State House cancels President Hotel management deal in dubious circumstances

Malawi President Joyce Banda has once again flexed her muscles on public procurement almost two months after another intervention concerning emergency buying of cholera, malaria and diabetes drugs.

This time, she has forced the Ministry of Tourism to cancel a deal with Peermont Hotels, which the procurement system approved as the preferred bidder to operate Umodzi Park, a government owned multi-billion kwacha complex in Lilongwe comprising the Bingu wa Mutharika Conference Centre, the President Hotel and the Presidential Village.

The President ordered the ministry to re-tender the contract for the second time amid reports that she had already met one of the bidders, Legacy, a South African hotel chain which will be bidding for the first time.

Office of the Director of Public Procurement (ODDP) spokesperson Mary Mbekeani confirmed that the Ministry of Tourism, Wildlife and Culture sought a “No Objection” to re-tender the procurement and it was granted.

Said Mbekeani: “According to the documentation we have seen from the ministry, the request to re-tender was arrived at because government requires the potential operator to commit to bring additional developments to support the existing facilities and in order to improve the original vision of the whole concept. However, we may not competently speak on behalf of the ministry. So, you may wish to call the ministry to confirm this information and any other information they may have.”

She said the ODPP cleared “eight international hospitality companies” to be used by the ministry in the restricted tender.

The companies are Legacy, The Indian Hotels Company Ltd, Rezidor Hotels Aps Denmark, The Marriot Hotels, The Intercontinental Hotels Group, Southern Sun Hotels, Sheraton Hotels and Hilton Hotels.

Records we have seen show that Peermont Hotels, also from South Africa, had come out favourites from the initial two processes and its contract had already been vetted by Justice Ministry.

But two Ministry of Tourism sources corroborated last week that State House, in a verbal order, accused the ministry of favouring Peermont and was immediately told to issue another limited tender to eight institutions, including Legacy.

Our investigations show that Legacy officials visited Malawi on a number of occasions and met President Banda and Minister of Tourism Rachel Zulu and Umodzi Holdings board.

State House and ministry sources confided that a Legacy team, led by business development manager Mark Havercroft met Zulu at Bingu Conference Centre on January 17, where they discussed the possibility of their managing the tourism facility.

The same day, they also met President Banda at Kamuzu Palace.

Documents we have seen show that Legacy was initially approached to submit their bid, but did not and have only emerged now.

The long winding road

The process to find managers for the park started in January 2012.

Initially, Ministry of Tourism, Wildlife and Culture wanted to shortlist companies to bid for the management contract, but the ODPP objected to this, advising the ministry to go for an open tender.

When the open tender was published, only three institutions—Starwood Hotels and Resorts, Shanghai Construction Groups General Company and Peermont Hotels and Resorts—responded.

“And worse still, only two companies—Shanghai Construction Group General Company and Peermont Hotels and Resorts submitted their request for proposal documents [RFP],” Secretary for Tourism Fletcher Zenengeya wrote to then director of Public Procurement Bright Mangulama.

When the result of the open tender was presented to the late president Bingu wa Mutharika, “His Excellency had directed that efforts be made to widen the search for a reputable operator for the facilities,” wrote Zenengeya.

In that memo of January 23 2012, Zenengeya also indicated a list of 10 hotel managers to be approached, including Legacy, on top of the initial list.

Others were Intercontinental, Marriot, Radissons, Southern Sun, Hilton, Sheraton, Holliday Inn, Le Meridien and Shangri-la of Hong Kong.

An officer from the ODPP, a Mr. AMJ Chirwa, wrote on February 3 2012 authorising the ministry to approach the 10.

“In view of the information provided in your letter, I am pleased to inform that this office has approved that you invite the shortlisted hospitality service providers to bid in a restricted tender…,” said Chirwa.

At this point, Malawi was preparing to host the African Union Summit which was later cancelled in May 2012.

When the ministry approached the 10, including Legacy, none was committal, forcing the special internal procurement committee on the project to review only Peermont and Shanghai in which the former proved suitable.

On February 28 2012, Zenengeya reported this to ODPP, saying “I once again wish to report that the ministry’s efforts in this regard have not been successful.”

“The purpose for writing, therefore, is to inform you that, in the absence of any objection from your esteemed office, I proceed inviting Peermont Global for negotiations on the contract to operate the entity,” he wrote.

This was “in view of the fact that offers to Peermont Global and Shanghai Construction Group who were the only remaining two and had submitted their operational proposals, were not cancelled.”

On March 6 2012, Mirriam Salika from ODPP wrote the Ministry of Tourism, endorsing that Peermont be engaged in negotiations.

“This office has noted your intention to invite Peermont Global for contract negotiations. This office has ‘No Objection’ to this proposal as the procurement process for the identification of the supplier was an open one,” she said.

Negotiations started with Peermont and an initial contract was drafted just to be stopped mid way through by the Mutharika Cabinet, which feared that the AU Summit was fast approaching.

The Mutharika Cabinet then directed the ministry and Umodzi Holdings Limited—the holding company for the facilities—to engage local hotel chain Sunbird Tourism on a three-month contract just to go past the summit scheduled for July 2012.

On May 29 2012, Zenengeya informed the ODPP about the development and wrote Sunbird chief executive officer Rodger Gardner who formerly accepted the offer on June 4 2012.

Meanwhile, things had taken a twist on the political scene with the death of Mutharika in April and President Banda ordered the Tourism Ministry and Umodzi Holdings to re-negotiate the contract with Peermont.

In September 2012, Peermont Group public relations officer Julie Van Wyk acknowledged the re-negotiation process was communicated to them.

“We have been informed that Cabinet has given approval to Umodzi Holdings to re-engage with Peermont regarding the management contract negotiations,” she said.

State House pulls surprise

But this week, four sources corroborated that after this order; negotiations with Peermont were re-opened and concluded without any objections from ODPP, Ministry of Justice, Office of the President and Cabinet or State House.

“That is why we went ahead and prepared the contract and the Ministry of Justice vetted it and told us to go ahead,” said one source.

When called why there has been silence on Peermont, Umodzi Holdings Limited chief executive officer Patricia Liabuba opted for few words.

“The procurement for the company to provide management services for the three facilities is still in process,” she said before hanging up.

But there is a letter from the Ministry of Justice which authorised the Ministry of Tourism to offer Peermont a contract.

Assistant chief legislative counsel Reyneck Matemba signed the letter on behalf of Solicitor General, then Anthony Kamanga, who is the current Attorney General.

“…[I] wish to inform you that I have looked at the Management Agreement by Peermont Global Proprietary Limited, the preferred bidder and generally find it in order,” reads the letter in part.

When reading the management agreement, Ministry of Justice also considered the report by Umodzi Holdings Limited on the comparative analysis that Umodzi carried. The report analysed capacity and suitability of the companies that expressed interest to manage Umodzi Park.

The Ministry of Justice letter adds: “….[I] would like to agree with your ministry’s view that it is Peermont’s Management Agreement that appears to meet the Government of Malawi’s objectives in safeguarding her economic and financial interests in the project.”

Matemba added: “Unless there are other matters that need to be considered in relation to this matter, I would urge you to proceed and make arrangements to have the Management Agreement signed between Umodzi Holding Limited and Peermont Global Proprietary Limited.”

Our source said just as the ministry was about to call Peermont to come to Malawi and sign the agreement, State House pulled a surprise.

“We were accused of backing Peermont and the President has ordered that the agreement be terminated,” said one source.

Van Wyk, in a fresh email interview this week, said: “We are no longer in any discussions regarding this opportunity and have decided not to pursue it any further,” she said. She refused to comment on the reasons for Peermont’s withdrawal.

But our sources confirmed that the Peermont deal has been cancelled and that State House is favouring Legacy for the Management Contract.

On January 17, Weekend Nation saw Minister of Tourism Zulu, Liabuba and Legacy officials in a meeting at Bingu Conference Centre.

Weekend Nation also saw President Banda’s adviser on policy and strategy Shyley Kondowe drive the Legacy team to Kamuzu Palace the same day.

As we went to press, presidential press secretary Steve Nhlane was yet to respond to our questionnaire sent on Monday.

In an interview on Tuesday, Kondowe wondered why “being seen with people should be news.”

“We are public figures and we meet a lot of people. If I were with them [it] doesn’t mean I am negotiating contracts. The President meets a lot of people—citizens and non-citizens, but in terms of who gets the contract, the ministry should know,” he said.

Tourism Minister Zulu refused to speak on the matter when the subject was introduced to her Monday night on the sidelines of the Chinese New Year ceremony.

“On that, not now; I will have a response in two weeks’ time,” she said before being driven off.

Cancellation of drug deals

In December last year, President Banda cancelled duly processed contracts to buy emergency medicines worth K890.7 million. In a Weekend Nation story published last month, State House defended the President’s move, saying she has powers to intervene if things are not going well as was the case with the drug deals.