel drive vehicles for project implementation and maintenance, solar powered Base Stations that were meant to serve as coverage gap fillers, the online charge system, where NetOne will later have to expand the existing system to meet the increased subscribers to be connected,” says the letter.
The response goes on to allay fears regarding the number of 4G stations, as the Transport department said that these would be deployed in highly dense urban areas to cater for demand.
The Huawei-NetOne contract, though, was publicly announced in July while deliberations continued in the background.
And in that same month, concerns about the deal were communicated from the State Procurement Board in a record of proceedings.
Among these included:
- “Members noted that there were allegations of overpricing some aspects of the project components.”
- “Members noted with concern that according to the minute from the Secretary for Transport, Communications and Infrastructure Development to Treasury dated June 19, 2013, NetOne and Huawei Technologies of China had already signed a contract for the Works without authority.”
A board resolution on the 18th of July then further deferred the matter.
Further reading into the documents also reveals that the Post & Telecommunications Regulatory Authority of Zimbabwe but that concerns existed that the watchdog had not consulted the relevant industry experts.
The contract price in the documents goes down then to $218 million, while reports in July talk of a deal that was just over $200 million
Court case postponed
Subsequently, on 19 November, Tafadzwa Muguti’s court case against the relevant parties was postponed.
However, in court documents, the SPB has outline that it did finally approve the Huawei deal, despite its concerns outlined in the record of proceedings.
The board then further highlights how it consulted advice from three government ministries and telecommunication and IT engineers.
The board goes on to say in court papers that the urgency of the upgrade drove its decision.
As a result, the board asked that the court reject Muguti’s appeal as “frivolous and vexatious.”
The board also then asks that the court finds that its decision was “prudent and feasible.”
Finally, the board asks that the court throws out the appeal with costs for a lack of merit.
Chinese telecommunications equipment firm, Huawei, meanwhile has also denied alleged corruption regarding the deal.
“For the project with NetOne, we strictly abide by all procurement laws and regulations in Zimbabwe, our target is to help Zimbabwe people enjoy their life through communication at affordable price,” Jacky Zhang, who works with Huawei Technologies Zambia but manages communications for Zimbabwe, told ITWeb Africa.
“The allegation for over-inflated is not base on the truth,” Zhang told ITWeb Africa.
ITWeb Africa also asked NetOne for comment, but the company has not responded to emails.
To read about Muguti’s reasons, click on the related article links to the right and further above.