Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) Chief Executive Officer (CEO) Richard Chikunkhuzeni Tuesday said the fertiliser deal between the Government of Malawi and United Kingdom-based Bakaart Food Company, which saw Malawi being swindled in excess of K750 million, was a result of desperation on the part of the Ministry of Agriculture.
While admitting that procurement procedures were flouted, Chikunkhuzeni told a Joint Parliamentary Committee that is investigating the matter that SFFRFM got instructions from officials at Capital Hill not to engage the Public Procurement and Disposal of Assets Authority (PPDA) in the initial upfront payment of K750 million because the transaction was a trial run.
The trial run, according to Chikunkhuzeni, was for the purchase of 25,000 metric tonnes (mt) of fertiliser, out of the planned 800, 000mt.
Chikunkhuzeni told the joint committee that, following the ministry’s determination to have the deal go through, it was difficult for the fund and other technocrats to give contrary advice to the ministry even when they got suspicious about the credibility of the company.
“This deal was more exciting to the Ministry of Agriculture than any other stakeholder. The transaction was initiated at Capital Hill, in which K750 million was made to Bakaart Food Company as advance payment for the deal since it was a condition that was given,” Chikunkhuzeni said.
Asked why the fund was comfortable with the idea of making payment, which was done in two installments, without conducting any due diligence on the company, Chikunkhuzeni said the fund’s understanding was that the payment was meant to “lock” the price that the supplier was offering since they were advised that the price would be raised if there was any delay in making payment.
PPDA Director General Eddington Chilapondwa said “price locking” is irregular, adding that any payment has to be done after signing of a contract— which was not the case in this matter.
In his address last week, President Lazarus Chakwera told Malawians that SFFRFM paid the first installment, amounting to $181,250, on May 13 2022 and another one, amounting to 543,750 on June 14 2022, all without any credible evidence about viability of the deal.
On May 3 2022, an alleged broker of the deal, Moses Khombe, wrote an email to the Treasury and the Ministry of Agriculture, advising them to speed up payment of the deposit to Bakaart Food Company, threatening that if there were any delays the prices would go up from the agreed $290 per tonne.
But Chikunkhuzeni said Khombe was a stranger to him and the fund and did not know in what capacity he was involved in the deal.
“We used to have him during meetings, at least the three that I attended at Capital Hill. The Ministry of Agriculture was comfortable [with the idea of] having him there and it was difficult for me to make any inquiries about him,” he said.
SFFRFM Board Chairperson Marjorie Phiri also lamented that the Ministry of Agriculture and management oftentimes bypassed the board on matters to do with AIP.
“They only come to us when things go wrong,” Phiri said, citing the example of the controversial deal that SFFRFM has with Paramount Holdings.
And Chairperson for the PPDA Board, Innocencia Ottober, confirmed that they did not receive any submission pertaining to the K750 million deal in question.
Ottober and her team said procurement laws allow SFFRFM to conduct certain transactions without involving the authority but was quick to say, in the case in question, the amount involved exceeded the given threshold.
Speaking at the close of yesterday’s business, co-chairperson for the committee Gladys Ganda decried what transpired in the botched up fertiliser deal.
She described circumstances that led to it as an epitome of fraud by public servants, adding that the deal sets a bad precedent for the country.
She added that they have information that so far about $182,250 has been recovered from a bank in Germany and that a man [name withheld] has been arrested and his assets ceased following his alleged involvement in the saga.
“The board of SFFRFM was used as a conduit to externalise funds by the Ministry of Agriculture. The shortcuts were not necessary and Malawians have been shortchanged. The committee is not happy that procedures were not followed and these are issues we want to get to the bottom of,” Ganda said.
Following revelations of the failed deal and the challenges that have marred the AIP, Chakwera fired Lobin Lowe as Minister of Agriculture last week. He has been replaced with Sam Kawale.
Meanwhile, the government has fired Secretary for Agriculture Sandram Maweru over the AIP mess.
Information Minister Gospel Kazako confirmed the development.
“The contract has, indeed, been terminated,” Kazako said.