Government has signed a deal with a financier of the K400 billion Lilongwe-Salima Project, effectively putting on course the project that faced several hurdles, Nation on Sunday has established.
Minister of Finance, Economic Planning and Development Goodall Gondwe confirmed on Tuesday they have discussed with the financier that the contractor Khato Civils identified and have reached an agreement.
The news should also be a big relief to Lilongwe residents who are only two years away from having less than three days of tap water a week if alternative water sources are not developed to complement those from its two dams on Lilongwe River.
Gondwe said Khato Civils identified a financier, Trissag Espanola of South Africa, but headquartered in London, to finance the K400 billion project.
“An agreement has been entered that 35 percent of the loan will be granted without interest,” Gondwe said.
Asked again, in an interview on Friday, to clarify whether the deal had the endorsement of the International Monetary Fund (IMF), as previously required, Gondwe said the loan would no longer require approval from IMF as it was not a sovereign guarantee anymore, but rather, a bank guarantee.
Sovereign guarantee is a promise by the government to discharge the liability of a third person in case of default while a bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss.
“We have renegotiated the loan. It is now concessionary, 35 percent interest free, and the interest on the whole amount is at 1.8 percent, with 30 years repayment period, increased from 15 years. There is also a five-year grace period,” Gondwe said.
He added: “We are in discussion with the Reserve Bank of Malawi [RBM] in preparation of this bank guarantee because the funds will come from commercial banks. When everything is done, it will be taken to Cabinet to review the changes and for approval.”
The Finance minister also said under the renegotiated deal, there is also an agreement that apart from just taking the water straight from Salima to Lilongwe, diversions would be made in Salima for irrigation in the project’s second phase.
Gondwe also confirmed that government had paid Khato some money as part-payment for the works, though he could not provide the actual figure.
He disclosed that Lilongwe Water Board (LWB) asked government for the payment towards preparatory works the contractor has done so far.
The works, according to Gondwe, include mobilising and assembling equipment and works on Environmental and Social Impact Assessment (Esia).
“They have brought all the equipment in the country. They had to conduct a study using a [Portuguese firm Nemus] consultant, so we have made some payment related to that,” Gondwe said.
He insisted that owners of the project, LWB, were better-placed to provide finer details, such as the amount government paid so far to Khato and the progress on the work because the request for support from government was made by them.
Gondwe said government had nothing to do with matters currently in court on the project, arguing that those were issues between civil society organisations (CSOs) and Khato Civils.
LWB chief executive officer (CEO) Alfonso Chikuni, who could neither confirm nor deny the payment made to Khato Civils in an interview on Tuesday, said all issues squarely fall under Treasury and they were the right people to provide information.
Lilongwe-Salima Waterway Project CEO, Modesta Kanjale, who was appointed by government to oversee the project, also said the Ministry of Finance was better-placed to comment on the matter.
Principal Secretary in the Ministry of Agriculture, Irrigation and Water Development, Gray Nyandule Phiri, also said LWB were better-placed to speak on the matter.
Khato Civils spokesperson in Malawi, Taonga Botolo, also declined to comment.
Meanwhile, nine Supreme Court of Appeal judges are set to hear a motion of appeal by two CSOs on October 25 2018, to replace the Malawi Law Society (MLS) in the Salima-Lilongwe Water Project case.
If the two CSOs—Youth and Society (YAS) and Centre for Human Rights and Rehabilitation (CHRR)—succeed in the case, the matter will revert to the High Court to determine the legality of the project in respect of awarding of the contract to Khato Civils Limited.
YAS and CHRR, through private practice lawyer Bright Theu, appealed the matter to the full bench after a single Supreme Court of Appeal judge, Lovemore Chikopa, dismissed their application on December 22 2017.
In his judgement, Chikopa said the wishes of CHRR and YAS could not be granted because at the time of making the application, proceedings that had existed between MLS and the respondents, Khato Holdings, had ceased to exist after leave had expired and there was no renewal.
He added that the two CSOs had no sufficient interest to bring the application and were yet to become parties to the proceedings in respect of whom the order was sought.
The Esia was, however, done by Nemus and it highlighted positives about the project.
LWB’s initial project of the Diamphwe Multi-purpose Dam Project, which was earmarked to avert the looming water crisis, hit a snag after the World Bank withdrew its financial backing.