By Timo Shihepo | 5 March 2025
The Ministry of Defence and Veterans Affairs paid fuel supplier Enercon N$60 million in 2023 – just months after terminating its contract with the company for failing to deliver fuel to military bases for six months.
Enercon is partly owned by the defence ministry through the state-owned military company August 26 Holdings and brothers Peter and Malakia Elindi.
Another partner is former Enercon chief executive Victor Malima and businessman Austin Elindi.
Executive director of defence and veterans affairs Wilhelmine Shivute last week confirmed the payment.
“The ministry did due diligence and requested the necessary legal opinion and authorisation before affecting payment, though this was a contractual agreement,” she told The Namibian.
The payout followed a legal directive from the attorney general’s office, which cited a controversial clause in the contract obligating the government to settle outstanding invoices even after termination.
Critics have dubbed this the ‘devil’s clause’ for binding the state to pay despite Enercon’s consistent failure to deliver fuel to military bases.
The government terminated the contract around October last year.
Enercon has a history of high-stakes dealings with state entities.
The company was previously implicated in a N$58-million scandal at the National Petroleum Corporation of Namibia (Namcor) and now faces a N$114-million debt dispute with the parastatal, prompting Namcor to seek its liquidation in court.
MILKING THE CASH COW
Since 2012, Enercon has secured over N$1 billion in defence ministry contracts, including a deal to supply petroleum products and install fuel infrastructure at Namibian Defence Force (NDF) bases.
This long-standing partnership collapsed in 2023 after Enercon allegedly failed to deliver fuel for six months, yet still received millions via a contentious contractual clause.
The disputed joint venture agreement is structured so that Enercon can bill the defence ministry for services, regardless of whether work is completed.
The arrangement involves three state-owned entities: August 26, the defence ministry, and Namcor, which has incurred the heaviest losses.
Under this agreement, Enercon sourced fuel from Namcor allegedly without paying, accruing a debt of over N$114 million.
This fuel was then supplied to the NDF, generating profits for Enercon while leaving Namcor with losses.
‘THE DEVIL’S CLAUSE’
Between 2019 and 2024, Enercon billed the defence ministry for ‘service bureau charges’, which are fees for maintaining and managing fuelling station assets at NDF bases, including those at Suiderhof, Osona, and Grootfontein.
The agreement is that as long as these assets remain under Enercon’s ownership, the NDF is obligated to pay monthly charges, some of which remain outstanding.
According to the agreement, the monthly service bureau charges would be applicable and be charged in respect of N$33 000 for each completed defence ministry fuel station, and the rate would be increased by 10% every year from the date of completion.
Similarly, an amount of N$42 000 in monthly bureau charges should be applicable for every strategic petroleum reserve (SPR) facility, with an increment of 10% every year from the date of completion.
Some officials from the defence ministry, including executive director Shivute, were against the payment of last month’s N$60 million.
She wanted Enercon to sign a deal to waiver any future payments.
“Being an accounting officer, it was my duty to make sure I obtain all the necessary information and documentation as part of the compliance to effect payment,” Shivute said last week.
LEGAL OPINION
The N$60-million payment was only made after a legal opinion from attorney general Festus Mbandeka forced Shivute’s hand.
The opinion, dated 19 December 2024, was addressed to defence minister Frans Kapofi.
Mbandeka said the defence ministry went back on its promise by failing to pay Enercon the service bureau charges outlined in the main contract.
The ministry said Enercon had not billed since 2016, when invoicing was supposed to begin, and that claims older than three years were now prescribed.
Enercon has disputed this.
Mbandeka clarified that the charges were fixed periodic amounts, automatically owed at the end of each period.
“The amount becomes due and payable each month as stipulated… it remains a valid debt to the paid client, the defence ministry in this instance,” he said.
Mbandeka said the payment was contractually required, regardless of whether services were rendered. He said no prescription applied, as the contract was still in force and had not been cancelled.
Even if terminated, arbitration would suspend the prescription under Section 15 of the act.
Mbandeka said while the eight-year period exceeds the Prescription Act’s three-year limit, no contractual provision extends the claim period.
“Against the above, it is our considered view that the defence ministry is contractually obliged to pay these monthly service bureau charges,” he said.
“If the ministry wishes to continue the agreement, the Office of the Attorney General could renegotiate the charges to be based on services rendered. Lastly, the defence ministry is advised to settle this amount soonest as it will continue to escalate each month,” Mbandeka said.
He suggested negotiating a payment plan with Enercon if necessary.
OIL FIRST
The deal between Namcor and Enercon was also key in the dismissal of former Namcor managing director Immanuel Mulunga last year.
At the centre of the controversy was a N$53-million payment Namcor made to Enercon.
This payment would have made Namcor take over the fuel stations at various NDF bases.
The deal also included Namcor purchasing oil storage facilities from Enercon.
However, due to objections from the military, Enercon was forced to reverse the agreement but failed to immediately repay the N$53 million, resulting in more losses for Namcor.
Minister of finance and public enterprises Iipumbu Shiimi has previously raised concerns about Enercon’s dealings with Namcor. The parastatal has since filed for Enercon’s liquidation in the High Court to reclaim the N$114-million debt.
Namcor spokesperson Utaara Hoveka yesterday said the company was not aware of the payment nor have they received money from Enercon.
“We wait for the judicial process to run its course,” he said.
Enercon chief executive Connie van Wyk yesterday said all payments made to Enercon have been outstanding invoices owed by the ministry.
“Due to payment delays from the defence ministry, Enercon has been unable to service most of its creditors.
Van Wyk said this has resulted in accruing arrears with numerous creditors.
“Enercon has since received payment of outstanding invoices and made payment to its creditors. Enercon and Namcor have an ongoing legal matter and we cannot comment until this has been resolved,” he said.
