By Deogratias Mmana:
Details have emerged that the government risks paying $14.5 million, plus interest, to a Namibian firm, Nendongo Commercial Group, after a fertiliser deal went sour.
Government, through the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM), entered into a fertiliser supply contract to the tune of $150 million (K263.5 billion) on September 7, 2022 with Nendongo Commercial Group.
The firm was to deliver 200,000 metric tonnes of fertiliser comprising 100,000 metric tonnes of NPK and 100,000 metric tonnes of Urea and the agreed delivered prices of $850 per tonne for NPK and $650 per tonne for Urea.
Attorney General Thabo Chakaka Nyirenda said the company’s initial claim stood at $20 million for breach of contract, which has now been reduced to $14.5 million plus interest.
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According to amended claimant’s statement of case dated March 13, 2024 Nendongo procured the fertiliser at the delivered costs of $630 per tonne for Urea fertiliser and $750 per tonne for NPK making a profit of $20 per tonne for Urea and $100 per tonne for NPK.
Nendongo argues that from the contract it was supposed to make a profit of $2 million from Urea and $10 million from NPK.
The company further claims a loss of $2.6 million after selling the 6,000 metric tonnes delivered in Beira, Mozambique at a loss to mitigate damage.
It further demands $1 million for indemnity for the storage charges for 6000 metric tonnes kept in warehouses at Beira from September 15 2022 to July 15, 2023.
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Further, the company also demands compound interest on $1 million at one percent above the bank lending rate for being kept out of the said money by paying for the storage charges from July 15, 2023 to the date of payment.
“The Claimant has suffered loss and damage due to the breach of the contract by the Respondent’s failure to open Letters of Credit and shall require compensation equal to the amount of the Letter of Credit,” reads the amended statement signed by Madalo Banda of Messrs Maganga & Co, legal practitioners for Nendongo Commercial Group.
The claim further says: “The Claimant therefore claims losses under the Convention on the International Sale of Goods including non-perform under loss, incidental loss and consequential loss resulting from the breach of the contract herein as per the confirmation of financing undertaking with the Respondent by Auzano Capital Management Limited.”
But the government through SFFRFM argues that Nendongo failed to deliver all of the contracted fertiliser in Lilongwe by November 30 2022 when the 12 weeks delivery period expired.
In the amended defence filed by lawyers Wilson and Morgan, legal practitioners for SFFRFM, dated April 8, 2024, the company argues that since Nendongo failed to supply the contracted fertiliser, SFFRFM’s obligation to pay for the fertiliser and issue the Letter of Credit did not arise.
It argues that the issue of the Letter of Credit was not a condition precedent to the fertiliser delivery by the claimant.
On the contrary, the fertiliser delivery was to precede the submission of the invoice or a payment request.
SFFRFM also denies the alleged delivered cost of the fertiliser and the alleged profit of $12 million.
SFFRFM further argues that the representation by Auzano Capital Capital Management Limited was that the Letter of Credit was to be executable by October 28 2023 on the condition of complete delivery of contractual volumes and quality of the fertiliser to the satisfaction of the company.
“The fertiliser supply contract obliged the claimant to deliver the fertiliser in Lilongwe, Malawi. Making the alleged 6,000 MT of Urea fertiliser at Beira was a contractual non-event,” reads the defence.
Chakaka Nyirenda said last week that the government would defend the matter.
Nendongo legal practitioner Chancy Gondwe said the matter is under arbitration proceedings and that it is private and confidential.
The documents show that the arbitrator is lawyer Noel Chalamanda.
Last week, Centre for Social Accountability and Transparency Executive Director Willy Kambwandira blamed the government for striking ‘bogus’ deals which become costly for the citizens.
“This is the price that we pay when the government uses its power to engage in dubious procurement deals. Unfortunately, public officers who deliberately violated procurement laws and procedures have not been personally held accountable and the government appears to apply all tricks to protect them from facing the law,” Kambwandira said.
He also blamed the National Assembly for being passive in its oversight role.
“Our Parliament too appears powerless as their enquiries on these issues have been ceremonial,” he said.
