SA-LL project woes continue, court restrains banks from funding the project

SOURCE: WEEKEND NATION

The Salima-Lilongwe water project, initiated in 2015, was on Thursday thrown into further turmoil after Forum for National Development (FND) obtained an injunction restraining two commercial banks from providing funds and Khato Civils from performing on the project.

The stay order granted by High Court Justice Ken Manda restrains NBS Bank plc and National Bank of Malawi plc from lending government K105 billion for the project and stops Khato Civils from working on the project on the basis of the NBS Bank plc and National Bank of Malawi plc [Lake Malawi Water Supply Project] Loan Authorisation Bill.

In an interview yesterday, FND coordinator Fryson Chodzi said they obtained the order to compel government to attend to unresolved issues surrounding the project.

“Government needs to fully explain what happened to an agreement with Quay Energy Corp we were told would arrange an external loan and was already given a sovereign guarantee. If the contract stipulated that the contractor would find a financier and now there is a new arrangement then let the whole process start all over again by retendering instead of reviewing the contract for the benefit of Khato Civils.”

Said Chozi: “Otherwise, Malawians are borrowing the K105 billion from the commercial banks on behalf of Khato Civils which is illegal because a government is not supposed get loans on behalf of a private company.”

Leader of opposition in Parliament Kondwani Nankhumwa and other experts and watchdogs have described government’s secrecy in handling the contract review and financing arrangements as a “serious governance, transparency and accountability issue.”

In an interview, he said he was not surprised with government’s acts as the mystery began during the tabling and passing of the Bill in Parliament.

Part of Khato Civils equipment which is already in the country
awaiting commencement of the project

He said government did not explain anything in the House on the contract review and the changes made but proceeded to bulldoze the Bill under suspicious circumstances because they wanted to borrow the money.

Nankhumwa, who is DPP vice-president for the South, said the secrecy surrounding the project brings about suspicions and smacks of a government that lacks transparency and accountability.

“The Bill was circulated electronically at 9.40am. Using its numerical strength the government side moved a motion for the production of a supplementary order which was passed. Consequently, the Bill was brought on the floor and got passed the same day amid protests from the opposition. How would members deliberate on a financial Bill that had just been circulated?”

But in an earlier interview Leader of the House Richard Chimwendo-Banda wondered how that could be the case when at the case when by the time a bill is presented to the House, the committees and the leadership of the House will have already scrutinized and given direction on it.

According to Chimwendo-Banda, in the circumstance that a bill is urgent and the 28-day rule is not fulfilled, the bill is still circulated for seven days before the minister can waive the 28-day notice.

The contract had seven condition precedents namely securing financing, issuing a sovereign guarantee, receiving a ‘No Objection’ from the Public Procurement and Disposal of Public Assets (PPDA) and incorporation of a Special Purpose Vehicle.

Others were diligence on the contract, compliance with the construction industry regulations and submission of a programme of works for the project that was initiated during the Democratic Progressive Party (DPP) administration but has remained at a discussion stage for almost seven years now. The project was supposed to be completed by 2018/2019.

On April 6 2023, Parliament passed the financial bill No. 11 of 2023: NBS Bank plc and National Bank of Malawi plc [Lake Malawi Water Supply Project] Loan Authorisation empowering Minister of Finance Sosten Gwengwe to borrow K105 billion from the two banks to finance the project.

The project, billed as Africa’s largest to be constructed, is expected to pump and deliver about 50 million litres of potable water from Lake Malawi to Lilongwe City and surrounding areas every day. Khato Civils is also expected to build clear water tanks and pumping stations along the 125km Salima-Lilongwe stretch with the first at Lifuwu in Salima with a capacity of 2500 cubic metres.

But construction has been delayed as the contractor, Khato Civils Pty Ltd and South Zambezi Joint Venture, could not identify a financier.

In 2018, Lilongwe Water Board also obtained a facility from National Bank of Malawi plc amounting to $17 million (over K17 billion) as part payment to Khato Civils before government curtailed any activity on the project pending identification of financing as per the contract conditions.

In January last year, one of the directors at Ministry of Finance Nations Msowoya told the Parliamentary Committee on Natural Resources and Climate Change that the project would be back on track because Khato Civils had identified a financier who met government’s criteria.

He said: “The major thing that has been delaying the project was financing of the project, which now has been resolved.”

Msowoya stated that government had started engaging the financier and once the process was completed, the matter would be brought to Parliament.

“When borrowing externally we have certain guidelines that have to be followed. We look at a number of aspects such as how the money will flow to Malawi, which bank we are going to use, type of banks we use, currency and rates. So many things go into these financial negotiations, actually it is a complex topic,” he explained.

But three months later, on April 7 2022, Khato Civils revealed through a post on its website that it had identified Quay Energy Corp (AuS) Pty Ltd from Australia in 2021 as an “arranger of the financing”.

Khato Civils further reported Quay Energy Corp was to source $313 447 757.00 (over K315 billion) for project financing.

When presenting the bill in Parliament, among other issues, Gwengwe mentioned that the contract with Khato Civils had been reviewed. But he did not elaborate.

When asked to give more details about the contract review, Ministry of Water and Sanitation Principal Secretary Elias Chimulambe and Lilongwe Water Board (LWB) spokesperson Chisomo Chibwana referred Weekend Nation to the Ministry of Finance.

Secretary to the Treasury MacDonald Mwale had been unavailable but Gwengwe referred Weekend Nation to the Office of the President and Cabinet (OPC) which he said was coordinating the project.

When contacted, OPC chief communications officer Robert Kalindiza promised to get back to us with the responses before changing tune on Wednesday saying “at the moment our stand is that we do not have comment.”

On his part, Khato Civils chief executive officer Mongezi Moyeni said he could not comment much on financing of the project other than confirming that negotiations were underway between Ministry of Finance and banks.

“All I can say for now is that negotiations are still going on between the banks and the government so that will make or break the project to start.”

Transparency and accountability watchdog Catholic Commission for Justice and Peace (CCJP) observed that the water project is one of the suspicious public projects with several unanswered questions.

“This project is synonymous to the country’s mining projects whose contracts and activities are very secretive. We were told

 that Khato identified a financer but before being briefed on what exactly happened, government wants to borrow money for the project on behalf of Khato.

“This is suspicious and baffles CCJP. Government has to be transparent otherwise it raises a lot of questions and it’s clear Malawians are being given a raw deal in as far as this contract is concerned,” bemoaned CCJP national director Boniface Chibwana.

Governance expert Mavuto  Bamusi said the secrecy surrounding the project was a recipe for fraud.

“This is another Cashgate in the making. Conflicting figures and inconsistent calculations on the project cost reflect a serious accountability crisis that may sink the nation in a mire of unsustainable debts.”

Said Bamusi: “Government should stop taking Malawians for granted and learn to be serious by practising accountability and being honest. For more read, https://mwnation.com/sa-ll-project-woes-continue/