Companies Charged with Corruption on Lesotho Dams

Lori Pottinger
Wednesday, December 1, 1999

Ten companies and two consortia were summoned to appear in the Maseru Magistrates’ Court in Lesotho on November 29 on charges of bribing Masupha Sole, former director of the Lesotho Highlands Development Authority (LHDA). Sole is accused of accepting around US$2 million in bribes from the companies, which included major dam–building firms from Europe, Canada and South Africa.

The accused companies worked on the Katse Dam, the first of five huge dams planned for the Lesotho Highlands Water Project (LHWP). Katse is now completed and work has started on a second dam, Mohale.

The World Bank has provided both fiscal management and loans for the Lesotho project, and is currently carrying out an internal investigation of the LHWP contracts it has financed. According to public statements made by World Bank staff, the Bank is planning to take sanctions only against companies that had direct contracts with the Bank. Companies which paid bribes on other project–related contracts would thus be exempt.

In a November 26 press release, International Rivers called for the dam–building companies charged with corruption to be suspended from receiving World Bank contracts while they are under investigation. International Rivers is also calling on the World Bank to establish an independent investigation of its role in the scandal.

Critics argue that the Bank’s responsibilities are not restricted to individual contracts because of the Bank’s role in getting the project off the ground, and as its fiscal manager. They argue that the World Bank is interpreting its procurement guidelines narrowly in hopes that they will not have to apply them to some of the biggest dam building companies in the world, companies with which they do substantial business.

"Such a narrow interpretation of its procurement guidelines may be in keeping with the letter of the guidelines, but it is certainly not within their spirit, nor the spirit of President Wolfensohn’s frequent anti–corruption statements," says Patrick McCully, campaigns director for International Rivers.

In an unusual move, the World Bank has pledged financial and other support for the Lesotho justice department in its pursuit of this case. But critics argue that this support is inappropriate because the World Bank is the fiscal manager and a funder and promoter of the project with a long–standing and close relationship with the companies charged.

"The Bank is not a knight coming to the rescue of the government of Lesotho. It is a leading actor in a major corruption scandal. The set–up gives little reason for confidence that justice will be served," says McCully.

"It’s time for an independent investigation that considers not just the role of the companies, but the performance of the World Bank in its oversight responsibilities," McCully says. "We need to know what the World Bank knows about the bribes, and when it first knew it. We know from past experience that internal World Bank investigations cannot be trusted to reveal the truth."

International Rivers also called for the establishment of a Commission of Inquiry that would include representatives of local non–government organizations, to investigate more allegations of corruption among former and current senior officials of both the Lesotho Highlands Development Authority, and the Ministry of Natural Resources.