Malawi has told the International Monetary Fund (IMF) that it will cancel its fertiliser procurement deal with Romanian firm East Bridge Estate.
In a Letter of Intent, dated June 30 2023, to IMF Managing Director Kristalina Georgieva, Finance Minister Sosten Gwengwe and Reserve Bank of Malawi (RBM) Governor Wilson Banda say the barter deal to secure access to fertiliser in exchange with crops raised a number of governance concerns.
Gwengwe and Banda note that Attorney General (AG) Thabo Chakaka Nyirenda advised that the deal be halted because the transaction was undertaken without the proper procurement and authorisation procedures.
“In light of this, we are taking all the necessary steps to nullify this deal and to avoid a recurrence of such incidences in the future. We also confirmed that the government has a manual repository of contracts (which are also recorded in excel) and has made available to fund [IMF] staff a full repository of contracts that would give rise to actual or contingent external debt liabilities of the government and the RBM.
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“We recommit to following the appropriate public procurement procedures and adhering to the limits on contracting and guaranteeing non-concessional and concessional external debt set forth in the PMB [the Staff Monitored Program with Executive Board involvement]. We requested governance diagnostic technical assistance from fund staff to identify any weaknesses in regulation, legislation and compliance,” the top officials say.
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In an interview Tuesday, Human Rights Defenders Coalition Chairperson Gift Trapence said he was not surprised that the government is taking steps to halt the deal.
Trapence said Malawians questioned the whole contract right from the beginning.
“This is an embarrassment to the government. Government should show real commitment to issues of accountability and transparency and should make sure it adheres to procurement procedures to avoid loss of taxpayers money through lawsuits for careless decision making,” Trapence said.
On July 4, the Malawi Law Society (MLS) wrote the Office of the AG, Anti-Corruption Bureau (ACB) and the Director of Public Prosecutions (DPP), asking them to investigate the deal with East Bridge Estate.
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As part of the deal, Malawi is expected to pay back, in the form of produce, 250,000 metric tonnes (mt) of soya beans at $528 per mt— which translates into $132,000,000 (K132 billion) — and 250,000mt of groundnuts at $725 per mt costing $181,250,000 (about K182 billion).
MLS claimed in its letter that the deal flouted some of the country’s laws.
MLS President Patrick Mpaka noted, in the letter, that there appears to be a violation of procurement and public finance management laws.
“[There are violations of laws] starting with apparent failure to obtain certification from the Minister of Finance that funds were available for the procurement, going through due diligence to initiation and conduct of procurement proceedings and ending with apparent illegitimacy of the signatures on the agreements,” it reads.
In June this year, details emerged that the government had signed a $124.5 million (K125 billion) agreement with the Romanian company before its consultations with the ACB were finalised.
It transpired that, in April this year, the Ministry of Agriculture wrote the ACB, asking it to conduct due diligence on the company but, before consultations between the ministry and the ACB were finalised, the government proceeded to sign the contract.
Recently, government spokesperson Moses Kunkuyu defended the deal, saying Malawians should not be worried because no money will be paid before the product is supplied.
Kunkuyu further said this is a commodity exchange deal where, after the company has supplied the fertiliser, the government is going to pay back using farm produce such as soya, maize and other products.
