By Cathy Maulidi:
A fuel deal between the Malawi Government and ‘His Highness Sheikh Ahmed Bin Faisal Al Qassimi from the United Arab Emirates (UAE) to supply 250,000MT to National Oil Company of Malawi (Nocma) is raising eyebrows.
Some quarters are questioning if Malawi has done some due diligence on the said deal, warning that the country risks losing money.
In a confidential document from Nocma to Public Procurement and Disposal of Assets Authority (PPDA) dated September 6, 2024 that Malawi News has seen, the fuel company expresses intention to single source Sheikh Qassimi to supply fuel to Nocma for which payment shall be made in Malawi Kwacha.
The document states that the foreign exchange challenge that Malawi is facing has led to Nocma and the government to look for fuel suppliers that can help supply the fuel in the local currency.
“Current stock cover days are now at an all-time low. The monetary authorities in Malawi have confided in Nocma that they are not in a position to support or increase an allocation of foreign exchange to Nocma,” reads the document.
Nocma further states: “In line with requirements of the law and regulations, Nocma Board has notified government and Mera (Malawi Energy Regulatory Authority) formally of threats to fuel supply stability and security attributed to the above challenges, thus invoking regular stakeholder engagements.”
Nocma says in the document that it is failing to settle debts in dollars and that paying to the Sheikh in Malawi Kwacha will enable Nocma to pay for fuel imports.
On its basis for single sourcing of al Qasimi, Nocma cites “emergency”.
“Malawi faces a dire fuel stock situation, which may soon result in a difficult to roll-back stock-out, hence new strategies for overcoming existing challenges are required immediately and over the time-spans – short, medium to long-term,” reads the document.
Another factor is what it calls contract security. According to information, the Sheikh shall provide a bank security cheque, against which a Bank Guarantee shall be issued by National Bank of Malawi to safeguard and protect funds and 50 percent shall be paid by Nocma to secure the consignment.
Further, he shall provide authority through power of attorney to a special purpose vehicle (SPV) namely, QLV Digital FX Limited, and the SPV shall receive the Malawi Kwacha from Nocma.
Information we have sourced indicates that due diligence on QLV Digital FX Limited is yet to be carried out.
According to a document from the Sheikh dated July 22, 2024, the deal involves supplying 125,000 metric tonnes of petrol and 125,000 metric tonnes of diesel.
However, an inside source within the deal negotiations has raised concerns that the international single-sourcing conditions were not met and the pricing is too high.
The source told Malawi News that the highest bid in the latest tender was $195 per tonne while the Sheikh is charging $295 per tonne, which is considered “way too high”.
“The payment mode also raises eyebrows,” according to the source.
In a letter dated July 19, 2024 and referenced Ref No. Nocma/Mera/24/7/4, Nocma is quoted asking Mera and PPDA for a no objection to proceed with the contract.
“The Nocma Board resolved to approve, subject to Mera’s and PPDA’s no objections: – That Nocma allocates to the Office of His Highness Sheikh Ahmed Bin Faisal Al Qassimi, fuel supply volumes of 125,000 metric tons of diesel 50ppm and 125,000 metric tons of gasoline RON93 to be delivered through QLV Digital FX (Malawi) Limited, which is a special purpose vehicle to facilitate Malawi Kwacha transactions.”
We contacted Mera’s Chief Executive Officer Henry Kachaje but he did not pick our calls.
When contacted, PPDA Director General Edington Chilapondwa requested that we send him a questionnaire.
We asked: “I understand Nocma penned you requesting that you grant a no objection following Nocma’s Board approval. I understand you have advised that the contract be put on hold because there are some issues that need to be followed since this is a single sourcing and an international contract. What issues are these?”
In his response, Chilapondwa said: “I would love to give you facts of the matter, so can you send us questions then we provide a proper response.”
But information we have sourced indicates that PPDA in a letter to Nocma dated September 9, 2024 has advised that the deal be suspended until the single sourcing conditions are addressed.
The letter has not stated the conditions.
In the country’s procurement laws, single sourcing is only acceptable according to Section 37 only in the following circumstances:
(a) Where the estimated value of the procurement does not exceed the amount set in the regulations. The value for this procurement exceeds the Nocma threshold.
(b) Where only one supplier has the technical capability or capacity to fulfill the procurement requirement, or only one supplier has the exclusive right to manufacture the goods, carry out the works, or perform the services to be procured. Sources told us there are many other suppliers who can also deliver.
(c) Where there is an emergency need for the goods, works and services. Sources further said there is no emergency as other suppliers are still providing fuel to Nocma.
(d) Where the procuring and disposing entity, having procured goods, works and services from a supplier, determines that additional goods, works or services need to procured from the same source for reasons of standardization or because of the need for compatibility.
Amid fears that paying 50 percent upfront to an individual before delivery and in the absence of due diligence puts Malawi at risk of losing money, Nocma CEO Clement Kanyama said that the contract has not been signed yet.
“We had not yet signed the contract,” he told Malawi News.
