How negligence may cost Malawi K40bn

A decision to ignore advice from legal experts at Ministry of Justice over a multi-million dollar national identity cards contract 12 years ago, may end up in penalties of about $100 million (K40 billion).

This amount is just over eight percent of the current K476 billion (about $1.19 billion) National Budget.

The K40 billion, which could potentially become the single biggest payout in the country’s history, now haunts President Joyce Banda’s administration because of eight promissory notes that were released to Secucom Holdings Limited as payment for the production of national identity cards.

This deal was sealed during President Bakili Muluzi’s administration.

In an interview on Wednesday, Attorney General Anthony Kamanga explained how bad decisions made 12 years ago could cost taxpayers billions today.

“Ministry of Justice advised government not to award the contract to Secucom Holdings Limited, but Ministry of Home Affairs went ahead and awarded the contract.

“Then a mistake was made when promissory notes were issued committing government to pay and this is what makes their [Secucom] claim legitimate,” Kamanga said.

The K40 billion is enough to put an extra one million families on the Farm Input Subsidy Programme (Fisp). This year, Malawi is spending K47.4 billion on 1.5 million Fisp beneficiaries.

Government awarded Secucom a contract to develop and supply national identity cards at a contract price of about $27 million (K10.8 billion at present exchange rate) on December 7 1999 only to revoke it seven months later.

In the contract, which we have reviewed, the two parties agreed that the $27 million would be paid by eight promissory notes of about $3.3 million (K1.3 billion) each,

The Reserve Bank of Malawi (RBM) issued an unconditional and irrevocable guarantee payment of the full contract price to Secucom in foreign currency. This guarantee letter was signed by then Governor Matthews Chikaonda on December 8 1999, a day after the contract was signed.

The Ministry of Finance then issued to Secucom eight promissory notes of $3.3 million each supported by a letter written on December 18 1999 by late Raspicious Dzanjalimodzi who was Secretary to Treasury.

Secucom then air freighted equipment and works stations for setting up 150 registration work stations of the 264 registration work stations agreed in the contract, according to Malawi Revenue Authority and AMI documents we have seen.

The equipment was valued at $8 million (K3.2 billion at present exchange rate). But on August 26 2000, just seven months later, the Office of the President and Cabinet (OPC) issued a press statement to announce that the contract had been rescinded.

The reason given was that it was due to the circumstances surrounding the award of the contract.

The Anti-Corruption Bureau (ACB) picked up the matter and issued a restriction notice stopping the Ministry of Home Affairs from dealing with Secucom.

“By unilaterally terminating the contract in the manner that government did, Government of Malawi breached terms of the contract with the Secucom,” the company’s lawyer, Titus Mvalo told Weekend Nation last week.

Secucom sued ACB and asked the court to lift the restriction notice.

On July 28 2000, the High Court ordered ACB to complete investigations of suspected corrupt practices within 30 days or the restriction notice would automatically be lifted.

ACB failed to furnish the court with evidence against Secucom and automatically, the restriction notice was lifted.

But that did not change anything for the better for the Swiss registered firm.

“The Government of Malawi ignored the contract it signed with Secucom Holdings Limited 12 years ago and two High Court judgements that were in our favour,” said Anatol Weinstein, chairperson and chief executive officer of Secucom last week.

“Even when we agreed to waive the interests and settled for payment of $8 million only, government has still continued to play hide and seek,” he said.

His lawyer, Mvalo, explained that it is government that stands to lose out because of the amount of money involved that has accumulated over the years.

“The last settlement negotiation meeting was held at Ministry of Justice in Lilongwe on 22nd July 2011, Secucom, in the interest of settlement, agreed to waive all interest and to drop its claim for damages for breach of contract,” Mvalo said.

At that meeting, Mvalo said, government was represented by the Solicitor General (who at the time was Kamanga), then Chief State Advocate ( Pacharo Kayira) and a private lawyer outsourced by government from private practice (Mrs Innocentia Ottober).

“We came to an agreement with Secucom on a settlement sum of $8 million subject to endorsement by Treasury,” Mvalo said.

According to court records, the two parties went back to court and reported that the Attorney General and Secucom’s lawyers had agreed on the settlement payable by instalments to be agreed.

But to this day, government has not moved an inch to pay Secucom.

Kamanga said that they were told to renegotiate the settlement because government has no money.

He explained that even the Bingu wa Mutharika administration had abandoned the contract with Secucom because of the manner they got the contract.

Principal Secretary in the National Registration Bureau, Francis Chinsinga, said in an interview that he had little information about what transpired between government and the Secucom contract.

“It’s difficult for me to give you the details because this happened way back when I was at Ministry of Transport, but I was told informally that the contract did not work out,” Chinsinga said.