BizDay Zimbabwe
BizDay Zimbabwe

Zimbabwe's leading authority on business, finance and investment news.





Zesa unit faces US$11m lawsuit


Zesa Holdings subsidiary, Zimbabwe Electricity Transmission and Distribution Company, is being sued for US$11 million by a local private firm over alleged breach of contract.Sixth Century Contraction has dragged the power utility’s transmission and distribution arm to court claiming it breached a contract entered for the construction of three sub-stations in Harare.

In its submissions to the High Court, Case HC 7150/12, Sixth Century Contraction claims in 2010 ZETDC gave its sister company permission to complete the project which had been suspended in 2006.

The firm said installation was suspended in 2006 due to financial constraints and the parties mutually agreed that construction would start when the situation had improved.

According to Sixth Century Contraction, the 33/11Kv substations at the centre of dispute were being constructed in the Harare suburbs of Luna, Glen Norah and Mufakose.

The firm claimed it had agreed to suspend construction, which started in 2004, after it became clear ZETDC was facing serious financial problems during the hyperinflationary era.

“When the defendant’s financial situation improved, it chose to engage its sister company Zent, notwithstanding the fact that there was an open-ended contract with plaintiff.

“The plaintiff won the tender to construct the substations through the State Procurement Board. The sudden turn of events came about when the plaintiff was preparing for the resumption of the suspended contract,” said Sixth Century Contraction.

This, the company said, was after it had submitted a revised bill of quantities and prices. Sixth Century Contraction said it then suffered huge damages after ZETDC breached the contract.

The damages comprised US$787 000 for loss of potential profit and retention, US$10,107 million for the cost incurred for salaries of key staff, non-productive staff, plant and equipment hiring, site buildings and offices, demobilisation and tax charges.

Sixth Century Contraction claimed when construction was suspended it kept skeletal staff on its payroll and retained hired plant and equipment on standby anticipating project resumption.

The contracted firm also claimed that it had taken insurance for the three substations that ZETDC had contracted it to build, which it continued to pay for until May 2012.

“The (contract) breach by the defendant came as a surprise since the parties had agreed that suspended works would resume when the defendant’s financial position improved.”

“The defendant, without the knowledge of plaintiff and without tender approval breached the contract by engaging another company, which is sister company called Zent in 2010,” Sixth Century Contraction said.

The plaintiff said parties were supposed to be bound by conditions in ZGCC.4 (General Conditions of Contract and Forms of Tender and Deed Surety-ship for use in connection with Works of Civil Engineering Construction Fourth Edition, 1984).

Sixth Century Contraction claimed that the contract was extended to the power utility’s transformer manufacturing unit without its knowledge or termination of the existing agreement.