- But still struggling and run down
Admarc Limited—a commercial entity—has become government’s source of financial pain, expending over K100 billion during the past five years on recapitalisation and social roles.
But Parliamentary Committee on Agriculture and Irrigation chairperson Sameer Suleman said on Friday that despite these funds from government, and loans from commercial banks, Admarc Limited is still struggling and run down, and called for a complete overhaul of the organisation.
Between 2015 and 2019, our analysis indicates government has cumulatively given Admarc over K24 billion for maize procurement, K53 billion as bail out to offset bank loans while the corporation obtained about K30 billion in loans.
These loans included K27 billion and K2.9 billion obtained in 2016 from commercial banks and Malawi Energy Regulatory Authority’s (Mera) Price Stabilisation Fund (PSF), respectively.
During the period, Admarc failed to account for K9.3 billion on personal emoluments and is said to have wasted about K10 billion from maize sales, after reducing its maize price from K270 per kilogramme (kg) to K150 per kg.
Then, Admarc was buying the maize from farmers at K165 per kg and by selling at K150 per kg, it meant the 90 000 metric tonnes (MT) which it sold at K150 per kg made a loss of about K1.35 million, according to our analysis.
Government has been releasing funds to Admarc to buy maize as a social function as follows: K4 billion in 2015, K1.6 billion in 2016, K18.5 billion in 2017 and K1 billion in 2019.
But this financial year, the parastatal expects to get K7.8 billion in total to buy maize (K5 billion) from the National Budget while K2.8 billion will be for cotton and production of legumes as a social function.
Former minister of Finance, Economic Planning and Development Goodall Gondwe indicated last year that government would recover the K53 billion bail out through proceeds Admarc would realise from selling its 90 000 MT of maize it had in stock. He said the bailout had created Admarc indebtedness to government and; therefore, the maize would be used to pay the indebtedness to government.
However, Ministry of Finance, Economic Planning and Development spokesperson Davies Saddo, in an interview last week, said the bail-out was treated as a “social cost” and recovered 100 percent by government.
According to Saddo, following the food shortage in 2015/16, government instructed Admarc to obtain loans from commercial banks to buy maize as part of social responsibility.
“These loan facilities were not serviced for three years such that by 2018 outstanding loan service accumulated to K53 billion, inclusive of both loan principal and interest charges,” he said.Government settled the K53 billion last financial year.
Admarc was created in 1971 as a statutory corporation with the mandate to, among others, market agricultural produce and inputs, facilitate the development of the smallholder agricultural subsector and also attend to social obligations on behalf of government.
Until 1987, Admarc was the sole buyer of smallholder produce, but in 2004, it was incorporated as a limited liability company with government owning 99 percent of the shares.
Section 2.1 and 2.2 of the Memorandum of Understanding (1994) between Admarc and Government stipulates that all social activities undertaken by Admarc Limited on behalf of Government must be fully funded by Government.
But, according to a Poverty and Social Impact Analysis (PSIA) on Admarc conducted by former Secretary to Treasury (ST) Milton Kutengule and two others—Antonio Nucifora and Hassan Zaman—the parastatal’s social functions ceased in early 2000.
The cessation followed government’s establishment of the National Food Reserve Agency (NFRA) and the Department of Poverty and Disaster Management (DoPODMA), now the Department of Disaster Management Affairs (Dodma).
“In 2001, government mandated the National Food Reserve Agency to manage the strategic grain reserve [Until December 2000, the reserves were managed by Admarc]. A few years later, it established the Department of Poverty and Disaster Management to act solely as a disaster and emergency relief agency, thus taking over the core of Admarc’s social functions,” reads the PSIA, in part.
In line with these changes, says the PSIA, Admarc’s storage capacity—which used to reach approximately 468 000 MT was reduced to about 200 000 MT with the transfer of storage infrastructure to NFRA.
Before the reforms, Admarc operated about 1 300 seasonal markets, 217 unit markets, 80 area offices, 12 district headquarters, three regional offices and 18 storage depots. Over half of these were closed and Admarc now operates 700 seasonal markets across the country, including depots, unit markets and district headquarters.
Public policy specialist Blessings Chinsinga, an associate professor at University of Malawi’s Chancellor College, was quoted by Weekend Nation in 2015 saying the gist of Admarc’s transformation into a limited company was to separate its social and commercial functions.
But despite Chinsinga and the PSIA’s assertions on Admarc’s social functions, the statutory body still plays the social functions.
Explained Saddo: “All social activities undertaken by Admarc Limited must be fully funded by government … Therefore, where Admarc Limited has incurred a social cost, the same is recovered from government 100 percent.”
On the other hand, as a commercial entity, Admarc Ltd is failing to compete on the market and its financial position continues to weaken despite government perpetually rescuing it.
When asked to state its position on the bailouts to Admarc and the parastatal’s alleged social responsibility function, Ministry of Agriculture, Irrigation and Water Development spokesperson Priscilla Mateyu referred Weekend Nation to Treasury and Admarc itself.
Admarc board chairperson Felix Jumbe declined to comment, saying his board was new and yet to get the handovers from the old board before “starting a new chapter for ourselves.”
“So, I wouldn’t have that information at the moment and can refer you to the old board chair [James Masumbu],” said Jumbe.
Masumbu, too, referred us to Admarc management, saying he could not remember anything, having left office almost a year ago.
For two weeks, Admarc’s public relations officer Agnes Ndovi has not responded to our questionnaire.
Suleman said Admarc was a crucial player in the food security chain, but the problem is that “it has been completely run down” and there is need for a complete overhaul of the organisation.
“While there has always been an arrangement where government settles Admarc’s loans whenever it incurs losses through its maize sales, as a committee we feel it is better to obtain the loans from foreign banks or direct from the Reserve Bank of Malawi,” said Suleman.
But agricultural and development specialist Tamani Nkhono-Mvula, while admitting Admarc could be the most important entity in agricultural development and transformation due to its widest markets network and reliable source of reasonably priced maize, bemoaned its abuse by politicians.
“There has been a lot of political interference in the work of Admarc since its creation. Maizegate is one such kind of State abuse of Admarc,” he observed.
Nkhono-Mvula said the abuse was not giving Admarc enough room to develop; hence, failing to perform its role in the agriculture value chains.
“On the issue of bailouts and government guaranteed loans that yield nothing is, to me … Admarc is still going to under perform if there will be continued political interference,” he said.
In December 2017, Admarc acting chief executive officer Margaret Roka-Mauwa complained when she appeared before Parliament, that her institution was choked with debts after borrowing funds to buy maize for resale.