Zambia has lost millions of taxpayers’ money through bogus purchase of undelivered planes as government, with help from Ethiopian Airline pushes through the controversial relaunch of the national carrier, despite the country’s precarious debt position.
A source familiar with the deal said government paid US$7 million to Airbus, a French-based company as part payment for two Airbus planes and an ATR 72 plane.
An industry source has explained to MakanDay that it is a common and lucrative practice for plane manufacturers, through intermediaries to accept down payments even when it is clear the country placing an order may not afford the purchase. He said the payments are understood to be non-refundable.
He urged government to pursue the matter and establish whether the money reached the manufacturer.
“Known corrupt governments are approached through intermediaries by similarly corrupt senior staffers of the aircraft manufacturer. They're advised to place an order for several aircraft even when both parties know that the country placing an order is not able to afford. After the order is placed, the agreed down payment is paid. This payment could be in the range of 2 to 5 per cent. A small token payment is then paid to the manufacturer and the remainder of the down payment is shared by the bad actors,” he narrated.
Airbus has not responded to an emailed query from MakanDay.
Last month, Transport and Communication Minister, Frank Tayali told a local radio station – Hot FM that he is following up the matter were close to US$7 million was paid for the purchase of new planes.
“Being a new Minister, I have found that, obviously, Zambia Airways 2014 did make some serious strides in terms of trying to get to the skies and operationalise the deal that the previous administration had gotten into,” he said.
“I think money has been deposited to that effect, a matter which I’m looking into, because I think that close to US$ 7 million had been paid as advance payment towards purchase of aircrafts.”
Zambia also lost money through another supply agreement for an SSJ 100 aircraft in the VIP version after the Russian government suspended the contract because the country does not have enough funds to finance the contract.
In March 2019, Russia’s Industry and Trade Minister Denis Manturov told the Russian News Agency (TASS) during the Russia-Africa Forum that the contract was suspended despite receiving advance payment.
In Africa, for example, we signed a contract for the supply of a VIP version of the SSJ 100 to Zambia. But in Zambia, besides the advance payment, there were no funds to finance this aircraft, so the contract has been frozen," Manturov said.
Zambia Airways has a board in place, led by former attorney-general Bonaventure Mutale and a chief executive officer, Bruk Endeshaw-Abebe, who was appointed in 2019. Endershaw who was Ethiopian Airlines, sales and services director for the southern region remains on government payroll running an airline that has no planes.
It is understood an initial investment of US$30-million was required to launch the airline under a joint venture agreement where Zambia holds 55%through the Industrial Development Corporation (IDC) and Ethiopian Airways holding the balance of the shares.
The fleet for the new IDC-controlled company called Zambia Airways (2014) Ltd was to be provided by Ethiopian Airlines and leased for $700 000 a month. The figure does not include other expenses such as maintenance and insurance.
In June last year, a well-placed government source told MakanDay that government’s decision to engage Ethiopian Airlines to relaunch the national carrier would cost Zambia US$700 000 a month in aircraft leasing charges.
The government has come under heavy criticism over the decision, with concerns focused on the business plan, which remains a closely guarded secret.
Former employees of Zambia Airways who formed an independent company called Zambian AirWorks believe that the best approach is a public-private partnership anchored in funding from private sources, either local or foreign.
“During the past 30 years, most of the world, including Zambia, has learnt the folly of government-owned airlines,” said Captain Alick Sakala, one of the company’s founders.
Addressing the parliamentary committee on transport in 2018, Sakala said: “We propose a private sector and market-driven airline. The IDC could play a part in sourcing investment either locally or[abroad].”
According to sources within the aviation sector, a much cheaper option was ignored by the previous government. One of the sources said part of an alternative less costly deal and an option to avoid losing the down payment, government can go ahead with the ATR agreement.
“Zambia has both pilots and engineers rated on the ATR,” said one of the former pilots under Zambia Airways. “Why doesn’t the new dawn government do the right thing?”
The airline is the former governing Patriotic Front (PF) party’s flagship project which started in January 2013.
The project first stopped then re-started by late President Michael Sata in 2013 has gone through various challenges. Insiders say, the late President had initially stopped the whole project after learning of shady business dealings involving some of his senior officials.
At his first press conference as president in 2015, Edgar Lungu, who succeeded Sata “deferred” the formation of the national airline “until such a time that the economy is able to afford the high establishment costs”.
The economy is still in the doldrums, and the new government has said stabilising the economy and employment creation remains top priority.
During a presentation to creditors and stakeholders on 2nd November, which MakanDay attended, Finance Minister Situmbeko disclosed that the Ministry will be holding talks with the IMF in the same week with the aim of Zambia entering what is known as an Extended Credit Facility(ECF) program.
Experts say, if the deal goes through, the airline may be one of the “wasteful projects” that may be shelved.
Brief timeline of events during the first two years of the project
2013: The national airline project started in January 2013 and was supposed to end in June 2014when the first new Zambia Airways plane would have taken off.
- Government constitutes a committee to oversee the project.
- The first committee was later dissolved and another one set up by then Secretary to Cabinet, late Dr Roland Msiska.
2014: Boeing and Airbus, with a little help from their friends, fight it out to supply planes for Zambia Airways. Former Zambia Intelligence Chief, Xavier Chungu, was said to be acting as a local consultant for Airbus.
- 12th April 2014: The project committee held a weekend retreat in Siavonga to draw up a plan to present to cabinet.
- 17th April 2014: The committee met three representatives from Airbus at the Zambia Air Force (ZAF) headquarters in Lusaka to persuade them to support the offer for supply of planes from Airbus. Some of the committee members who attended the meeting included former ZAF commander, Lieutenant General Eric Chimese, former National Airport Corporation director general, Robinson Misitala, and then Department of Civil Aviation now Civil Aviation Authority director, Gabriel Lesa. In attendance also was Chungu and M. Jean-Paul Gravier - a former French intelligence officer who has connections with Airbus and was said to be Chungu’s link to Airbus.
- 30th April 2014: During a meeting at Cabinet office, late Dr Msiska, made a presentation on behalf of Airbus to a committee of ministers about the choice of the company. Six cabinet ministers were present – Alexander Chikwanda for Finance, Yamfwa Mukanga for Transport, Bob Sichinga for Commerce, Harry Kalaba for Foreign Affairs, Fackson Shamenda for Labour and Wilbur Simuusa for Agriculture.
- Government prints some fliers and car stickers of the new Zambia Airways. One sticker displayed two Airbus planes – the A319 and A330 -- painted in the national colours and flying above the Victoria Falls with the heading “the perfect combination for Zambia Airways”.