Even though Lutombi downplayed the crisis by claiming that the state roads agency has secured funding and will start paying as from today, his letter paints a picture of a desperate man.
In the wake of Lutombi’s letter, finance minister Calle Schlettwein confirmed that he will hold a crisis meeting today with top government officials to discuss whether the state will pay N$500 million owed to the road construction companies.
Lutombi told Goeiemann that the Roads Authority currently faces a serious problem because of the government’s failure to pay road contractors and consultants.
“This dire state of affairs is posting a huge financial and reputational risk to the government and the Roads Authority. All but one Roads Authority contractor have suspended works primarily due to the lack of funds to buy required supplies and construction material needed for the ongoing construction works,” Lutombi explained.
He said the challenge of the lack of funds to pay outstanding invoices could be attributed to the reduced Roads Authority budget.
The Roads Authority initially proposed a N$2,5 billion budget for the 2018/19 financial year to fund the ongoing roads projects.
“However, only an amount of N$1,2 million was made available. This resulted in a shortfall/underfunding of N$1,3 billion,” Lutombi added.
He said to make matters worse, the national budget review in October last year reduced the transport sector’s budget by N$344 million, which added pressure on the availability of funds.
“The dire consequences of the continued non-payment of invoices means that both the government and the Roads Authority are in default of contractual obligations,” he stated.
The chief executive said unless all outstanding invoices are fully paid, the government and the Roads Authority are obliged to pay for idle equipment and site fees for no work done until work restarts.
“The current daily compounded losses due to the suspension of work as a result of invoices will translate into millions of dollars, estimated to be ranging between N$15 million and N$30 million per month per project, depending on the size,” he continued.
A senior official involved in the payments talks said some companies had not been paid since September or October last year, forcing some of them to stop work.
The Roads Authority has been knocking on Schlettwein’s door, asking for N$500 million to pay for several roads projects.
A person familiar with this matter said the Roads Authority wanted Schlettwein to approve a plan to borrow N$500 million from Standard Bank to fund the projects.
The loan was supposed to be taken out by the state-owned Road Fund Administration, but the finance minister blocked it, saying there was need for more consultations.
“The matter was brought to me, and I have referred it back for further consultations,” Schlettwein told The Namibian on Wednesday.
“To commit to significant payments that are not funded under the budget needs careful and thorough investigations. That is what I have instructed involved stakeholders to do and come back with comprehensive information,” he said.
Schlettwein said a solution could be found today when he meets officials and parastatal bosses to discuss the outstanding payments.
Today’s meeting follows another meeting held at State House, where road parastatal chiefs tried to convince the government’s top leadership to pay the companies.
According to Schlettwein, “the minister of finance cannot just be confronted with an invoice from a parastatal [Roads Authority]. Some procedures need to be followed,” he stressed.
Transport ministry officials believe that the road projects could cost as high as N$800 million by the end of next month if the outstanding amounts are not paid since the companies are charging interest on unpaid amounts and standing fees.
“We must avoid unnecessary penalties, but I cannot just commit to paying things that are not budgeted for,” Schlettwein said.
Sources said finance officials fumed about the N$500 million loan proposal, to the extent that one of them allegedly tossed away the documents outlining this plan and shouted: “We did not create this mess” during a recent meeting.
Schlettwein has for years criticised the Roads Authority for committing the government to contracts of more than N$2 billion without following procedures and claiming that they were made a priority by “the highest offices”.
Lutombi told The Namibian on Tuesday that they are consulting the government to fast-track the payments.
“The RA is not at liberty to reveal the amount of money owed to contractors for work done on the road projects. However, we can confirm that we do have outstanding invoices on some of our projects,” he said.
Lutombi added that the parastatal engaged affected consultants and contractors about the lack of payments.
“I can confirm that we have managed to settle some outstanding invoices on our government-funded capital projects in the past few weeks, for example the Windhoek-Hosea Kutako International Airport road upgrade. Works on this project are progressing well,” he said.
Confidénte reported yesterday that the government owes five companies around N$98 million.
This includes the N$25 million owed to the joint venture between Italian civil construction CMC and Otesa for the Windhoek-Okahandja two-way road, and the N$22 million owed to Unik/Thohi for the Swakopmund-Walvis Bay dual carriageway.
According to the newspaper, Nexus is owed N$28 million for the Isize-Luhonono road in the Zambezi region.
Chinese firm Zhong Mei is allegedly owed N$18,8 million for the ongoing work on the Swakopmund-Henties Bay road.