The pitfalls ahead and the choice facing the nation are clear if we want to stall the risk of being pilloried again and sullied by new instances of poor governance
By Mrinal Roy
The lockdown had masked the sordid realities of the country. The lull imposed by Covid-19 was short-lived. The end of the lockdown has brought them back to light with unabashed effrontery. The serious allegations of corruption underpinning the Rs 4.3 billion contract (hiked by Rs 700 million in the space of a year) allocated by the Central Electricity Board (CEB) to Burmeister & Wain Scandinavian Contractor (BWSC), a Danish firm, in March 2016 for the redevelopment of the St Louis power plant has been highlighted in the findings of an inquiry carried out by the African Development Bank (AfDB), the funding agency of the project.
“Despite the damning indictment of the African Development Bank and Burmeister & Wain that there were corrupt and fraudulent practices in relation to the CEB St Louis redevelopment project, the government and the relevant investigating agencies in Mauritius are, despite the rhetoric that there would be no cover up, yet to initiate a credible investigation…”
In its findings, the AfDB’s Office of Integrity and Anti-Corruption concluded on 8 June that ‘Evidence supports a finding that Burmeister & Wain, on a balance of probabilities, financially rewarded members of the Mauritian administration and others, through the intermediary of third parties, for providing access to confidential tender-related information which allowed them to tailor the technical specifications of the tenders to its offering, thus gaining an undue competitive advantage over other tenderers’.
As a consequence, the African Development Bank has debarred Burmeister & Wain for 21 months for fraudulent and corrupt practices. The debarment renders Burmeister & Wain ineligible to participate in AfDB-financed projects or to benefit from its financing during the debarment period.
In a press release on 4 June 2020, Burmeister & Wain accepting the 21 month debarment in a settlement agreement with the AfDB announced that it had communicated publicly on the case of suspected corruption in February 2019 and had on the basis of their own investigation carried by an external law firm Poul Schmidt concluded that certain employees of the firm had engaged in corrupt and fraudulent practices in relation to the CEB project in Mauritius. The involved employees were summarily dismissed and two persons were reported to the police. Explaining the background of the investigation Burmeister & Wain declared that in April 2018 it had received an anonymous tip-off from a whistleblower shortly after the inauguration of the new St Louis power plant in March 2018 alleging misconduct in some of its projects. Upon the completion of Poul Schmith’s investigation, Burmeister & Wain self-reported the case to the African Development Bank and other relevant stakeholders.
Despite the damning indictment of the African Development Bank and Burmeister & Wain that there were corrupt and fraudulent practices in relation to the CEB St Louis redevelopment project, the government and the relevant investigating agencies in Mauritius are, despite the rhetoric that there would be no cover up, yet to initiate a credible investigation to nab as stated in the AFDB findings ‘members of the Mauritian administration and others who were financially rewarded’.
Burmeister & Wain had publicly revealed the case of suspected corruption in February 2019 and had informed the management of the CEB accordingly since 15 February 2019. On 14 March 2019, Nicolaj Holmer Nissen, CEO of Burmeister & Wain officially advised the CEB management that the St Louis project ‘was among other projects subject of the investigation.’ He added in the letter that ‘we intentionally did not specify this in the press release to protect the reputation of clients such as the CEB… The investigation was limited as it did not and could not interview third parties.’
In a press release dated 21 March 2018, Burmeister & Wain highlighted that the ‘ inauguration ceremony of the St Louis new power plant project marks the 10th power plant delivered by BWSC to CEB over a 20 year period’.
Against such a backdrop, the country is now faced with the tall claim that the government and its key leaders came to know of the allegations of corrupt and fraudulent practices in relation to the CEB project only on the 8 June 2020. To crown it all, the African Development Bank has refused to share a copy of its investigation report on the alleged improprieties at the CEB with the government and the Independent Commission Against Corruption (ICAC), the Mauritian agency responsible to fight corruption in the country. This says it all.
For too long the standing and repute of Mauritius has been sullied by poor governance and the incapacity of regulatory institutions very often manned by political appointees or cronies instead of seasoned and competent career professionals driven by a high sense of probity, to put in place the necessary bulwarks against corruption and costly botched decisions detrimental to public interest. Too often the country has been let down by the cohort of political appointees heading state owned companies and key institutions of the State.
The list of questionable and costly decisions and lack of rigorous due diligence whether at Air Mauritius or the allocation of operating permits to the likes of Alvaro Sobrinho, the wanton distribution of scarce state lands to cronies and politicians, the exposure of the State Commercial Bank of Mauritius to allegedly billions of Rupees of risky loans which necessitated substantial impairment provisions, the significant cost overruns and the lack of transparency and accountability on infrastructural projects such as the Midlands dam, the Cote d’Or multisport complex or the Safe City project valued at some Rs 16 billion. This list also includes the decried and questionable policy decision to grant extremely generous fiscal incentives amounting to billions of rupees of forfeited tax revenue since 2015 to promoters of smart city and high end real estate development projects.
In the wake of the last general elections, defeated candidates of the ruling party have been blithely nominated as ambassadors in key countries or as head of important institutions of the State. On retirement, the Commissioner of Police is nominated Commissioner of Prisons whereas the latter on retirement is nominated as an advisor to the PM office, all at public expense. Will transparent rules of merit based promotion within the hierarchy of the government Establishment be systematically thwarted by nepotism and favouritism? Will the talented and bright not be promoted? The musical chair of appointees of the party faithful even includes such key constitutional posts such as that of the Speaker. The outcome of such inane political interference is highly detrimental to the country.
The people are therefore alert and apprehensive of the governing rules and the manner the Rs 140 billion advanced by the Bank of Mauritius to government and the Mauritius Investment Corporation Ltd (MIC) will be used. Will this colossal sum of scarce resources be rigorously allocated on the basis of strict business savvy decisions and commercial and financial best practice norms to ensure that these are secured by sound guarantees and provide a fair return?
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Has the image and repute of Mauritius been dented by systemic poor governance and the questionable choice of appointments to head key institutions of the country by successive governments and its recurrent inclusion over the years in the damaging Panama papers, the Paradise Papers and the Mauritius Leaks? For years, Mauritius has been running behind the elusive objective of setting up a robust legal and supervisory framework which aligns and benchmarks the Mauritius international financial services sector on the highest norms prevailing and approved by key regulatory institutions such as the Financial Action Task Force (FATF) the global money laundering and terrorist financing watchdog, the OECD, the Securities & Exchange Board of India (SEBI) regulating the capital markets industry or the European Commission.
The European Commission (EC) has recently included Mauritius in its revised list of high-risk countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks. These are serious deficiencies. The classification of Mauritius as a high risk country in respect of terrorist financing and money laundering should have jolted and alerted the government and the regulatory authorities on the serious shortcomings of our jurisdiction in terms of stricter legal framework and rigorous oversight of the global business to stem any risks of our international financial services sector acting as a conduit for illicit money laundering and terrorist financing.
In this regard, the EC referring to shortcomings relating to Mauritius in its official Journal in particular highlights ‘(1) deficiencies in demonstrating that the supervisors of its global business sector and Designated Non-Financial Business and Professions implement risk-based supervision; (2) failure to ensure access to accurate basic and beneficial ownership information by competent authorities in a timely manner; (3) failure to demonstrate that law enforcement authorities have capacity to conduct money laundering investigations, including parallel financial investigations and complex cases; (4) failure in implementing a risk-based approach for supervision of its non-profit organization sector to prevent abuse for terrorist financing purposes, and (5) failure to demonstrate adequate implementation of targeted financial sanctions through outreach and supervision.’
It is pointless to enact new laws to beef up and align our financial legal framework governing the international financial services sector in consultation with FATF or the European Commission if we do not at the same time ensure that all the regulatory institutions are not only manned by internationally renowned and seasoned professionals but are also administered with the highest standards of due diligence and rigorous oversight to stem any risk of money laundering or terrorist financing. Being consistently rapped on the fingers by the SEBI or the EC or listed in Panama and other papers does not help build the unimpeachable standing and repute of Mauritius as a clean and transparent jurisdiction which prompts top world operators to do business in.
Good governance and trust
The European Commission’s critical appraisal of the serious deficiencies of our international financial services sector and the refusal of the African Development Bank to share the findings of its investigation with the government and ICAC are damning indictments of the poor state of governance in the country and trust in the competence and rigour of its institutions.
Covid-19 has significantly weakened the economy. The status quo is therefore patently not a viable option for the future. Only a radical change in governance benchmarked on lofty values of probity, equity, transparency and accountability coupled with the highest managerial competence at all levels in both the public and the private sector can turn the tide of plummeting standards and underperformance. The pitfalls ahead and the choice facing the nation are clear if we want to stall the risk of being pilloried again and sullied by new instances of poor governance.
* Published in print edition on 26 June 2020