By Patience Nyangove
THE cost of constructing the national oil storage, oil tanker jetty, on-shore site and pipeline facilities at Walvis Bay has ballooned to N$4.5 billion from the initial N$920 million following the National Energy Fund (NEF) request through the Ministry of Mines and Energy in June for a green light to borrow an additional N$500 million, Confidente can reveal.
The multi-billion dollar contract was awarded to China-RCC-Baby face joint venture.
Foreign currency fluctuations have been cited as the reason behind the increase in costs hence the request for additional funds.
The development comes amid an economic crisis triggered by volatile economic conditions and a severe drought that has seen Treasury tighten its spending habits, by cutting the national budget as well as halting recruitment in the civil service this year.
The national oil storage, oil tanker jetty, on-shore site and pipeline project was commissioned during former President Hifikepunye Pohamba’s era when Isak Katali was the Minister of Mines and Energy.
According to documents at hand on June 29 2016, current portfolio Minister, Obeth Kandjoze wrote to Cabinet seeking its approval to sanction the borrowing of an additional N$500 million for the construction of the oil storage project whose cost continues to rise.
“To seek Cabinet approval to: Increase the strategic oil storage facility levy from 40c/I to 60C/I on petrol and diesel to enable National Energy Fund to repay the loans used to construct the project. Allow the fund to borrow additional N$500 million from N$4 billion to N$4.5 billion to fund the construction of the project…An additional N$500 million is required to cover the exchange rate fluctuation. This will increase the project total funding from N$4 billion to N$4.5 billion.
“However, the fund is currently experiencing USD currency exposure in the project emanating from the agreement signed between CRB-Joint Venture and the Ministry. The agreement stipulates that 80 percent of the project total cost will be paid in USD and the remaining 20 percent in local currency. During the tender award the USD exchange rate was at N$10.17/ US$,” the Cabinet submission reads in part.
Kandjoze explains in the letter that in January last year a ministerial committee on Strategic Projects through the Ministry of Finance (MoF) engaged the African Development Bank (AfDB) and the Development Bank of Namibia (DBN) to finance the national oil storage, oil pipeline and petroleum jetty project at a cost of N$4 billion.
He added that the fund through the finance ministry had tasked DBN to provide a 12-month bridging loan of N$670 million that was sourced from Standard Bank Namibia while waiting for a loan from AfDB.
“However, AfDB only approved an amount of N$2.5 billion to finance the project. NEF signed a mandate letter to DBN to borrow N$2.5 billion from AfDB while the MoF will provide a back to back guarantee for the loan. Negotiations for the loan agreement were concluded in February 2016 in order to provide funds to NEF to honour invoices from the contractor.
“DBN advised NEF to increase the levy from 40 cents per litre to 60 cents per litre on petrol and diesel in order to meet borrowing obligations i.e. interest, exchange rate exposure and principal payment.”
Kandjoze in the submission also reveals that nearly N$3 billion needed for the project remains outstanding and government expects to get the money from AfDB and other lenders.
“The total project balance remaining amounts to N$2.891.799.600.23. This amount is expected to be paid with loans from AfDB and other lenders. These loans are expected to be repaid with income collected from the NEF strategic oil storage levy,” Kandjoze wrote.
The Permanent Secretary of the National Planning Commission, Leevi Hungamo when approached to comment on the matter referred Confidente to his counterpart Erica Shafudah at the finance ministry.
“I am not the one to answer them. All the information is with the Tender Board.
I am not the one who signed the contract,” he said.
Former Permanent Secretary in the Ministry of Mines, Kahijoro Kahuure when contacted for comment promised to get back to Confidente but never did so. Subsequent calls to his mobile went unanswered or were being cut off.
Confidente had also emailed him questions a week before going to print which were not responded to.