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IN FULL: MAJORO’S WARNING TO CABINET

THE FINANCING AGREEMENT AND GUARANTEE AGREEMENTS BETWEEN THE GOVERNMENT OF LESOTHO AND PROPERTY 2000 (PTY) LTD FOR THE FINANCING OF THE AFRICAN UNION SPORTS COUNCIL (AUSC) 2020 REGION 5 YOUTH GAMES

MEMORANDUM BY THE HONOURABLE MINISTER OF FINANCE

                        I recommend that cabinet approves:

  • The negotiations of the loan agreements and guarantee agreements between the Government of Lesotho and Property 2000 (PTY) LTD for an amount of R2,450,000,000.00, and;  
  • That I, The Minister of Finance or a person I will designate, sign the negotiated loan agreements and guarantee agreements on behalf of the Government of Lesotho.
  • Cabinet is invited to note that the Government of Lesotho will host the AUSC 2020 Region 5 Youth Games in December 2020.  These Games will be held pursuant to the 14th December, 2017 Protocol Agreement signed between the Government of Lesotho and AUSC to host the Games during December, 2020. These Games are held biennially and are mandatorily hosted on a rotational basis by member states.
  • To host these Games the Government of Lesotho has to construct a number of major infrastructures namely the Multi-Purpose Indoor Sport Centre to accommodate all sports codes and a 20,000 seater stadium that will host football and athletics in Lepereng Maseru. Student accommodation flats will also be built to accommodate all the players during the games at NUL Roma, Maseru.
  • Cabinet is invited to also note that I, the Minister of Finance while I support this initiative to host the 2020 AUSC Region 5 games, it is worth noting for Cabinet that there are huge risks involved in the acquisition of the proposed infrastructure given the approach used in the infrastructure financing model and the timing of the construction of the infrastructure in which a number of key assessment tools, procedures and strategies have been flawed. Of note are the following;
  •                     The unavailability of a feasibility Study – Given the size and magnitude of the proposed infrastructure and the complexity of coordinating multiple stakeholders and long term nature of this project a feasibility study should have been conducted as it could have served a critical function of independently evaluating and assessing the viability of the project. Therefore, the non-existence of a feasibility study has compromised the ability of the Ministry of Finance to determine the affordability, viability, value for money, proper risk assessment, proper project cost, financing model assumptions, the maintenance and sustainability of the infrastructure.
  • Procurement and sourcing procedures have been undermined – expression of interest rather than the issuance of requests for proposals were used in sourcing the developers and contractors.
  • The Project implementation and timeliness – given the remaining time to December 2020 and the massive infrastructure being proposed, the time left for construction of this infrastructure brings into doubt the quality and professionalism of works that will be done and achieved.
  • Debt sustainability measures to ensure prudent Debt levels and sustainability remain critical. The magnitude of debt to be incurred for the project pushes the debt stock towards upper limits of sustainability. This will limit the government’s ability to acquire debt for fiscal operations in future. Deferring the construction of 20,000 seater stadium and hosting the games with the existing and refurbished Setsoto Stadium would exert less pressure on the prevailing Government Fiscal position.

All The above concerns immediately render this project, risky.

  • The Terms of the Loans and Grants are as follows:
Loan Terms NEPCO TWO (PTY) LTD (100%  GoL Guarantee) DESIGN EDGE (PTY)  LTD (50% GoL Guarantee & 50% GoL Loan) MFT (PTY)  LTD (100% GoL Loan)
Loan Amount R760,000,000.00 R898,315,906.00 R785,851,217.00
Maturity Period 30 years 30 years 30 years
Grace Period 5 years 5 years 5 years
Interest Rate 3% 3% 3%
  • The Ministry of Gender, Youth, Sports and Recreation shall implement the project, including reporting, monitoring and evaluation.
  • The Honourable Minister of Gender, Youth, Sports and Recreation has been consulted and she concurs.
  • Cabinet is invited to advise in accordance with paragraph 1 above.

M. M.

Ministry of Finance

Maseru 100

09 September, 2019

Comments (1)

  1. Property 2000 (Pty) Ltd doesn’t exist on Lesotho Company Registry!

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