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Medical Stores headache

CMST appeals K3.3 billion interest bill

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KANDODO CHIPONDA—We cannot be losing taxpayers’ money for nothing

A legal battle is set to continue between Central Medical Stores Trust (CMST) and a pharmaceutical company over a K3.3 billion interest bill which the High Court had ordered CMST to pay the latter.

CMST has however sought an appeal at the Supreme Court of Appeal over the judgement.

It is alleged that CMST delayed to pay Sadm Pharmaceuticals, such that the supplier took them to court where the court awarded the pharmaceutical company a whopping K3.3 billion as interest charges for the debt.

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Malawi News investigations have exposed that, in 2013, CMST awarded a tender to Sadm Pharmaceuticals to provide medical supplies worth $12,577,605 (about K9.4 billion).

After some time, CSMT paid Sadm Pharmaceuticals $12,236,790 (K9.2 billion), thereby owing Sadm a settlement balance of $340,815 (K200 million).

It is believed CMSTU delayed to settle the balance and took years to do so as it only met the whole amount in February this year.

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However, due to the delay, Sadm Pharmaceuticals went to court and sued CMST for interest on the K 200 million payment balance.

The case was heard before Justice Kenani Manda of the High Court’s Commercial Division who, in his ruling dated June 18 2020, ordered CMST to pay Sadm Pharmaceuticals an interest of $4,366,848 (K3.3 billion).

The order meant that CMST would pay Sadm Pharmaceuticals K3.5 billion.

Our analysis shows that this figure is enough to procure medical supplies for a district hospital at least for one year and is also enough to provide high-quality community health services to 100 health facilities, and K 3.3 billion is also enough to provide food rations to about three million households.

Surprisingly, CMST did not even challenge computation of the interest charges.

Nonetheless, it has sought a stay of the High Court Order, which was granted by Justice Lovemore Chikopa of the Supreme Court on August 7 2020.

Meanwhile, CMST has just awarded another contract to Sadm Pharmaceuticals worth $1 million (about K7.5 billion) to make available more medical supplies despite the protracted legal battle.

Meanwhile, Ministry of Health has said it will review all procurements of goods and services that were done under the former ruling Democratic Progressive Party regime.

Minister of Health Khumbize Kandodo Chiponda confirmed that her ministry will review all procurement processes that were done in the initial deal.

“Considering the fact that the issue happened in 2013, we have to review the procurement process and determine what exactly happened, so that it doesn’t happen again. My ministry has taken the issue back to the Attorney General to relook at the issue. We cannot be losing taxpayers’ money for nothing,” Kandodo Chiponda said.

In an interview, Attorney General Chikosa Silungwe said CMST has not paid the K3.3 billion interest bill, saying the organisation is not satisfied with the High Court’s Commercial Division judgment, hence the decision to appeal at the Supreme Court.

When asked on matter, CMST spokesperson Hebert Chandilanga played down assertions that their lawyers deliberately presented a weak case against Sadm Pharmaceuticals to defraud government.

“The fact that judgment was entered against CMST does not and cannot mean that the lawyers did not put a strong defence. Being dissatisfied with the judgment, CMST has appealed against the commercial court judgment and believes there is merit in its arguments in this case as guided by its legal team,” he said.

When asked to confirm if CMST has indeed awarded another contract to Sadm Pharmaceuticals worth $1 million, Chandilanga said CMST is awaiting legal advice on the matter as part of the issues relate to the appeal.

But Centre for Social Accountability and Transparency Executive Director, Willy Kambwandira, said his organisation suspects foul play, describing the matter as a well-calculated mission arranged to defraud Malawians of their hard-earned taxes.

He has since asked the Anti-Corruption Bureau (ACB) to investigate the matter.

“We smell corruption in the whole story. One would expect Central Medical Stores to challenge computation of the interest charges but we hear this did not happen. The interest charges are not making sense to us and we strongly believe that this could be a well-calculated mission where some people deliberately put a weak case to defraud Malawians of their hard-earned taxes. We appeal to the graft-bursting body to commerce investigations on the matter,” he said.

Kambwandira has also called on government to swiftly reform CMST’s drug procurement systems.

This is not the first time that CMST is embroiled in controversy as in October this year, the Human Rights Defenders Coalition through their whistle-blowing initiative reported the organisation to the ACB over a suspicious K36 billion contract involving Victoria Pharmaceuticals Limited and CMST.

This is happening at a time when public hospitals are fast running out of essential medical drugs because some suppliers have allegedly stopped supplying drugs to CMST.

In March this year, CMST Chairperson Hilda Singo sounded an alarm when suppliers had suspended supply of drugs to the organisation due to government’s failure to pay them.

Finance Minister Felix Mlusu announced during this year’s budget presentation that the country is facing a K4.1 billion debt stock in both domestic and foreign debts.

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