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Mauritius: Fading Image of Clean Governance Hurts Investment Prospects

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The island nation must pay better attention to the warning signs to avoid the slippery slope of corruption.

Hardly a week after Mauritius was placed on the European Union’s potential blacklist for money laundering and terrorism financing, another scandal came back to bite. On 8 June the African Development Bank (AfDB) announced that there was evidence that an energy project it had financed in Mauritius executed by Burmeister & Wain Scandinavian Contractor (BWSC) was marred by procurement corruption.

A 2019 Eastern and Southern Africa Anti-Money Laundering Group report identified the energy sector as one of the most vulnerable to procurement corruption, and the Mauritius episode backs this finding. The incident is one of several corruption scandals that have arisen in the past decade, negatively impacting on investor confidence and Mauritius’ image as a model of clean governance.

It all started in 2014 when the Central Electricity Board issued a procurement notice for its Saint Louis Power Station which would be funded by the AfDB. The successful bidder was to design, supply, install and commission a diesel power plant of 60MW +/-10% capacity.

The bid also noted that the unit size of each turbine should not exceed 15MW – a clause which later became the cause of controversy. After the bid closed, the Central Procurement Board received only one submission – from BWSC.

A 2019 report identifies the energy sector as one of the most vulnerable to procurement corruption

A few weeks later, the bidding exercise was cancelled. The Bid Evaluation Committee said BWSC’s proposal was ‘found to be non‐responsive to the requirements laid down in the bidding documents.’ In other words, the application contained material deviations on the technical specifications of the tender. BWSC launched an appeal soon after.

The bid was re-advertised in 2015 which BWSC duly challenged with the Independent Review Panel. The panel ruled that the tender in fact offered an advantage to BWSC and set aside the company’s application. Despite this setback, BWSC went on to win the contract with an estimated budget of US$129.7 million.

The company completed the project in October 2017 taking 19 months to do so (the scheduled timeframe was 18 months), at a total cost of around US$119.14 million. A completion report by the AfDB in 2019 described the BWSC’s execution of the project as highly satisfactory.

However, after a tip-off in 2018 followed by its own investigation, BWSC concluded in 2019 that a ‘small group of employees, in connection with sale of projects in Africa, had acted against our company’s policies.’ The investigation revealed that criminal actions including bribery had taken place. After dismissing five employees and reporting two others to police, the company approached the AfDB and was subsequently debarred in 2020.

Corruption scandals undermine investor confidence and Mauritius’ image as a model of clean governance

This has had a ripple effect on Mauritius. After the issue was raised in Parliament in June 2020, the Central Electricity Board’s management board stepped down and was replaced. Higher up in government, Prime Minister Pravind Jugnauth dismissed his deputy, Ivan Collendavelloo, who was also energy and public utilities minister. Collendavelloo had been named in the investigation.

Public procurement corruption in the energy sector in Mauritius isn’t new. In almost a replica of this year’s scandal, in 1994 the then energy minister was forced to resign after tender irregularities surrounding the purchase of turbines for a power station were discovered.

A brief examination of BWSC’s past projects would have revealed the company’s involvement in questionable deals around the world. These include allegations of bribery in the Philippines, irregularities in contracts in Malta and scandals in the Bahamas.

Given the high risk of procurement corruption in such large contracts, it is concerning that the warning signs were ignored – deliberately or otherwise. Perhaps this was because the anti-corruption focus tends to be more on the public sector than the private sector.

Given the high risk of corruption in large procurement contracts, why were the warning signs ignored?

Corruption by corporates in their interaction with the state erodes confidence in public institutions and prevents equal access to resources. It leads to inflated prices on public and private contracts which in turn raise the cost to the consumer. Other consequences are tax avoidance and illicit financial flows out of the country.

Moving forward, those responsible for public procurement must be aware of these challenges and how to address them. For example, greater transparency in the procurement process is needed. The public should have access to the bidding documents as far as legally possible. In the present situation, were it not for unsuccessful bidders challenging the awarding of the contract to BWSC, the public would not have had access to some of the bidding information.

Controls in the procurement process should also be enhanced. Public officials involved in tenders should receive training and capacity support. Civil society organisations could play a monitoring role via a civilian oversight committee. For tenders over a certain threshold, an ad hoc committee of external actors could provide additional oversight.

There is little doubt that Mauritius’s image of clean governance has taken a knock due to these and other corruption scandals. The risks of graft must be reduced and culprits held accountable if the country is to avoid the slippery slope down the corruption hill.

Richard Chelin, Researcher, ENACT organised crime project, ISS Pretoria

This article was first published by the ENACT project. ENACT is funded by the European Union (EU). The contents of this article are the sole responsibility of the author and can under no circumstances be regarded as reflecting the position of the EU.

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