Failure by public officers to scrutinise documents has cost Malawi about K21 billion (about $30 million) government would have claimed from a disaster risk cover it bought from a continental agency to ease disaster recovery efforts.
Malawi Government paid the Africa Risk Capacity Company Limited, an initiative of the African Union (AU), K2.9 billion as premium for an insurance policy to cover disaster risk. The annual premium had a maximum cover of $30 million.
However, it has emerged that the insurance contract for the period had a clause that stipulated terms and conditions under which a country can make successful claim which Malawi Government officials signing the policy apparently did not see at the time.2015/16 farming season
In an interview on Monday, Department of Disaster Management Affairs (Dodma) Principal Secretary Ben Botolo confirmed the development, observing that there was a need to critically scrutinise the policy documents and involve lawyers before signing.
He said: “There is a clause within the policy which talks of rainfall patterns. The policy compensates for extreme weather conditions and, unfortunately, despite the adverse drought encountered within the Southern and Central regions, Malawi will not qualify.”
Botolo said given the bigger population size in the two regions, the country would have benefited from the insurance policy.
He said: “Yes, we have lost all that money. We went into these things blindly, otherwise we should have done it regionally and not the whole country per se.
“We will try to renegotiate, but I don’t think it will work because these are legal issues and insurance companies do not easily part away with money.”
Attorney General Kalekeni Kaphale, whose office is government’s chief legal adviser, refused to comment on the contract, asking: “How is my office involved? Please, ask Treasury.”
Treasury spokesperson Nations Msowoya corroborated Botolo’s statement, saying the policy did not insure regions, but a country as a whole.
He also said there was nothing wrong that the country did in buying the insurance policy only that things have not worked out as planned.
Said Msowoya: “We have not done anything wrong. We insured against drought and at the end of the year, we started experiencing rain and because of that we have not qualified.
“According to their calculations our rains surpassed the limit and, therefore, were no longer eligible.”
The development comes after Ministry of Agriculture, Irrigation and Water Development George Chaponda announced in Parliament last week that 8.4 million people have lost their crops due to adverse impacts of drought and may need assistance.
The K21 billion compensation was enough to pay the whole civil service for at least four months. The amount is also more than the Ministry of Health annual drug budget pegged at K17 billion (about $26.4million).
In January this year, Vice-President Saulos Chilima announced the drought insurance policy from African Risk Capacity Insurance Company Limited for the 2015/2016 farming season to cushion the cost of recovery from the impact of El Nino pattern of rainfall.
“The exact amount of the pay-out to which the country would be eligible would be up to a maximum of K21 billion, depending on the extent of the drought,” he said at the launch.
In April, President Peter Mutharika declared the country a State of National Disaster following prolonged dry spells in the Southern Region and parts of the Central Region that wilted crops, reducing harvest.
The President appealed for assistance from well-wishers