By Deogratias Mmana:
The fertiliser deal which the government has signed with a Romanian firm, East Bridge Estate SRL, could see the country shipping out produce worth nearly K500 billion.
Initially, it emerged that the deal would have the Romanian firm supply 600, 000 metric tonnes of fertiliser to Malawi.
However, Minister of Finance Sosten Gwengwe has told Malawi News that Cabinet recommended the halving of the quantities.
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In that case, East Bridge will supply 300,000 tonnes of fertiliser in two batches of 150,000 tonnes each valued at $124.5 million each.
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“Cabinet reduced the quantities to half and directed that two SGs [Sovereign Guarantees] of $124.5 million be issued,” he said.
Malawi will pay back in form of produce.
A section of the commodity exchange agreement reads: “The contract between the parties being a Commodity Exchange based arrangements, the Parties have agreed that the Seller will accept the below commodities at the below agreed prices as payment in respect of the fertilisers.
“Further, the purchaser will aggregate for the Seller the commodities in the quantities.”
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Under the agreement, the list of the crops and their corresponding volumes and prices Malawi will pay are as follows:
- 250,000 metric tonnes of soya beans at $528 per metric tonnes which translates into $132,000,000 (K132 billion);
- 250,000 metric tonnes of groundnuts at $725 per metric tonne costing in total $181,250,000 (K181.25 billion);
- 200,000 metric tonnes of pigeon peas at $365 per tonne making $73 million (K73 billion).
- 50,000 metric tonnes of rice at $370 per tonne making $18.5 million (K18.5 billion);
- 200,000 metric tonnes at $232 per tonne giving a total of $46.4 million (K46.6 billion);
- 25,000 metric tonnes of sugar at $483 per tonne making $12.075 million (K12 billion);
- 50,000 metric tonnes of sorghum at $295 per tonne making $14.750 million (K14.7 billion and
- 25,000 metric tonnes of cotton at $785 per tonne translating into $19.625 million (K19.6 billion).
The commodity exchange agreement was signed on May 18, 2023 and has official stamps from East Bridge Estates SRL and Ministry of Agriculture, Irrigation and Water Development.
When asked yesterday to comment on the K500 billion figure for the commodity exchange deal and whether Malawi has the capacity to deliver the goods, Gwengwe said: “So still agriculture deals with productive capacities and mega farms. I am sure all this was considered.”
Minister of Agriculture Sam Kawale said the $124.5million (K124.5billion) covers 150,000 metric tonnes of urea as per Sovereign Gurantee.
“We are also going to use mega and anchor farms, with irrigation and contract farming to increase production,” he said.
He said Malawi’s low exports are a result of not having a solid off taker.
“With East Bridge, farmers will be told what to grow and volumes to grow. We will aggregate and forward to them,” he said.
Kawale added: “One more thing, we are paying over two years after delivery [of the fertiliser].”
“In the event that there is drought, cyclone or any other natural disaster, Malawi Kwacha will be paid, and not forex.”
On whether the produce quantities Malawi will exchange have also been revised downwards, Kawale said “Not to my knowledge.
“They will be changed at discussion level depending on their demand at that time.
“To make it easy, we will be letting farmers know how much will be needed that season so that we don’t under produce.”
This agreement comes barely a year after Malawi failed to satisfy export demands to South Sudan by supplying only 10 percent of the goods agreed under the Africa Continental Free Trade Area.
The commodities included maize flour and rice.
Ministry of Trade Principal Secretary Francis Zhuwao said at that time that the subdued supply was a result of Malawi’s shrinking capacity, which he said the government was working to address.
In May this year, Gwengwe said Malawi loses about $700 million (about K710 billion) in a year through illicit export of various agricultural commodities.
He said last year’s statistics indicate that the country exported goods worth $1.4 million but that in reality, the amount of export proceeds that came to Malawi were seen at just around $700 million.
In an interview on Thursday, agriculture expert Tamani Nkhono Mvula said the challenge with the deal is that the fertilisers to be supplied have nothing to do with the crops being demanded.
“We are talking of soya beans, groundnuts and sugar that do not need the fertiliser. That is an issue to me,” Mvula said.
He said the taking away of lots of metric tonnes for soya and groundnuts, for example, is going to affect the local entrepreneurship that depends on such crops as raw materials, hence affects job creation in the process.
He urged the government to come up with measures to boost production of such crops.
Chairperson for Human Rights Defenders Coalition Gift Trapence Friday urged the government to cancel the deal if procedures were flouted.
“HRDC calls on the government to respond to all questions that Malawians are asking. Let the government cancel the contract if they flouted the procurement procedures and take those officers responsible to account,” Trapence said.
The Anti-Corruption Bureau, Public Procurement of Disposal of Assets Authority and Government Contracting Unit have distanced themselves from full participation in the contract.
