LEC loses M1 billion in three years 

…as PS Phapano calls for disciplinary action against suspended executives 

Mohloai Mpesi 

THE Lesotho Electricity Company (LEC) has lost more than M1 billion over the past three years due to alleged mismanagement by its suspended executive management, the Lesotho Times has learnt. 

This according to a letter written by the Principal Secretary (PS) in the Ministry of Energy and Mining, Tankiso Phapano, to LEC Board Chairperson, Thabo Khasipe, directing the Board to institute disciplinary proceedings against the suspended executives. 

In the letter, dated 15 May 2026 and seen by this publication, Mr Phapano said the losses were caused by outdated policies, weak internal controls and widespread governance failures. 

“The ministry notes with grave concern that both the external audit report and forensic investigation revealed systemic governance failures, material weaknesses in internal controls, operational irregularities, financial mismanagement, and significant exposure of the company to financial losses and reputational harm. 

“The forensic findings, read together with the external audit observations, establish sufficient basis for the Board to institute formal disciplinary proceedings against implicated and accountable officials occupying executive and strategic governance positions during the relevant period,” the letter states. 

Mr Phapano accused the executive management of failing to review, implement and enforce effective operational and internal control policies, resulting in weak revenue protection measures that exposed the utility to losses exceeding M1 billion over three years. 

“Accordingly, the Board is hereby directed to immediately commence disciplinary proceedings against responsible officials in relation to… Failure by executive management to review, implement and enforce effective and current operational and internal control policies, resulting in weaknesses in revenue protection controls and consequently exposing LEC to losses reportedly exceeding M1 billion over a three-year period,” Mr Phapano wrote. 

He further blamed an incomplete and unreconciled asset register for repeated failures by the Lesotho Electricity and Water Authority (LEWA) to approve tariff adjustments. According to the PS, the regulator was unable to approve the adjustments because of insufficient supporting information on bulk electricity purchases and infrastructure expenditure. 

The omissions, he said, resulted in foregone revenue exceeding M1.1 billion, posing a serious threat to the utility’s financial sustainability. As an example, he noted that the 2023 asset register failed to include distribution substations. 

“All assets form part of the tools and equipment used by departments within the company; thus, the entire executive management bears collective responsibility for this serious failure,” he said. 

Mr Phapano also highlighted a M96 million discrepancy in the fixed assets register identified by external auditors, saying management had failed to provide a satisfactory explanation. 

“Accordingly, the Board is hereby directed to immediately institute disciplinary proceedings against responsible officials,” the letter states. 

He noted that some of the suspended executives had served in senior operational and revenue management positions for more than 15 years, making it difficult to reconcile their experience with the persistence of the same governance failures. 

“The apparent normalisation of longstanding weaknesses, and the failure by executive management to collectively challenge, correct or decisively address recurring deficiencies, reflects a deeply concerning breakdown in leadership, accountability, governance and stewardship within the company,” he said. 

Despite the substantial remuneration and fiduciary responsibilities attached to their positions, Mr Phapano said, the company continued to suffer governance failures and recurring losses that required repeated government bailouts, raising serious concerns about executive accountability. 

Unrecorded tax penalties 

Mr Phapano further revealed that the forensic investigation uncovered about M14.5 million in tax penalties arising from four separate filing incidents that were never recorded in the company’s books, thereby understating its liabilities. 

The amount comprises M1.2 million in corporate income tax, M7.5 million in Value Added Tax (VAT), M5.8 million in Pay As You Earn (PAYE) and M196,929 in fringe benefit tax. 

“This pattern has been described in the forensic report as systemic in nature, indicating recurring practices in handling tax penalty obligations over time,” the letter states. 

Understated tax from SAPP dealings 

The forensic report also found significant under-declaration of gross revenue, particularly from Southern African Power Pool (SAPP) transactions, as well as understated electricity purchases. 

According to Mr Phapano, the misreporting suggests LEC may have understated its taxable income, exposing the company to a potential tax liability of about M19 million, excluding penalties and VAT. 

“This misreporting suggests that the company may have understated its taxable income by millions, resulting in a potential tax liability of around M19 million, excluding penalties and VAT exposure,” he said. 

Unreconciled revenue and banking records 

Mr Phapano also accused management of failing to reconcile revenue collection systems with banking records, creating opportunities for potentially fraudulent allocation of prepaid electricity to sales agents without payment being received. 

“There was a failure to ensure proper reconciliation between revenue collection systems and banking records, resulting in unauthorised, potentially fraudulent or irregular allocation of prepaid electricity to certain sales agents without the company receiving advance payment for the same, thus compromising the integrity and reliability of financial information, with unexplained journal entries found to have been processed towards the financial year-end,” the letter reads. 

The external audit report also recorded a 44 percent increase in revenue compared with the previous financial year, which auditors linked to irregular adjustments in the financial records. 

Auditors requested explanations for an unexplained M37 million increase, but, according to Mr Phapano, management failed to provide satisfactory answers. 

He further said management had overridden internal controls by processing unsupported journal entries close to the end of the financial year. 

Instead of being processed daily, as required, journal entries totalling more than M408 million were processed irregularly near year-end, a key factor behind the Auditor-General issuing a disclaimer opinion on the utility’s financial statements. 

Alleged procurement fraud 

The forensic report also alleges fraud in the procurement process for the Ha Belo Electrification Project. 

According to Mr Phapano, the Tender Evaluation Team’s report was altered without the committee’s knowledge to favour Phaks Joint Venture instead of AAR Joint Venture, which had originally been recommended. 

As a result, Phaks JV was awarded the contract despite submitting a bid that was approximately M21.98 million higher than AAR JV’s. 

“One of the most damning findings made by the Forensic Report concerns the alleged fraud in the procurement process that led to the award of the Ha Belo Electrification Project. 

“Certain dishonest and fraudulent changes were made to the Tender Evaluation Team’s report without the committee’s knowledge or approval after bids had already been evaluated. This ultimately led to the unjustifiable and fraudulent award of the tender to Phaks JV, despite its bid being substantially higher than AAR JV’s by M21,986,492.87,” he said. 

The forensic report further found that Phaks JV had allegedly been overpaid by M80.95 million, with the value of completed work falling significantly short of the amount paid. 

Mr Phapano said the discrepancy raises concerns over possible misappropriation of public funds and financial losses to government. 

Background 

LEC’s entire executive management team, led by Managing Director Mohlomi Seitlheko, was suspended for three months on 12 March 2025 to pave the way for an independent forensic investigation by the Auditor-General’s office. However, their suspension was extended indefinitely in June because the audit was not yet completed. 

The suspensions followed a Board resolution adopted on 7 March 2025 after mounting concerns over procurement, financial management and governance at the state-owned utility. 

Former Board Chairperson, Ntsie Maphathe, was appointed acting managing director during the suspensions. 

An external audit submitted to the Ministry of Energy in January 2025 found that LEC’s liabilities exceeded its assets by M98.6 million and that its cash reserves had declined by M145.8 million, at times leaving the utility unable to procure electricity for distribution. 

The Auditor-General also issued a disclaimer opinion after LEC failed to account for more than M408 million in journal entries. 

Of the 10 executives originally suspended, two — Corporate Secretary Attorney Khotso Nthontho and Head of Finance ‘Makabelo Matsoso — have since resigned while still under suspension. 

Nearly a year after the suspensions, the Lesotho Times reported that LEC had spent approximately M12 million paying salaries to the suspended executives while the forensic report remained undisclosed. The amount has since risen to more than M20 million. 

Separately, the utility has also been rocked by an alleged M81 million electricity fraud scheme dating back to 2015, allegedly masterminded by a sales agent working with outside accomplices to illegally load prepaid electricity units. The scheme came to light after Acting Managing Director, Tšeliso Mokela, launched an internal investigation into financial leakages. Several suspects have since appeared in court. 

Efforts to obtain comment from Mr Khasipe were unsuccessful as his mobile phone rang unanswered. 

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