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Red lights on Lilongwe water deal

Sosten Gwengwe

Milward Tobias
The Salima-Lilongwe Water Project has been riddled with controversy all through the time it has been on the table in the past seven years. Two weeks ago, government gave the impression that time for waiting is over. Now it has started speaking in tongues about it and the project could be a long way off

The much-touted Salima-Lilongwe Water Project is not coming anytime soon, Malawi News can report, because the government itself says it is not sure when exactly the funding could be available.

It further says the process of securing financing has just started and it could be long and tedious — if at all the money could be found.

Yet, two weeks ago, government gave the impression that the process was in the last leg.

On March 30, Minister of Finance Sosten Gwengwe gave Malawians this impression through Parliament when he announced to the legislators that the government had identified Quay Energy Corporation of Australia as the finance company that would provide $313 million loan to implementers of the project.

Gwengwe said then: “Talking to the contractor, this was the final approval process that was expected.

“Having gone through all processes, our expectation, as government, is that the project should roll out as soon as possible because the finances are now intact.”

At that time, Gwengwe gave the picture that Quay Energy Corporation is the financing company for the project, only for him, through his officials at the ministry, to change tune and said the company is only an arranger — the company is to look for a loan for the project instead of it being the source of the funding.

Now analysts have also questioned Gwengwe’s flipflopping on the role of Quay Energy Corporation where at one point he said the company was the financing institution and at another, he said it is only an arranger.

In an exclusive interview with Malawi News on Thursday, Gwengwe said, “politics aside, the process of the project has just begun”, and he said he could not tell when the funds will be made available.

He said there is also possibility that Quay Energy Corporation may even fail to secure the loan for the project.

He said the government has engaged a broker or an arranger because it is “almost impossible for us as a government to convince bilateral donors for a concessional loan for such a big project”.

“Quay will go and look for funds for us. It may not even work. To raise a concession loan for a big project like that is not easy,” Gwengwe said.

Asked to indicate the timelines the loan would be expected so that the project commences, Gwengwe said: “It will be extremely difficult for me to tell the timelines for the funds. But within three months we should be able to expect the loan.”

He added: “It is just the beginning of the long process of the project. It is a little bit complicated. It is not unusual. For now, it is just the legal requirement that we have satisfied.”

Gwengwe said the project cannot start until the funds are made available.

The Ministry of Finance and Economic Affairs last week issued a statement in which it stated that as of now, the government has not yet negotiated or signed a loan agreement with Quay Energy Corporation.

Government says it has also not yet issued any sovereign guarantee to Quay Energy Corporation.

The statement said a sovereign guarantee can only be issued once there is a financing agreement.

Now analysts say government’s garbled language on the project is raising potential transparency and accountability red flags and capacity issues for Quay Energy Corporation.

Director for Centre for Research and Consultancy Milwad Tobias said the project financing can be stopped if the minister is not sure of what he is saying about the role of Quay Energy Corporation.

“That is a significant concern as far as transparency and accountability is concerned. We expect duty bearers to be clear in what they do. If the minister is unsure himself, the process can be stopped and the government can look for other financing sources,” Tobias said.

Executive Director for Centre for Social Accountability and Transparency (CSAT) Willie Kambwandira faulted Gwengwe for giving conflicting statements on the role of Quay Energy Corporation, saying this raises suspicion and smacks of corruption in the process.

“There is literally no transparency and we are not convinced with statements from the Ministry of Finance. There are serious questions as to how this firm was identified, its role and capacity to finance such a huge project,” Kambwandira said.

He further said: “The company in question has no track record of financing multi-billion projects and let alone experience in money lending. We are told that Quay Energy is an arranger and yet at first, we were told that they were a financier. The twisting of statements raises doubts and smells of corruption.

“The Minister of Finance should be reminded that he is borrowing on behalf of Malawians who will pay back this loan.”

Kambwandira also faulted Parliament for authorising the loan without getting proper details of the company.

“Parliament failed in its oversight role and there is a risk that Malawians could be duped. We expect Parliament to swiftly come and act on the emerging revelations. We also ask Malawians to remain vigilant,” Kambwandira said, while calling on the Anti-Corruption Bureau to investigate how Quay Energy Corporation was identified.

But Gwengwe defended his statements, saying it is Quay Energy Corporation that is in government books as the company to bring funds for the project.

“Even the agreement will be between us and Quay. As far as we are concerned, we are dealing with them,” Gwengwe said.

In 2015, the government initiated this project to source water from Lake Malawi.

Lilongwe Water Board signed an engineering, procurement and construction contract on December 19, 2016 with Khato Civils Pty and South Zambezi Joint Venture.

The project will be implemented through a Special Purpose Vehicle called the Salima-Lilongwe Water Supply Company which will borrow funds from Quay Energy Corporation of Australia Pty Limited to the tune of $313,447,757.00.

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