Hypocrisy of Mera’s board: Approved purchase of MK2.9 billion maize
THE Malawi Energy Regulatory Authority (Mera) board of directors approved the purchase of 10,000 metric tonnes of maize which was bought in March 2016 using K2.9 billion from the Price Stabilisation Fund (PSF), The Sunday Times understands.
Mera bought the maize from Auction Holdings Commodities Exchange (AHCX) and gave it to the Agricultural Development and Marketing Corporation (Admarc). It has been established that former Mera board chairperson Dingiswayo Jere asked other board members to support the idea of buying maize to bail out people affected by hunger in Balaka, Blantyre and Nsanje.
The Sunday Times has seen an e-mail from Jere, dated February 24 2016, to board members and some Mera senior officials under the subject ‘Board Resolution – Maize Drought’.
“Directors, I forward the attached for your endorsement so that we can support our brothers and sisters [who are] suffering from hunger now,” reads part of the e-mail. The recipients of the email were Khwauli Msiska, Peterson Zembani, Estelle Nuka, Felisah Kilembe, Raphael Kamoto (dismissed Mera Chief Executive Officer) and Gideon Nyirongo, while Ishmael Chioko, Elias Hausi and Eunice Potani were copied in.
A resolution of the board on the issue, also dated February 24 2016, provides details of the purchase of maize. In the resolution, it is stated that the PSF was at K13.3 billion. It says out of the amount, K2 billion was earmarked for Fuel Sensors Project, K3.2 billion for normal claims from the National Oil Company of Malawi and K5 billion was meant to serve as a reserved PSF threshold to cater for unexpected pressures on the fund.
The resolution, however, notes that there was an excess of K3 billion, which was not earmarked for any activity. It is that amount which was diverted for the purchase of maize.
“Being cognizant of the need to provide funding to alleviate the effects of drought being experienced in the country; 1. The sum of K2,963,575,000 from the PSF be paid to Auction Holdings Commodity Exchange for [the] purchase of 10,000 metric tonnes of maize to be transported to Balaka, Bangula and Blantyre, being areas heavily affected by drought,” reads part of the resolution.
According to information in a report by the National Audit Office (NAO) on the issue, Limbe was to receive 3,000 metric tonnes, Balaka 2,000 metric tonnes while Bangula was allocated 5,000 metric tonnes. Another part of the resolution states that the government was to be informed of the board’s decision.
Kamoto subsequently wrote former Secretary to the Treasury Ronald Mangani informing him of the board’s decision on February 25, 2016.
“I have the honour to inform you that the Mera board, on 24 February 2016, resolved to purchase 10,000 metric tonnes of maize, at a cost of K2.964 billion, to be sent to Admarc for sale in its markets. In arriving at this decision, the board recognised that the current drought has affected a lot of Malawians who did not have the adequate access to maize stocks,” reads part of the letter.
Mangani wrote Kamoto on March 11, 2016 in which he said he was not formally aware of the purchase. “Treasury has received information that the Malawi Energy Regulatory Authority (Mera) has procured some maize for distribution.
I recollect that, recently, the same was informally mentioned to me in passing, by yourself, to which I displayed my ignorance of the matter. I also recollect advising you to bring the matter to the attention of the Treasury formally,” reads Mangani’s letter.
A report by a fact-finding team (FFT) on the purchase of the maize comprising officials from the Office of the President and Cabinet, NAO, Office of the Director of Public Procurement and the Technical Entrepreneurship and Vocational Training Authority, dated 19 August 2016, faulted the actions of the board.
“The Mera board passed a resolution on this matter, which was outside its mandate; the board’s decision was made through a round lobbying process, and while this approach is acceptable, in certain circumstances, the FFT holds the view that due to the nature of this transaction, and the amount involved, the board should have convened an extraordinary board meeting. The Mera board did not exercise due diligence in the manner it arrived at its decision considering the nature of the transaction and amount involved,” read some of the conclusions of the FFT.
It further says the board’s decision did not benefit from the input from all relevant members such as the Department of Statutory Corporations, Ministry of Finance, Economic Planning and Development and the Principal Secretary for Energy and Mining, who were not involved in the lobbying process.
When contacted, Jere—who ceased to be the board chairperson in April last year—referred us to the current chairperson, Bishop Joseph Bvumbwe.
“I made handovers. You can speak to the current board chairperson. I can only speak if he tells me to do so. It cannot be good that both of us [should] speak to the media,” Jere said. Bvumbwe on Thursday said he was outside the country, telling us to contact his vice, Felisah Kilembe, who, in turn, refused to speak to us without being told to do so by Bvumbwe.
A source familiar with operations of Mera observed that the board’s reason for diverting K3 billion from the PSF for the purchase of maize was highly irregular and punitive to consumers as the prices of fuel moved significantly during the period the decision was made.
“You can’t say there was K3 billion which had no use. It meant fuel customers were being ripped off for quite a long time. That K3 billion was supposed to be used in cushioning the fuel price, either by reducing the price of fuel or reinvesting the funds so that there would be no fuel price increase,” said the source who declined to be named.
The source observed that the prices of petrol, diesel and paraffin increased significantly from February to June 2016, but consumers would, under normal circumstance, have been cushioned by the so-called idle funds.
In February 2016, petrol, diesel and paraffin were selling at K711.90, K671.30 and 526.30 but they were increased to K743.30, K722.80 and K580.40 in March 2016 and K788.30, K766.90 and 609.80 in June 2016 respectively.
Last month, a disciplinary committee hearing the matter resolved to summarily dismiss Kamoto and have the contract of Director of Finance Elias Hausi terminated. According to a press statement released last week, the decision was made for “their actions which led to non-compliance with the Public Finance Management Act and the Public Procurement Act in the purchase of maize”.
In the statement, the board demanded a quick recovery of the K2.9 billion from Admarc. Another impeccable source says the whole management of Mera was implicated in the issue. The source says Director of Economic Regulation Eunice Potani and Director Energy Regulation Welton Saiwa were each given a serious warning. However, Director of Legal Affairs Ishmael Chioko, who is now Mera Acting Chief Executive Officer, and Procurement Officer Saukire Chanza were both cleared of disciplinary charges.
Consumers Association of Malawi Executive Director, John Kapito has said both the board and management needed to be careful on the issue. “If indeed the board participated in the process, it was supposed to share the blame.
However, the management was supposed to be careful. It was supposed to advise the board that what was happening was wrong and therefore not implement the decision,” said Kapito, who is a former chairperson for the Southern Region Water Board.
National Secretary for Catholic Commission for Justice and Peace, Martin Chiphwanya, has said the board was supposed to do better on the issue.
“The board is supposed to provide oversight function to ensure that management decisions are in keeping with principles of good governance and prudent management of resources. In this particular case, the board grossly failed to perform its oversight function,” he said.
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