The government plans to merge Export Development Fund (EDF) and the Malawi Agricultural and Industrial Investment Corporation (Maiic) plc, Times Business has established.
The government has disclosed this in a Memorandum of Economic and Financial Policies, which is accompanying the country’s Letter of Intent on measures it intends to implement under the Staff Monitoring Programme with Executive Board Involvement (PMB) to build a track record for Upper-Credit- Tranche (UCT) quality arrangement within the next 12 months.
According to the memorandum signed by Finance Minister Sosten Gwengwe and Reserve Bank of Malawi (RBM) Governor Wilson Banda, governance weaknesses at the EDF pose a risk to the government, in terms of contingent liabilities.
A contingent liability is a liability that may occur depending on the outcome of an uncertain future event. Contingent liabilities are recorded if the contingency is likely and the amount of the liability can be reasonably estimated.
“EDF is a wholly owned subsidiary of RBM but the government is working on modalities to merge EDF with Malawi Agricultural and Industrial Investment Corporation, PLC (Maiic),” the memorandum reads.
Early this year, a special audit report on EDF revealed that acts of negligence and abuse of office by the company’s management resulted in EDF losing K12.8 billion.
According to an audit by Fletcher and Evance, EDF lost the money through its Commodity Market Making (CMM) initiative which EDF management had allegedly been administering without adhering to laid down procedures.
In October this year, police arrested five officials from Transglobe Produce Limited and EDF over the alleged theft of K6.8 billion at EDF.
The arrest followed a decision by the High Court to dismiss an application by Transglobe officials restraining law enforcement agencies from effecting arrests on individuals involved in the matter.
Commenting on the proposed merger, Centre for Social Accountability and Transparency Executive Director Willy Kambwandira said the merger could be a step in the right direction.
“However, the problem is not always about these institutions; it is about the people we sometimes hire and put in these institutions. They are often partisan and compromised.
“So, the merger could be a beautiful reform, but as long as we continue hiring political party mercenaries to serve as CEOs, then we should not expect anything positive from this merger. We need to take politics out of these institutions,” Kambwandira said.