The Malawi Government yesterday confirmed that it has succeeded in slashing a controversial $145 million (about K100 billion at the current exchange rate) defence deal signed between former government of president Joyce Banda and South African-based arms company the Paramount Group, saying the contract was “too expensive” and not subjected to “proper analysis”.
Finance Minister Goodall Gondwe was quoted by South Africa’s Mail and Guardian publication on Thursday that after talks with Paramount, a 2013 credit agreement covering the supply of seven interceptor boats to patrol Lake Malawi was scrapped and replaced by a supply agreement worth the far lower amount of $17million (K12 billion).
Finance Ministry spokesperson Nations Msowoya yesterday confirmed to Weekend Nation the deal has been reduced.
The new agreement covers only goods under manufacture at the time of cancellation and “their accompanying services”, Gondwe was quoted by Mail Guardian.
Malawi Army officials and Paramount could not disclose to Mail and Guardian how many patrol boats were ultimately supplied.
Banda defended the 2013 deal by saying the boats were needed because of a long-running border dispute with neighbouring Tanzania, which was rekindled in 2012 by government’s plan to explore the lake for oil.
However, the deal was also criticised as a misdirection of scarce resources in one of the world’s poorest countries.
Questions were also asked about the relationship between Banda and Paramount, said to be Africa’s largest private defence contractor.
In 2012 the company purchased the presidential jet for $15-million, but according to the London-based Daily telegraph allowed Banda to continue using it.
The Telegraph also reported that the family foundation of Paramount owner Ivor Ichikowitz paid for British public relations firm Bell Pottinger to advise Banda on how to polish her image.
Paramount has denied any connection between alleged favours to Banda and the defence contract.
Asked what the government had learned from the deal, Gondwe said: “The contract highlights the importance of doing proper analyses of contracts before agreeing to them.
“Maybe at the time of making this agreement it was necessary, but when it became apparent that the contract was too expensive it was renegotiated.”
In other media reports, Gondwe has charged that the contract was illegal and “bypassed” the finance ministry. Another source told the Mail & Guardian that it did not pass through the government’s procurement committee.
Gondwe was also reported as claiming that the deal damaged Malawi’s credit line to the International Monetary Fund.
Paramount’s director of global marketing, Nico de Klerk, said the group could not comment on the details of the contract due to confidentiality agreements.
De Klerk referred to a joint government-Paramount statement in September 2014 that described as untrue reports that the original deal was illegal and had been terminated.
At the government’s request, the company “was engaged in constructive dialogue to replace the old contract in order to meet the government’s needs”, the statement said.
It said the original deal “was concluded according to Malawian government processes and signed by the former minister of finance and former minister of defence”, while Malawi’s attorney-general had confirmed its legality.
Malawi Defence Force spokesperson Paul Chiphwanya stonewalled Mail and Guardian questions about the number of boats supplied and whether and how they were being used.
“We cannot give any information because it’s [a matter of] national security. We can’t disclose what we have in the army,” Chiphwanya was quoted as saying.
According to its website, the Paramount subsidiary that supplied the boats, Nautic Africa, has an office at Monkey Bay, in Mangochi.
De Klerk said as part of the sale of the interceptor boats Nautic was contracted to provide training for the operation of the vessels and their service and maintenance.
However, this had been concluded and the company no longer operated in Malawi.
This week Information Minister and government spokesperson, Jappie Mhango, also said the 2013 deal “was not ideal for the people of Malawi and not a priority”.
“In her time Joyce Banda thought the deal was important, but our government maintains that it was done in haste and wasn’t good for the country because it doesn’t serve the needs of Malawians,” Mhango said.
University of Malawi economist Ben Kalua said Malawi was not at war at the time the contract was signed and remained on peaceful terms with its neighbours.
“We are not an economy that needs such contracts,” he said. “We have other priorities: we are in an economic mess and couldn’t repay this loan at the expense of the education and health systems.”
However, Banda’s spokesperson, Andekuche Chanthunya, insisted Malawi was in danger at the time of the deal and needed to bolster its security.
Banda’s former ruling party, the People’s Party, does not regret the decision to sign the boats contract, he said.
“We needed the patrol boats on our lake, to keep the country safe. It is routine to have borders checked, even across water. If we just leave the issue we will find our lake gone.”