Phaks JV Highlights Challenges and Cost Overruns in Belo Electricity Supply Project

The contractor for the Belo electricity supply project, Phaks JV, has informed the Parliamentary Natural Resources Committee that repeated changes to the original contract by the Government of Lesotho have caused work stoppages and significant financial losses. The original contract, valued at M86 million, has seen multiple adjustments leading to delays and additional costs.

Addressing the committee during its inspection visit, Phaks JV’s Finance Manager, Mr. Rapelang Sekatle, explained that while the project was initially budgeted and signed at M86 million, design alterations and client-induced delays increased the total project cost. This has made the government liable for additional payments.

Mr. Sekatle stated that the contractor was awarded the project in August 2021 with a clear implementation programme and approval to start work on site. Shortly after commencement, the team was instructed to halt operations pending an Environmental Impact Assessment (EIA). Despite repeated requests, the EIA report took months to obtain and was only approved in November 2021. The contractor was later informed that the approved assessment applied to LEC and the Ministry, not the World Bank, the project’s funding partner, requiring another work stoppage while waiting for the correct EIA.

According to Mr. Sekatle, the contract clearly stipulates that the client bears responsibility for delays caused on their part. Phaks JV issued an official notice claiming the government was liable for costs amounting to M24 million due to delays. Payment was delayed despite confirmation that the company was owed the funds. By August 2022, with payments still pending and site work halted, the contractor was instructed to inspect equipment it had ordered. During this stage, the client introduced additional design changes valued at M5 million, including modifications to communication and protection systems.

Further changes contributing to cost increases included the introduction of monopoles worth M7.6 million, the extension of the Mopeli–Belo line, and adjustments at the Hlotse tapping point. Mr. Sekatle emphasized that delayed payments have severely impacted operations. He noted that although the total project cost is claimed to be M129 million, the contractor has not fully utilized the M89 million allocated within the project framework, and only M109 million has been paid to date.

The testimony highlights ongoing challenges in project management, contract adherence, and funding approvals, stressing the need for timely decision-making and clear communication between the government, contractors, and funding agencies to avoid further delays and financial losses.