MASERU — A vehicle hire company with strong links to Public Works Principal Secretary Lebohang Phooko and his wealthy relative, These Phooko, is accused of ripping off millions of maloti from the government.
A study conducted by the World Bank’s International Finance Corporation consultant Mahtab Zolghadri last June revealed that Avis Fleet Services has been cheating and running rings around the government ever since it won a tender to manage the government’s vehicle fleet in 2007.
Avis Fleet Services is a subsidiary of Seahlolo Transport Logistics (Pty) Ltd, in which These Phooko owns 334 shares while Lebohang Phooko and little-known Lerato Litabe have 333 shares each.
As the principal secretary of the public service ministry, Lebohang Phooko is in charge of transport, construction of government-owned buildings and all civil works.
These Phooko, owner of These Construction, is known for winning several road and government building construction tenders.
Amongst the three shareholders, These Phooko is the only director of Seahlolo.
At the time the agreement to manage the government fleet was signed, the shareholders’ other relative Motloheloa Phooko, who is currently the public service minister, was a minister in the Prime Minister’s Office.
Pakalitha Mosisili, the then prime minister, is related to the Phookos.
The agreement to manage the government fleet was signed with Seahlolo in October 2007 after a tender process that was managed by the government’s transaction adviser PriceWaterhouseCoopers.
After the deal Seahlolo managed the government vehicles under an Avis franchise.
Zolghadri’s report says the agreement was riddled with legal loopholes, practical weaknesses and implementation challenges that were not favourable to the government.
“The detailed review of the existing contract showed poor performance on the part of PriceWaterhouseCoopers in establishing the most effective and efficient fleet management contract for the GoL (Government of Lesotho),” reads Zolghadri’s report.
“The contract at first glance looks like it has the required elements that are beneficial to the government,” she said.
“However, a closer review shows that for implementation purposes, the contract terms benefiting the GoL have been nullified with other corresponding terms that favour the service provider (Avis) at high costs to GoL.”
The report says with the money the government spends on Avis it can buy 900 to 1 000 vehicles every year.
Zolghadri found that the contract furnishes a multi-layered and highly complex pricing structure with multifaceted price escalations every three months.
The monthly costs include fees for each full maintenance leased and managed maintenance vehicles, which are 2 658 in all.
Zolghadri says the analysis of the “detailed GoL Customer Report” of May 15 last year submitted by Avis shows that “the accuracy of the data is at best questionable and there were a large number of duplicate and triple entries for the same vehicles with monthly charges for each line”.
“Another serious difference was in the actual number of vehicles under lease,” says the report.
Zolghadri says only 289 vehicles were under lease in June last year when she released the report and the rest of the vehicles, 1 269, were owned by the government.
She says Avis has reported that from November 2007 to April 2012 it increased the full maintenance leased vehicles from 389 to 990 and reduced monthly billing from M20.3 million in 2008 to M12.5 million in 2012.
“These numbers are contrary to the detailed data submitted earlier by Avis,” she says.
She says instead the monthly costs to the government increased by 176 percent from January 2008 to February 2012.
The high cost to the government also include the actual maintenance costs per managed maintenance vehicle, monthly fees for each accessory used in the vehicles, fleet management function, fleet management information, a further monthly fee for providing maintenance information per each car.
Zolghadri also found that the full maintenance leased vehicles are offered practically devoid of any accessories and the government’s requirements are not taken into account when Avis orders the requested vehicles.
“As an example, in cases where GoL vehicles are required to have dark tinted windows for protection, the tinted windows are considered as accessories and each vehicle is charged an additional fee for the tinted windows,” she says.
“Even items such as rubber mats and seat covers are considered accessories and have monthly rental fees for each vehicle.”
The consultant also found that Avis ignored vehicle manufacturers’ warrantees.
The vehicle warrantees usually run for five years or 96 000 kilometres during which period all vehicle service costs are covered under the manufacturers’ warrantees.
“Yet, this important benefit is not addressed or accounted for in the contract and maintenance charges start immediately on each new vehicle that is included in the contract. This is a serious loss of benefits to the GoL with high costs.”
She also revealed that the contract is silent on Avis’ personnel and their required expertise.
“Lack of this requirement resulted in Avis assigning a service manager with military background for management of the GoL fleet,” although that officer was changed in September 2011.
Avis further reduced the number of mechanical experts in the workshops from over 25 in 2007 to less than 10 in 2012.
She also found that the contract provides for Avis to manage its own contract and it has therefore given it “a free hand to do as it pleases with the contract and even misinform” government ministries on its requirements.
“Consequently, Avis has ignored all key service requirements under the contract and their actions have left the GoL with soaring transport costs for highly poor quality services from Avis.”
All government ministries complained of very high monthly costs for their transport services, Zalghadri has found.
“In some cases, high monthly payments resulted in shortage of the ministry’s transport budget with the impact that the officers were left without transport for long periods of time.”
Avis, she said, is obliged to pay penalties if it delays to provide replacement of vehicles when their maintenance or repair services exceed the stipulated time in the contract.
However, in almost all cases Avis refused to provide any replacement vehicles and has required government to either pay for short-term rental or stay without transport.
This has negatively impacted the police, ministries of health, agriculture, local government and other regional based ministries’ operations, Zalghadri said.
This has had a number of negative impacts because where a ministry is left with no transport Avis has effectively transferred all of its penalty costs for delayed and lack of services to the government.
She said Avis “has charged the government double payments through continued monthly charges for the in-service vehicles and new charges for the lease of the short-term hire vehicles”.
The report says government departments were also forced to pay “erroneous bills/overcharges by Avis with the promise that the errors would be fixed in the next monthly cycle”.
But when the departments followed up to recover the extra monies they would have paid their queries were “consistently ignored by Avis”.
“In cases where the users refused to pay the over-charges, Avis have used its higher management contacts in the government to force payment directly from the Treasury.”
Zalghadri advised the government not to renew Avis’s contract, which expired in October last year.
However, the government extended the contract by a further one year.
Government Secretary Motlatsi Ramafole said the decision to extend the contract was taken after consideration that the government still had to calculate how much it would claim from Avis.
“We were supposed to have started the process in September last year but we realised that there were some important things we would never achieve and so it was resolved that the contract should be extended,” Ramafole said.
Avis CEO, Clive Else, said he could not comment because the consultant did not give the company enough time to tell its side of the story.
“We were not properly consulted. The consultant gave us only half an hour,” Else said.
Zalghadri, on the other hand, said: “The Avis team while defiant at times, did not refute any of the review’s key findings and took note of the list as presented to them.”
“Avis, however, requested that GoL consider giving them a chance to fix their errors through a one year extension of the contract.”