The European Investment Bank (EIB) has pounced on Blantyre Water Board (BWB), demanding part repayment of the 18 million euros (K15 billion) funding which the Bank made available towards the water and sanitation project in Blantyre and Lilongwe cities due to suspected fraud and corruption.
It also indicates BWB risks being ineligible to access EIB funding in future.
The Bank has reached this conclusion following an investigation which its Inspectorate General’s office conducted on the utilisation of the funding which it provided towards the project.
The EIB says its findings provide reasonable grounds to suggest a breach of the Finance Contract and Grant Agreement which allows the Bank “to demand compulsory prepayment of the relevant part of the loan and repayment of the grant”.
In 2008, the Malawi Government obtained from EIB funding amounting to 18 million euros for Lilongwe Water Board and Blantyre Water Board to rehabilitate their infrastructure for improved “supply of affordable, sustainable and reliable drinking water to about 1.5 million inhabitants” in the two cities.
The financial package comprised 50 percent loan, with the rest being a grant. The project was initially supposed to end in 2013 but it has gone on to this year due to procurement hitches, among other factors, which delayed the project.
In May this year, EIB’s consultants, RSM, released a report of their investigation on the execution of the works in the project in Blantyre city.
And in a letter dated June 15 2016 to BWB highlighting the findings of the investigation, the EIB expresses reservations with how the Board has implemented the project, hinting at fraud and corruption as having saddled the execution.
According to the correspondence, the investigation found “serious issues” relating to construction of water kiosks, one of the most critical components of the project meant to ensure improved water access to peri-urban and low income settlements in the two cities.
The concerns include numerous deficiencies in procurement, strong indications of collusion between tenderers for the construction of water kiosks, excessive cost for construction of water kiosks’ and high number of non-operational water kiosks.
The investigation also found overstated final claims sheets of water kiosks.
The EIB also questions the quality of work by an NGO which the Board contracted in the task of providing water and basic sanitation services to people living in low income areas and in improvement of service quality.
The EIB says these findings are in breach of the financing terms which the board entered with the Bank.
It asks for a response from the Board on the issues raised, after which it will take further remedial measures.
“We will then be in contact with you to discuss the details and practical arrangements to determine a resolution to these issues (including the amount of prepayment of the loan and grant).
“In future, once the above issues are resolved, we would be willing to discuss measures, which would then be required in order to improve the performance of BWB in such a way that it may become an eligible institution for possible future financing,” reads the communication signed by Thomas Van Gilst and Benard O’Donnel, respectively Head of Water Management Division and Head of Fraud Investigations Division at the EIB.
Contacted for the response the Board has given to the EIB as requested, BWB Public Relations Officer Priscilla Mateyu said the Board would not comment on the issue.
We also sought the position of the EIB in terms of the response which BWB may have provided as regards the findings and the amount of money it seeks the Board to repay.
In its response, it said anti-fraud and anti-corruption processes rely on their being kept confidential for them to be effective and it would not, therefore, give much detail on the matter at this time.
“The EIB initiated a proactive integrity review of the Malawi Peri-Urban Water and Sanitation project in June 2015 to assess whether EIB funds are being used for their intended purpose. As the review is still ongoing, the EIB is unable to disclose any further details at this time….
“The effectiveness of any anti-fraud or anti-corruption processes relies on their being confidential. The EIB can therefore not comment further,” it said in an email response through Fernando Trabada-Crende, Team Leader: Social Sectors & Infrastructure at the Delegation of the European Union in Malawi.
The project in question started in 2009 and was supposed to run up to the 2013 going by the four-year implementation period as initially planned. However, it has kept running until this year.
For the implementation of the works, the government contracted a Dutch company Vitens Evides International to provide “technical and operational advice” to the Board.
Vitens Evides International would carry out the works in cooperation with three other Dutch companies, namely, water company WmL, advice and engineering consultants DHV and international health organisation, Simavi.
The project was expected to increase the Board’s water production volumes by 23 percent from 78,000m3 to 96,000m3.
It was designed to meet the demand based on population growth projection up to year 2025 when another project to increase water capacity could be carried out.
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