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Ports deal that sank

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Thomas Chafunya

How government and Mota Engil failed Malawians on a 35-year Lake Malawi ports management agreement

By Deogratias Mmana

On March 14, 2012, government entered a concession deal with Mota Engil for the Portuguese firm to manage the country’s ports on Lake Malawi for 35 years.

The deal was billed as the magic wand that would make the ports vibrant again and transform water transport in Malawi.

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Today, 10 years later, most of the ports are sinking in a sea of near dysfunctionality and water transport system is as good as non-existent.

We have details which show that both the government and the concessionaire have failed in their respective roles in the deal.

The government gave the 35-year concession to Mota Engil for financing, use, rehabilitation, modification, operation and maintenance of the ports which include Chilumba, Nkhata Bay, Chipoka and Monkey Bay.

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Mota Engil is running the concession under a company called Malawi Ports Company.

However, we have it on good authority that since the signing of the concession, the company has not submitted performance reports and audited accounts.

It has also neither established a management structure required by the government nor has it recruited suitably-qualified personnel to run the company, not to mention paying concession fees to the government.

On the other hand, the government through the Ministry of Transport has not lived up to its committed objectives which include monitoring the concession performance and taking the concessionaire to task for failure to honour obligations and non-payment of concession fees.

According to the concession agreement, the government is supposed to get concession fees which include annual fee amounting to 2.5 percent of profits related to the use of Lake Malawi Port assets.

The concessionaire also undertakes to advise the government of three key senior management personnel it intends to employ during the first two years of the concession period.

Further, the company undertakes to maintain for a period of two years from commencement date, without change, the same composition of key senior management personnel.

But the company has only a general manager as part of the key senior management, according to our sources.

The agreement also says the company will submit annual reports that include a report summarising all incidents related to operational safety including but limited to accidents, and spillages and including a report on the actions taken by the concessionaire to prevent the recurrence of such events.

Other reports include:

  • financial statements including the ones regarding profits made by the concessionaire related to the use of Lake Malawi Ports Assets which is used as the basis for calculating the annual concession fee;
  • report of the concessionaire’s operating statistics including cargo handled and vessel turn around and
  • report on the activities undertaken by the concessionaire in the maintenance and rehabilitation of the Lake Malawi Ports Assets.

“The concessionaire shall keep its accounts and statistics in a manner consistent with the applicable laws and regulatory provisions of the Republic of Malawi applying to limited liability companies in Malawi,” reads the concession agreement.

It adds: “The concessionaire shall submit an annual report to the Minister responsible for Transport and Public Infrastructure of the Republic of Malawi.”

On auditing, the agreement says the concessionaire shall engage annually a chartered accounting firm to carry out an annual audit of its finances, capital and revenue transactions, and traffic levels and submit the audit report to the Minister of Transport and Minister of Finance.

On insurance, the agreement says the concessionaire shall put in place reasonable measures to cover liability for damage to the Lake Malawi Ports Assets and third-party damage, as well as injury to persons and any other liabilities that may arise through the use of the assets.

At the time the government handed over the ports to Mota Engil, Monkey Bay operational port infrastructure was valued at K750 million while Chipoka’s operational port infrastructure at K45 million and Nkhata Bay operational port infrastructure at K120 million and Chilumba’s port infrastructure at K254 million.

The Malawi Ports Company business plan revenue projections for 2022 as highlighted in the concession agreement show K70.4 million for Chipoka; K52 million for Chilumba, K108.7 million for Nkhata Bay and K5,000 for Monkey Bay.

For 2021, the projections were at K71.3 million for Chipoka port; K53.2 million for Chilumba; K108.7 million for Nkhata Bay and K5,000 for Monkey Bay.

Projected concession fees for 2020 was K2.6 million with K2.6 million for 2021 and K2.6 million for 2022.

With our calculations, and based on the 2022 revenue projections as an annual revenue average, the government would have received over K8 billion by the end of the concession and over K92 million from concession fees.

We asked the Minister of Transport Jacob Hara why his ministry has not been monitoring the concession performance and failure to censure Malawi Ports Company for its failure to honour the concession obligations.

We also asked the minister to confirm that Mota Engil has not submitted required annual reports and what the ministry would do.

When reminded Friday about the response to the questionnaire we sent him on Wednesday, Hara simply said: “We are working on it.”

And when asked to explain why the company has not been fulfilling its concession obligations, Mota Engil spokesperson Thomas Chafunya said: “I refer your questionnaire to the authorities as we will not make any comments on its contents.”

Chairperson of the Transport and Public Infrastructure Committee of Parliament Uchizi Mkandawire described Mota Engil’s failure to honour the obligations as deliberate.

“Mota is doing all that deliberately to provoke the government into terminating the concession so that they cash in on the termination. Government is aware of the situation and are weighing on the best option out,” Mkandawire said.

He further said: “The problem is that the deals are hastily entered into and in most cases with the intention to benefit individuals and not the nation.”

Director for Centre for Research and Consultancy Milwad Tobias blamed the Minister of Transport for sleeping on the duty by not ensuring that Mota Engil fulfilled its obligations.

“This is clear negligence of duty by public officers who are supposed to monitor concessions. The Minister of Transport and Public Infrastructure should account to Malawians. He should explain how under his watch has allowed the concession agreement to be breached and what next steps the Ministry will take to cure the situation,” Tobias said.

Executive Director for Centre for Social Accountability and Transparent (Csat) Willie Kambwandira also demanded an explanation from the Minister of Transport Jacob Hara as to why his ministry allowed the breach of the concession.

He added: “We are not surprised though. Government has not been transparent on these concessions, and this creates suspicions of fraud, abuse of power and corrupt dealings. The Minister of Transport should come out clearly on these allegations. We need to appreciate disclosures and provisions of the concession agreement.”

Kambwandira demanded the recovery of the proceeds from the concession agreement.

In May this year, the parliamentary committee on transport recommended the cancellation of the concession as Mota was failing to carry out maintenance of the ports and ships.

Public Private Partnership Commission (PPPC) Chief Executive Officer Patrick Kabambe told the media in May this year that the commission had had a meeting with the investor, Ministry of Transport and Treasury on the need for the investor to adhere to agreement stipulations.

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