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Government says ready to give Khato Civils guarantee

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Ministry of Finance has written Khato Civils to bring forward a detailed loan agreement for the Salima-Lilongwe water project after the ministry finalised all legal processes with Parliament to offer a government guarantee to the company.

Minister of Finance Sosten Gwengwe confirmed the development in an interview on Thursday, saying government is ready to issue the guarantee.

“We have written the contractor that as government we are ready to issue a guarantee, a government guarantee, and that they should also be able to come forward with a detailed loan agreement and we intend to subject that loan agreement to due diligence before we actually give the actual guarantee.

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“So, we would want to see the loan agreement on the table and we negotiate it and we also subject it to some due diligence and then we proceed from there so we are just waiting from the contractor to provide such details. We wrote the contractor a week or two after Parliament,” he said.

Khato Civils spokesperson Danile Mababa could not reveal much when contacted.

“Lawyers and the financiers are working hard to finalise all the details and terms that will be on the loan agreement. We can’t commit when but once that is done, the outcome will be duly made public by the government,” he said.

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Speaking to Malawi News last month, Gwengwe said the contractor had informed government that they had identified the financier and that government wanted the loan to be on its terms.

“As a guarantor, the loan must be on our terms. Once the loan offer agreement is given to us, I intend to commission a thorough due diligence not only on the company but the entire contract itself. Given the public interest this has generated; it will only be fair to make the results of such a due diligence public so that no one is left behind. The President has committed to running an open government and the same will be delivered on this project as far as I am Finance Minister responsible for this project,” he said.

On March 30, Gwengwe through Parliament announced that the government had identified Quay Energy Corporation of Australia as the finance company that would provide $313 million loan to implementers of the project.

At that time, Gwengwe gave the picture that Quay Energy Corporation is the financing company for the project, however, it was discovered that the company in question is only an arranger — the company is to look for a loan for the project instead of it being the source of the funding.

In 2015, the government initiated this project to source water from Lake Malawi.

Lilongwe Water Board signed an engineering, procurement and construction contract on December 19, 2016 with Khato Civils Pty and South Zambezi Joint Venture.

The project will be implemented through a Special Purpose Vehicle called the Salima-Lilongwe Water Supply Company which will borrow funds from Quay Energy Corporation of Australia Pty Limited to the tune of $313.4 million.

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