Malawi cancels $145 million arms deal
Malawi has cancelled a deal worth $145 million (about K58 billion) under which South African military hardware manufacturer Paramount Group, was engaged, under the previous Joyce Banda administration, to supply military equipment to Malawi because it was “illegal and expensive”.
Minister of Finance, Goodall Gondwe, confirmed the development exclusively to Weekend Nation on Thursday, but declined to discuss the details, saying they were privileged.
“What you have heard is true. The agreement between the Malawi Government and Paramount Group has been abrogated. That is all I can confirm and say,” said Gondwe.
However, a source familiar with the development in the Ministry of Finance confided in the Weekend Nation that the deal was cancelled after the Malawi Government told Paramount Group during a recent meeting that the whole transaction was illegal and unsustainable.
“It is on the basis that the deal was unprocedural and expensive that it was cancelled,” said the source, a senior government expert in deals of such nature.
According to this source, the Government of Malawi previously struck what is called a supplier credit agreement (an instrument for making payments for goods obtained on credit) with the South African-based group of companies operating in the global defence, internal security and peacekeeping industries.
Under that agreement, Paramount Group was to supply wide-ranging equipment to establishments under the Malawi Defence Force. The total bill amounted to $145 million at the time, which under the current rate is about K58 billion.
“What made the deal unprocedural and unacceptable is that, for instance, the (previous) minister of finance was bypassed,” claimed our source. “In addition, the International Monetary Fund (IMF) questioned the deal because when you have a programme with the Fund, you are not supposed to enter into supplier credit agreements.”
The source confirmed what has been heard before that when the presidential jet was sold to Paramount Group’s subsidiary, British Virgin Island-based Bohnox Enterprises, at $15 million (about K6 billion at the current rate), the money was not repatriated to Malawi, instead it was used, in a barter style, as part payment of the military hardware agreement.
“What has been heard before is true. Bohnox Enterprises never paid the Malawi Government. It is like we gave them the plane to help offset the bill government incurred for procuring military equipment from Paramount Group,” explained the source.
According to the source, after taking the jet at K6 billion, the Government of Malawi was expected to settle the remaining bill by making quarterly payments of $5 million (about K2 billion) for the next eight years.
“The current administration found this to be ridiculously expensive and called for a review of the agreement,” said the source.
This, besides the illegality of the deal, is what led to the Government of Malawi recently convening a meeting involving officials from Paramount Group and Gondwe, Governor of the Reserve Bank Charles Chuka and Attorney General Kalekeni Kaphale.
“The Government of Malawi made it clear that the deal was illegal. But even if it were lawful, the point was made, that it was extremely expensive. For those reasons, the deal had to be cancelled,” said the source, who disclosed that officials from Paramount acknowledged the concerns of the government.
However, the compromise position, the source said, was that the government would pay for the equipment that had already been delivered.
“The cost of all the equipment already delivered is about $31 million (about K12.4 billion). When you subtract the $15 million (about K6 billion) already paid through the jet sale, it means we are remaining with about $16 million (about K6.4 billion) to pay,” the source explained.
According to another Ministry of Finance source, who corroborated our information, another meeting was scheduled for Thursday afternoon at Treasury where the Government of Malawi and Paramount Group were to structure the mode of payment for the outstanding bill of K6.4 billion.
As we went to the press, our questionnaire to Paramount Group for their side of the story had not yet been answered.
The Peter Mutharika administration has undertaken to get to the bottom of the sale of the plane by the Banda administration and how the proceeds from that transaction were used.
A lot of controversy surrounds the plane as it was sold at a loss. Different narratives are given about how it was paid for. It is reported that after being sold, those who bought it provided it back to Malawi as well-wishers for president Banda to use for free.
On its part, the Anti-Corruption Bureau (ACB) on Thursday said that it has not yet started investigating the sale of Malawi’s presidential jet and how the proceeds were used.
ACB spokesperson, Egrita Ndala, could not tell when the investigation will take place or if it will take place at all.
A source had confided in Weekend Nation that the ACB has received a complaint regarding how the presidential jet was sold and how the proceeds from the sale were used.
The inference of the information in our possession, as provided by the source, being that both the sale of the plane and the use of the proceeds bordered on abuse of office and corruption.
However, Ndala responded: “The Anti-Corruption Bureau has not started investigation into the sale of the presidential jet.”
