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2 Chinese firms in trouble

TWO Chinese companies that were part of a joint venture that won the M379 million contract for the upgrading of Mpilo Boulevard allegedly used a forged bank document to receive an advance payment from the Maseru City Council (MCC).

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The fake advance payment guarantee was allegedly submitted to the MCC by Shanxi Construction Investment Group Co (SCIG) and the Shanxi Mechanization Construction Group Co (SMCG) which won the contract in a joint venture with local partner Tim Plant Hire (TIM). The SCIG and SMCG were responsible for providing the advance payment guarantee as lead partners in the joint venture.

The SCIG-SMCG-TIM was then paid an advance of M14 million after they had misrepresented to the MCC that they had secured an advance payment guarantee from a local bank.

A demand guarantee is a commitment issued by a bank to pay a specified amount to one party of a contract on-demand as protection against the risk of the other party’s non-performance.
The M14 million, paid on the basis of that fake guarantee, was for the joint venture to start work. It was the first tranche of the advance payments the joint venture was supposed to receive from the MCC.

The bogus guarantee, seen by thepost, has the bank’s letterhead, a stamp and alleged signatures of two senior bank officials.
Even after receiving the M14 million the joint venture did not do much work on the project that involved transforming Mpilo Boulevard with new road links, vehicle flyover bridges, underpasses, exclusive pedestrian bridges and signalisation.

SCIG and SMCG also refused to pay their local partner, Tim Plant Hire, after it had provided its construction equipment, brought workers and done the initial work.
Instead, the Chinese companies demanded that the MCC pay a further M30 million as part of the advance payment.

Confidential documents seen by thepost reveal how the companies aggressively pushed for the M30 million and threatened to suspend operations if it was not paid.
The MCC later discovered that the initial advance payment guarantee had been forged and demanded a real one before further payments.

Minutes of a meeting held in November last year reveal how officials from SCIG and SMCG eventually admitted that the initial advance payment guarantee submitted to the MCC was fake.

They made the admission after being pressed for answers during the meeting.
The MCC asked when the joint venture would provide the guarantee.
The joint venture said it would submit on January 15 this year.

The MCC then reminded the SCIG and SMCG that they had made similar promises, in previous meetings, to provide the guarantee within two weeks but never did.
The council said it had given the companies a further two weeks but they still failed to deliver.
The MCC then pressed for a direct answer on the authenticity of the initial advance payment guarantee.

“The Client (MCC) wanted to know if the original swift message for the advance payment was approved by the board,” the minutes say. The “board” refers to the board of the Chinese company in China.

“The Contractor responded that it was not approved.”

The minutes show that the MCC then reiterated the question and the joint venture confirmed that the board had not approved the guarantee.
Minutes of other meetings show that the Chinese companies were pushing for the M30 million even when their guarantee was already being questioned.

In all those meetings the MCC would resist the pressure, insisting that no further payment could be released until the genuine guarantee was submitted.
The Ministry of Finance however later agreed in principle to pay the M30 million on condition that the joint venture submits written confirmation that the guarantee was enforceable.

The companies did not write the letter until the MCC terminated the contract on January 30 this year, accusing the SCIG-SMCG-TIM of failing to produce the guarantee despite “numerous requests”.

The notice of termination written by the Town Clerk, Selete Molete, ordered the joint venture to “cease all works, and vacate the site with immediate effect”.
Molete says the joint venture “failed to avail adequate plant on-site” despite being paid an advance of M14 million to mobilize plant resources. The MCC is now bracing for a legal battle to recover the M14 million.

Staff Reporter

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