Zambia debt audit shows Government paid 600% premium for laptops
An audit of Zambia’s public debt found inflated costs and wasteful spending, including the government’s purchase of vastly overpriced computers and laptops for public schools that have no electricity.
One of the loans the audit scrutinized was used to buy 10,000 laptops for $3,900 each, compared with the $630 they should have cost, according to the report by the Zambian Office of the Auditor General published this week. The government overpaid for laptops and desktop computers by about $96 million, it said.
The report provides a glimpse into Zambia’s loan spree that led to it becoming Africa’s first pandemic-era sovereign defaulter in 2020. It paints a picture of reckless borrowing with weak management and controls. Acting Auditor General Ron Mwambwa called for “remedial action” to be taken as a deterrence to would-be offenders, according to a statement.
Soon after Zambia’s Patriotic Front party won power in 2011, the government started racking up billions of dollars of debt to fund projects from roads to airports and education supplies. The government tapped the eurobond market for the first time in 2012, and ultimately borrowed $3 billion from investors. Chinese state-owned lenders also financed billions of dollars of projects.
President Hakainde Hichilema’s United Party for National Development won power in 2021, and his government has sought to address the debt problem. It’s taken years of painfully slow negotiations with creditors to rework its loans and the process has yet to be completed.
The auditor general also found weaknesses and poor controls in spending of the $3 billion in eurobonds the government raised.
Zambia defaulted on that debt in 2020 and last month reached an in-principal deal with investors to restructure the liabilities. That’s part of a broader effort the government in 2021 set out on to revamp about $13.4 billion of debt using the Group of 20’s Common Framework mechanism.
The audit found other more obscure creditors. The computer supply deal was one of two loans totaling about $470 million from a vendor it identified as Mikalile Trading Co. of Hong Kong. The report raised a plethora of concerns about the deals, besides the alleged overpricing. The company denied any wrongdoing.
“This is not true. Where can you get a laptop for $630 with their specifications?” founder Mulenga Mikalile said by text message. “This was an open tender with other bidders.”
Mikalile also said the items his company delivered to the 10,000 schools countrywide under a $401 million deal were inspected and approved, countering the auditor general’s findings of undelivered, non-installed, or poor-quality items.
The Ministry of Education signed the deal with the company in October 2017, according to the AG report. That followed an August 2016 contract to supply police uniforms and riot gear for a price of $69 million, including financing costs.
