Lilongwe Water Board (LWB) wants the K400 billion Salima-Lilongwe water supply project terminated on grounds that the contractor, Khato Civils, has failed to find a financier.
But the South Africa-based engineering firm has dismissed LWB’s claims; and it earlier warned that Malawi Government would be made to cough $71 million (about K60 billion) in compensation in the event that the contract is terminated.
LWB acting chief executive officer (CEO) Moses Mwenye said in an interview on Saturday that they have written Attorney General (AG) Kalekeni Kaphale, seeking his second opinion on the board’s decision to terminate the contract signed in 2016.
“The letter will be delivered any day from Monday. The AG earlier advised us to give the contractor six months to identify a financier, and the six-month period ended on April 30.
“It is on the basis that the contractor has failed to identify the financier that we want the contract terminated,” he said.
The acting CEO said they were not disturbed with the compensation demand by Khato Civils, explaining that they are seeking legal advice from the AG on all actions the board is taking.
Mwenye said LWB would also seek legal advice from the AG on the part payment of $17 million (about K12.6 billion at the current exchange rate) which Malawi Government paid to Khato Civils.
“This money was expected to be recovered and paid back to government when Khato Civils finds a financier. In an event that the contract is successfully terminated, the AG will advise us on this part payment made,” he said.
Asked to comment on the developments on Saturday, Kaphale asked to be engaged on the subject Monday.
But Chancy Gondwe, lawyer for Khato Civils, said in an interview on Saturday that his clients are demanding the compensation if the contract is terminated.
“They have always wanted to terminate this contract by frustration. Let them produce evidence that my clients have failed to identify a financier. They got a number of financiers and we have documents to that effect,” Gondwe said.
According to a letter dated August 2019, addressed to Minister of Finance and Economic Planning Joseph Mwanamvekha and LWB CEO which we have seen, Khato Civils is introducing Atrafin, an American trade and finance company, which offered LWB a credit facility.
The loan guarantee was provided by the Export and Import Bank (ExIm Bank) expected to notify ExIm Bank that the transaction was of the highest priority and would conform with IMF and World Bank programme limits on non-concessional debt.and Ministry of Finance was
Government, through Ministry of Finance, is on record to have said financiers Khato Civils found were expensive in as far as interest rates were concerned.
The project, if done, is expected to provide water to the city of Lilongwe via a 120- kilometre pipeline from Lake Malawi.
Khato Civils is on record to have said that it spent U$71.2 million of its money on the required processes precedent to commencing the project this far.
The firm’s CEO, Mongezi Mnyani, said earlier that since their appointment, they have worked tirelessly to ensure that they meet all conditions prior to the contract.
“We have completed all the designs of the pipeline metre-by-metre from Salima to Kanengo and the construction drawings and plans have been accepted and approved by Lilongwe Water Board.
“Our contract with Lilongwe Water Board is still valid and if government wishes to cancel…then Khato Civils will be entitled to full payment of all expenses incurred to date,” he said.
The implementation of the project will require an investment of K400 billion and the Malawi Government was expected to participate in the financing of the project through LWB.
As discussions on the project were underway, civil society organisations also staged protests on the choice of the company to do the work, including a legal battle, but the Malawi Supreme Court of Malawi ruled in favour of Khato Civils—allowing it to proceed with the project.
There were also environmental activists who demanded environmental and social impact assessments (Esias) before implementation of the project.