Cotton Ginners Africa Limited, which is accused of defrauding banks K20.9 billion through toxic loans, wants Export Development Fund (EDF)—a Reserve Bank of Malawi (RBM) owned company—to be removed from the list of its alleged preys.
Cotton Ginners argues that EDF should not be part of the case because it loaned them money illegally since the fund did not have a licence.
Director of Public Prosecutions Steven Kayuni said the matter returns to court today.
“They are arguing that, since EDF has been operating without a licence, the funds were lent to them illegally and that, as such, they cannot repay. It is like what we call katapila, where someone can get katapila and not pay back challenging the proprietor to report to police,” he said adding that parties would appear before Judge Sylvester Kalembera.
EDF was established by the RBM with the objective of increasing the productive potential of the country through the provision of financial services.
EDF was reportedly defrauded K4.1 billion while other alleged major victims of the fraud are Standard Bank (K8.5 billion), CDH Investment Bank (K4.5 billion), Ecobank Malawi (K3.5 billion) and National Bank of Malawi (K250 million).
In February 2018, High Court Commercial Division Judge Michael Mtambo declined to declare bankrupt Cotton Ginners Africa Limited, a ruling which put the banks at liberty to sell the company’s assets valued at K10 billion.
Cotton Ginners proprietor Abdul Kader Patel sought the bankruptcy application to allow the company to reorganise itself and start repaying the loans.
In September 2021, the Public Accounts Committee (Pac) of Parliament took to task RBM officials over their failure to licence EDF for close to nine years.
Pac raised the concerns when RBM and EDF top brass appeared before committee members to shed light on operations of the institution.
During the meeting, EDF officials told committee members that there had been a spike in non-performing loans in preceding months due to tight operating conditions occasioned by the Covid pandemic, which, among other things, slowed down borrowers’ capacity to repay loans on time.
The officials said key assets that, because of their significance, were receiving special attention from both management and the board of directors included Transglobe Produce Exports Limited, Alliance Capital Limited, AHL Commodities Exchange and Cotton Ginners Africa Limited.
Asked by Pac if RBM would have allowed a firm that was not licenced to operate in the financial industry had it been that it was not a baby of the central bank itself, RBM Governor Wilson Banda said the bank could not allow that.
He added that processes to licence EDF were at an advanced stage.
EDF is a development finance institution registered in Malawi under the Companies Act (1984) and is a wholly-owned subsidiary of RBM.
Cotton Ginners lawyer Clement Mwala did not pick his mobile phone for comment when we made several attempts to get in touch with him.
