By Cathy Maulidi:
Government is in a mess with its fertiliser deal with East Bridge Limited.
The Romanian firm made an initial supply for which the government is failing to meet payment deadlines.
The company already has another consignment of 60,000 metric tonnes ready for shipping as part of meeting its contractual obligations.
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But, amid these developments, the government has entered a deal with another supplier for similar amounts of fertiliser, which might suggest it has quietly abandoned East Bridge Limited.
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Early last year, the government announced it had signed a fertiliser contract with East Bridge.
Initially, it emerged that the deal would see the Romanian firm supply 600, 000 tonnes of fertiliser to Malawi.
Later, the then Minister of Finance Sosten Gwengwe said Cabinet had recommended the halving of the quantities.
In that case, East Bridge would supply 300,000 tonnes of fertiliser in two batches of 150,000 tonnes each valued at $124.5 million each.
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Malawi would pay back in form of produce.
In response to growing questions about how the deal flouted procurement procedures, in August last year, Minister of Agriculture Sam Kawale told Parliament that the government had suspended the deal.
He said his ministry was instead arranging to have the contract transferred to Smallholder Farmers Fertilizer Revolving Fund of Malawi (SFFRFM).
He made this announcement after Gwengwe and Reserve Bank of Malawi Governor Wilson Banda had written the International Monetary Fund (IMF) that the government would cancel the barter deal in order to recommit to following the appropriate public procurement procedures.
We now know that East Bridge supplied an initial 28,000 metric tonnes of fertiliser to SFFRFM.
But it has not received full payment, although it has also been planning to ship into the country another 60,000 metric tonnes.
However, it looks like government has jettisoned East Bridge, because it has entered another fertiliser deal with ‘His Highness Sheikh Ahmed Al-Qassimi’.
A letter dated May 27, 2024, from Richard Chikunkhuzeni, SFFRFM CEO to Secretary for Agriculture, reads:
“We would like to inform you that SFFRFM has received a revised offer from the Office of His Highness Sheikh Ahmed Al-Qassimi to supply 600,000 tonnes of fertiliser (300,000 tonnes Urea: 300,000 tonnes NPK).
“The revised term sheet has reduced the cash cover requirement from 120 percent to 100 percent as per attached email correspondence.”
Chikunkhuzeni said in the letter that the removal of the 20 percent would cost the bag at K65,000, lower than the K80,000 on the market.
“The transaction will also help to ease the country’s forex burden as the payment to the supplier will be in Malawi kwacha,” reads the letter.
Now, East Bridge is demanding K39.5 billion ($22.5 million) for breach of contract, loses and damages.
In a letter dated September, 20 2024 to Attorney General Thabo Chaka Nyirenda, the company demanded immediate payment of the money.
According to the letter, this is an outstanding balance for fertiliser supplied to the Malawi government on March 20, 2024.
“The agreement stipulated that the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) would settle the amount with commodities of equivalent value or cash by June 14, 2024. However, this did not happen,” reads the letter from East Bridge’s lawyer, Chimwemwe Kalua.
The agreement further said that if SFFRFM failed to settle the amount by June 14, 2024, the government would pay the outstanding balance in cash immediately after that date.
Todate, neither SFFRFM nor the government has fulfilled their payment obligations.
As a result, East Bridge Estate SRL demands immediate payment of the outstanding sum plus collection fees of $3.3 million and interest on the outstanding sum at the statutory rate from March 20, 2024.
East Bridge warns that if the payment is not received in full, they will commence arbitration proceedings, seek specific performance of the agreement and claim damages for breach of contract or pursue other legal remedies available under Malawi law.
“Time is of the essence, and our client’s forbearance should not be construed as a waiver of any rights under the agreement or at law,” the letter further says.
The Attorney General’s office is responsible for advising the government and representing it in litigation.
In this case and in the previous letters that we have seen, the Attorney General responded, indicating that he was initiating plans for payment.
However, nothing has happened.
We contacted, lawyer Kalua refused to speak to us.
But East Bridge’s Chief Executive Officer Haim Tzutziashvili said the firm has indeed put forward the demand letter to the Attorney General.
“We have the fertiliser which we already supplied and we have over 60,000 metric tonnes also ready for shipping.
“We even agreed to be paid in Kwacha if the farm produce are not ready. What we want is to continue with the contract,” Tzutziashvili said.
Attorney General Nyirenda promised to get back to us with a response when we called. He had not reverted as we went to press.
Kawale refused to comment.
