Commentaries | Nov 19,2022
Close to 5,660 cash counting machines purchased for 1.7 million dollars have been stranded at the warehouse of the Commercial Bank of Ethiopia (CBE) following a dispute that arose between the Bank and its supplier.
Supplied by E-Banking Technology, a Korean maker of banknote counters, the machines have been held in the Bank's storage facility since April. The primary dispute is the Bank's allegation that the cash counting machines that have been delivered are different than the machines that were sent as samples and approved for purchase.
E-Banking Technology, which delivered the machines through its local partner, Impact Technology, was awarded the bid for the initial provision of 8,359 cash counting machines in mid-August 2019, with a unit price of 300 dollars. The Bank then placed an order with the company for the supply of an additional 1,027 machines in January.
Since then, the company has delivered 8,359 pieces and the remaining are en route, according to Endalkachew Bezu, CEO of Impact, which signed the local supplier contract with the Bank later in September.
Impact Technology had previously supplied CBE with 3,764 of the same cash counting machines in 2015 as a direct supplier. The company was paid 85pc of the value in advance and received the remaining 15pc after the technical test report, according to the agreement.
CBE, which had conducted an inspection of the cash counting machines, greenlighted the first 1,499 machines of the first two batches of 1,500 in December and had informed the supplier through a letter.
"After the machines had gone through initial testing," Endalkachew said. "The reports came back with positive results."
Afterwards, Impact supplied 5,000 of the machines in six rounds until it received a letter from the Bank stating that the machines failed technical inspection. In its letter, the Bank stated that a total of 3,500 machines that were supplied in four rounds failed to meet the technical requirements.
About 2,700 machines that were supplied by the company have already been distributed to branches of the Bank, while the remaining are stocked at its warehouse located in Gelan.
When CBE informed the supplier that the remaining machines failed inspection, it was deliberate sabotage, according to Impact's Endlakcahew, who believes that a senior technician at the Bank failed the machines on purpose due to a personal conflict.
By the end of April, E-Banking received a letter from the Bank requesting that they clarify the points raised during the inspection.
"The inspections were completely hair-splitting," said Endalkachew. "The technician had dismantled the entire machine and was cross-checking all 210 of its parts, which is neither the norm nor the process that it had followed initially."
The Bank raised five points in its letter, three of which focused on differences found between the samples and the delivered machines. The response from E-Banking sent in May was that the machines were all identical to the samples and in some cases even better.
"The machines have a better motor capacity," Endalkachew said. "They've been upgraded from 3,600 RPM (Revolutions Per Minute, indicating the speed at which the machine counts cash) to 4,200 RPM, but this applies to all the machines that have already passed inspection."
E-Banking Technology uses two companies to assemble the machines.
The company's response clarified all the questions raised, and the Bank directed Impact Technology to fix all remaining issues.
Impact then asked to do a demonstration for the Bank around mid-June, but the proposal has yet to be granted, according to Endalkachew, who claims that this has all been caused by a personal fallout between himself and a senior technician at the Bank.
The senior technician at the Bank has denied these claims and insists that they are baseless.
"He's harassed both me and my employee," said Endalkachew.
Impact Technology has provided cash counting machines to Abay, Awash and Lion banks as well as the Development Bank of Ethiopia in previous years.
The legal parameters for procurement in the country are set according to international laws, and the law itself does not leave a lot of gaps, according to Mathios Ensermu (PhD), a logistics and supply chain lecturer at Addis Abeba University's School of Commerce.
"The failure here seems to be at the level of contract administration," he said. "This comes after all the legal processes were followed and the actual procurement was finalised."
This can be resolved by service level agreements, according to the expert, who states that this includes elements like training on the use of the machines, repair when it seems that certain parts have malfunctioned, and overall replacement when the machines fail altogether.
"It's the responsibility of the provider to do so," he said. "However, it isn't the mandate of the technical team to change anything that is not in the legal agreement between the two parties at this stage. If the machines are similar and have been verified before, then there is no grounds to hold up the sale on technical grounds."
Yeabsera Kebede, CBE's corporate communications director, did not respond to queries from Fortune.
PUBLISHED ON Aug 08,2020 [ VOL 21 , NO 1058]
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