Government has cancelled two sovereign guarantees given to Quay Energy and Auzano Capital due to non-performance, the latest Annual Public Debt Report by the Ministry of Finance has shown.
Government issued a sovereign guarantee to Quay Energy in December 2021 and issued another guarantee to Auzano Capital in September 2022.
Quay Energy Corp of Australia was recruited to make $313.447 million financing arrangements for the Salima- Lilongwe Water Project on terms acceptable to government.
On the other hand, government issued a $170 million guarantee for United Kingdom-based Auzano—contracted by Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM)— to supply 350,000 metric tonnes (mt) of fertiliser.
“…Government issued a sovereign guarantee to Auzano Capital Ltd in September 2022 on behalf of the Smallholder Farmers Fertiliser Revolving Fund of Malawi. However, due to nonperformance of the guarantee, the government cancelled this in December 2022.
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“Likewise, the government guarantee that was issued to Quay in December 2021 for the implementation of the Lake Malawi-Lilongwe City Water Supply Project was cancelled due to non-performance,” the report reads.
Both guarantees raised public worry, including from members of Parliament.
Late last year, lawmakers wondered why government issued the Auzano guarantee for such a huge contract with a company that was just one year-old.
But Minister of Finance and Economic Affairs Sosten Gwengwe assured the legislators that the sovereign guarantee did not put public funds at risk as the deal would only become effective upon delivery of fertiliser to SFFRFM warehouses.
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According to the report, in the 2022- 23 financial year, government also issued a sovereign guarantee of $50 million to Badea for a fuel financing facility on behalf of National Oil Company of Malawi.
“During the same period, two guarantees were fully discharged. These were the K25 billion guarantee issued to NBS Bank plc for Admarc [Agricultural Development and Marketing Corporation] Ltd and $7 million guarantee issued to CDHIB for Salima Sugar Company Limited.
“Another guarantee, the K12 billion guarantee issued to CDH Investment Bank for Admarc Ltd, was partly discharged. The Admarc guarantees were discharged through a World Bank grant whilst the Salima Sugar Company guarantee was settled by the company,” the report says.
Early this month, Budget and Finance Committee of Parliament Chairperson Gladys Ganda said her committee was proposing that issuance of sovereign guarantees be approved by Parliament unlike the current arrangement where the august House is just informed for noting.
