High Court Ruling Puts Government’s Project in Legal Limbo
The government of Lesotho is facing a significant legal challenge after the High Court nullified its decision to terminate a M170 million contract with Phaks Joint Venture (Phaks JV), the original contractor for the Ha Belo electricity substation project. This ruling has created uncertainty about the future of the long-delayed project, which has been plagued by allegations of mismanagement and corruption.
The Contract Termination and Subsequent Actions
In an effort to move forward, the Ministry of Energy had previously terminated Phaks JV’s contract, accusing the company of failing to complete the project on time and within budget. The initial contract was valued at M86.6 million, but costs escalated to M170 million due to various issues. Following the termination, the ministry engaged Actom (Pty) Ltd, a South African electrical engineering firm, to complete the unfinished work at a cost of M49,720,215.42.
However, Phaks JV contested the termination, arguing that it remained legally bound to continue the project. This led the government to seek judicial intervention, but the Northern Division of the High Court in Leribe declined jurisdiction, stating that arbitration should have been pursued first.
Legal Implications of the Court’s Decision
Justice Makampong Mokhoro ruled that the original contract between the government and Phaks JV still holds legal weight, emphasizing that the Arbitration Clause remains binding under the Arbitration Act No. 12 of 1980. The court highlighted that the government should have initiated the arbitration process before approaching the court, as outlined in Section 4(2) of the Act.
“The Court declines jurisdiction. The (Energy ministry) application is dismissed with costs,” Justice Mokhoro stated, adding that full reasons would follow later. This decision has left the government in a difficult position, as it now faces two conflicting contracts—one with Phaks JV and another with Actom.
Background of the Ha Belo Project
The Ha Belo project, part of the World Bank-funded Lesotho Renewable Energy and Energy Access Project (LREEAP), aimed to expand electricity access in peri-urban and rural areas. The project was divided into three key components: the installation of transmission lines from Ha Mopeli to Ha Belo and from Hlotse to Ha Belo, along with the construction of a power substation at the Ha Belo industrial site.
Despite its importance, the project has been mired in controversy. Allegations of massive corruption have surfaced, with millions of maloti reportedly paid to the contractor despite minimal work being completed. In June 2025, the government refunded M22 million to the World Bank after failing to account for funds meant for the substation.
Corruption Scandals and Leadership Changes
The Ministry of Energy’s Principal Secretary, Tankiso Phapano, has distanced himself from the scandal, noting that he assumed office in January 2024, long after the contract was signed. His predecessor, Themba Sopeng, was charged with corruption, embezzlement, and money laundering in connection with the project. The Directorate on Corruption and Economic Offences (DCEO) accused Mr. Sopeng of facilitating the award of the tender to Phaks JV without proper procurement procedures.
In March this year, Prime Minister Sam Matekane announced that an additional M50 million would be required to complete the project. The government subsequently contracted Actom (Pty) Ltd to take over the work, citing poor administration and mismanagement as the primary causes of the cost overruns.
Ongoing Challenges and Future Outlook
The Ministry of Energy’s statement blamed the project’s cost overruns on mismanagement and poor administration, noting that the contractor was paid for equipment that was not delivered. The ministry also mentioned that attempts to renegotiate with Phaks JV from early 2024 failed to yield progress.
With the High Court’s ruling, it remains uncertain whether the government will appeal the decision or proceed with arbitration. If the ruling stands, it could further highlight the government’s struggles with legal processes and oversight. Just last week, the government dissolved the Government Asset Search and Recovery Task Team (GASRTT) on the grounds there was no legal instrument to back its existence, despite its three-year operation.