Parliamentarians yesterday questioned the rationale behind a Malawi Government decision to guarantee $170 million (about K170 billion) for a United Kingdom-based supplier contracted by Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM).
But Minister of Finance and Economic Affairs Sosten Gwengwe assured the legislators that the sovereign guarantee did not put public funds at risk as the deal will only become effective upon delivery of fertiliser to SFFRFM warehouses.
Thyolo Central member of Parliament (MP) Ben Phiri (Democratic Progressive Party-DPP) said he suspected the contract between Auzano Capital Management Limited and SFFRFM to supply 350 000 metric tonnes (MT) of fertiliser was dubious.
He wondered how government issued the guarantee for such a huge contract with a company that is just one-year-old. He said a guarantee is a tradeable product which could be abused.
Phiri said: “Was due diligence done on the said company? Because, according to details we have here, the registration of the company was done on November 15 2021, meaning that at the point of the contract it was less than one-year-old.
“To trust a company that is less than one-year-old with such huge sums of money is a risk. I don’t think under the economic hardships that we have in Malawi, we can surely take such a risk.”
The legislator also queried if the Public Procurement and Disposal of Assets Authority (PPDA) gave a ‘no objection’ on the contract. He said issues of misprocurement in government institutions need to be addressed because they are becoming rampant.
Mulanje South West MP George Chaponda (DPP) wondered if government conducted a background check on the company.
On his part, Mangochi South West MP Shadric Namalomba (DPP) observed that under the Tonse Alliance administration, there has been an influx of intermediaries trying to influence public officers to enter into contracts.
Gwengwe: That is a reason I included that clause
He said there is need to revisit relevant laws to ensure that anyone offering financial services to government should be subjected to public procurement processes.
“Why don’t we revisit the Public Procurement and Disposal of Assets Act so that all procurements, including financial services are subject to public procurement checks? If we do that, we are going to normalise this issue. We are not going to have people running around offices,” said Namalomba.
But Gwengwe said the contract has a clause stipulating that the guarantee would only become effective after the fertiliser was delivered to protect public finances.
Said the minister: “There is a reason I included that [clause] because I am a finance person. I am sitting as a Finance Minister, but each and every day I am approached by so many people saying there are billions somewhere, we can bring in dollars tomorrow, we can bring in money the next day.
“But you need to be able, as Minister of Finance, to think ‘how do I protect public finances?’. That is the duty I build up to, that is the duty I intend to take with integrity.”
He said what SFFRFM and Auzano signed for is a financing agreement for the procurement of fertiliser for commercial purposes.
But Gwengwe said initially there was inclusion of the Affordable Inputs Programme (AIP) fertiliser, but SFFRFM was asked to remove the AIP component because it would not make business sense to have it under such a guarantee.
He told Parliament that PPDA approved the contract.
On the guarantee being issued on a contract involving a one-year-old company, the minister said guarantees are not given just to companies, but even to an individual.
He said he will soon make a report to Parliament on the guarantee.
In an interview outside Parliament, Phiri said he suspected that someone was behind the deal and said the country risks losing money if the deal is not checked.
During the deliberations in Parliament, Gwengwe also revealed that International Monetary Fund (IMF) has released to the Reserve Bank of Malawi $88.3 million that it had committed under the Rapid Credit Facility (RCF).
He said the Tonse Alliance administration was winning back the confidence of donors and the country will soon be getting direct budgetary support from development partners.
Said Gwengwe: “The World Bank has promised that its board will meet to give Malawi direct budgetary support. The money being expected is hundreds of millions of dollars.”
He said a European Union delegation will visit Malawi on November 28 to assess the country’s readiness for budgetary support.
Gwengwe said Parliament needs to promote prudent financial management systems and that starts with the budget.
The concerns on the UK-based fertiliser deal come weeks after revelations that SFFRFM entered into a deal with another UK-based company, Baarkat Foods Limited, to supply 800 0000MT of fertiliser and ended up being duped K750million in a trial run for 25 000MT.
The handling of the Baarkat Foods Limited deal, which also involved intermediaries, cost the job of former minister of Agriculture Lobin Lowe and his deputy Madalitso Kambauwa Wirima.
On Tuesday this week, former National Oil Company of Malawi acting chief executive officer Helen Buluma also alleged that some senior public officers were pressuring her to award fuel contracts to certain suppliers through intermediaries.