Dust is refusing to settle in the award of 2021-22 fuel importation contracts by the National Oil Company of Malawi (Nocma) as it has emerged that the company did not obtain consent from the Anti-Corruption Bureau (ACB) to use a new way of importing fuel in the country called Delivered At Place Unloaded (DPU).
DPU is an International Commercial Terms (incoterm) system that requires that the seller delivers the goods unloaded at a named place of destination. The seller covers all the costs of transport including export fees, carriage, unloading from main carrier at destination port and destination port charges and assumes all risks until arrival at the destination port or terminal.
Incoterms are a series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law. They are widely used in international commercial transactions, or procurement processes, and their use is encouraged by trade councils, courts and international lawyers.
Nocma has awarded fuel supply contracts to two firms, Lake Oil Limited and Camel Oil Limited, on DPU despite a High Court order and an ACB determination restricting it to import fuel via Ex-tank.
Briefing transporters in Lilongwe Tuesday, Nocma Deputy Chief Executive Officer Hellen Buluma said her organisation’s legal team scrutinised the High Court order and established that it did not restrict the awarding of fuel contracts to Ex-tank only.
Buluma claimed that, after making the observation, Nocma sought clarification from the ACB, which cleared it to award the contracts using any other incoterm apart from DDU.
She said Nocma has thus awarded the contracts at 75 percent DPU and 25 percent Ex-tank.
According to Buluma, though similar to DDU, the method of DPU is somehow different from DDU in that it places some responsibilities in the hands of Nocma.
But when asked to confirm whether ACB gave Nocma the nod to use other incoterms of importing fuel than Ex-tank, ACB Director General Martha Chizuma referred The Daily Times to a letter she wrote, clarifying the matter to Nocma, on August 16 2021.
In the letter, titled ‘Clarification in The Consent to Deal’, Chizuma advised Buluma that the only other method to use in the award of contracts was Ex-tank.
“As clarified during the meeting, our understanding of the ruling by the court was in the context of the fact that the whole ruling simply makes reference to two methods of fuel importation i.e DDU and Ex-tank.
“In addition to this is the fact that your own bid document, by which this procurement process proceeded, only mentioned the two incoterms, DDU and Ex-tank. Accordingly, for us if you could not proceed by the way of DDU as per court ruling, the only other method to use was the Ex-tank method,” Chizuma said.
In her justification of the adoption of DPU as a new incoterm for importing fuel into Malawi, Buluma said using Ex-tank alone could crash Nocma within seconds.
Among other things, Buluma said Nocma pays K3 billion to the Malawi Revenue Authority (MRA) in duty every month, adding that the money is paid after selling the fuel.
She said adopting Ex-tank wholesale could mean Nocma paying the K3 billion to MRA upfront at the border every month, the money, she claimed, Nocma does not have.
However, a source conversant with the issue of fuel importation said Buluma’s fears were misplaced as companies that import fuel using the Ex-tank method could arrange with MRA to pay the duty at the border or the duty can be paid days after entering the country.
“It is not a must that duty for fuel be paid at the border,” said the source.
Buluma observed that since Nocma started its operations, the government has not injected any capital into the company, adding that Nocma operates through a $75 million financing facility from Trade and Development Bank arranged through the Reserve Bank of Malawi.
On June 10 this year, ACB officials stopped Nocma from proceeding with the award of fuel importation contracts for the year 2021-22 to pave the way for investigations into how the deals were awarded following red flags raised by the Human Rights Defenders Coalition and the Malawi Energy Regulatory Authority (Mera).
Mera had indicated that the deals could trigger a fuel price hike as they were $50 million [about K45 billion at the current exchange rate] more expensive.
Later, in August, ACB cleared Nocma and gave it the go-ahead to offer the deals to Lake Oil Limited, Dalbit International Limited and Camel Oil.