The Public Accounts Committee (Pac) of Parliament Wednesday took to task the Reserve Bank of Malawi (RBM) over its failure to licence a subsidiary, the Export Development Fund (EDF), for close to nine years.
Pac raised the concerns when RBM and EDF top brass appeared before committee members to shed light on operations of the institution.
Members of the committee also demanded to know the piece of legislation which RBM officials are using to buy gold from small-scale miners in the country.
This was after RBM Governor Wilson Banda had told the committee that EDF had, so far, bought 20 kilogrammes of gold from miners at a value of about K900 million.
During the meeting, EDF officials told committee members that there had been a spike in non-performing loans in recent months due to tight operating conditions occasioned by the Covid pandemic, which, among other things, slowed down borrowers’ capacity to repay loans on time.
EDF officials said, in addition, there had been an isolated case of delinquent clients/ partners who breached contracts with the fund, leading to impairment of underlying assets.
“Key assets that are receiving special attention of both management and the board of directors because of their significance include Transglobe Produce Exports Limited, Alliance Capital Limited, Cotton Ginners Africa Limited and AHL Commodities Exchange (AHCX).
“The recovery plans and measures that the fund is undertaking to redeem the capital stuck in these challenging transactions have been highlighted in the subsequent sections,” EDF said.
Transglobe owes EDF $3 million, Alliance Capital Limited (K6 billion plus interest) while AHL Commodities Exchange has $800,000 to pay back.
However, Pac Chairperson Shadreck Namalomba wondered why RBM could let a firm operate in the sector for over nine years without a licence.
Namalomba wanted to know if RBM would have allowed a firm that was not licenced to operate in the financial industry, had it been that it was not a baby of RBM itself.
“Here is a firm which is not licenced but is operating in the financial sector and buying gold. Again, the same unlicenced firm is being owed billions of Kwacha by defaulters,” Namalomba said.
Banda said RBM could not allow any other firm to operate in the financial sector without a licence, adding that processes to licence EDF were at an advanced stage.
EDF is a development finance institution registered in Malawi under the Companies Act (1984) and is a wholly-owned subsidiary of RBM.
It was established as a Special Purpose Vehicle with the mandate of promoting the growth of exports as a way of assisting in the realisation of national development goals of growing and diversifying the country’s exports.
EDF is also a key institution for the implementation of the National Export Strategy (Nes), specifically diversifying Malawi’s export base by focusing on non-traditional exports, increasing export revenue earnings into the country and bolstering international reserves through increased flows of foreign direct investments into export sectors.