Malawi Government has depleted the K1.1 billion (about $3.06 million) budget for compensations in the 2012/13 fiscal year.
According to a payment schedule we have seen, K1 624 125 983.87 (about $4.5 million) had been paid in compensations by February end this year against the budgeted K1 129 839 325 (about $3.14 million). The Ministry of Finance has confirmed these figures.
This means that by mid-year, government had overspent this vote by K500 million (about $1.39 million).
We have also established that by the end of this financial year, over K7 billion (about $19.4 million) is expected to be paid on compensations—money enough to put 87 500 HIV-positive people on ARVs for 12 months.
These payouts—including the K7 billion total —only concerns breach of contract cases with individuals and companies outside government as well as human rights violations such as unlawful arrests.
The figure, therefore, excludes the hundreds of millions government agreed to pay public officers that the Joyce Banda administration fired illegally and whose payments Finance Minister Dr Ken Lipenga last week said Capital Hill has stopped because they will be challenged in court.
Government has since asked Attorney General Anthony Kamanga to renegotiate compensations to former public servants such as former Admarc chief Charles Matabwa (K82 million), former Anti-Corruption Bureau director Alex Nampota (K70 million), former Reserve Bank of Malawi governor Dr Perks Ligoya (K49 million), former MBC head Bright Malopa (K40 million) and former Malawi Revenue Authority commissioner general Lloyd Muhara (K25 million).
According to the payment schedule we have seen, government is expected to pay out K7 154 559 550.38 by the end of the 2012/13 fiscal year to over 30 companies and individuals deemed to have been wronged by the State.
Treasury spokesperson Nations Msowoya confirmed the figures, including a remainder of K5.5 billion meant to be paid by the end of the fiscal year. He said the Ministry of Finance is not sure where government will get the money to clear the balance.
In an interview on Wednesday, he said: “We have nowhere to get the money if nothing comes from the current midterm budget review process.”
“If anything, they will be paid in the next fiscal year,” Msowoya said.
Asked how government can avoid these payouts in the age of austerity, Msowoya said “doing a thorough job would help”.
“There should be proper exit and appraisal clauses in these contracts. That would help a lot,” he said.
What K7 billion can do
Malawi, a donor-dependent nation, still has most of its essential services free or subsidised for its citizens.
According to documents we have seen, government pays K2 670 for a 2kg bag of legume seed— which cost K 3 170 on commercial market—to allow poor farmers buy it at K500 under the Farm Input Subsidy Programme (Fisp).
Therefore, by saving K7 billion paid out in compensations, government might have subsidised legume seed for 2 621 729 poor farming families.
In Health, spokesperson Henry Chimbali said it costs $200 (K80 000) for government to put one HIV-positive person on ARVs for 12 months.
With K7 billion, government would potentially have prolonged 87 500 lives in 12 months.
In the transport sector, figures at Treasury show that it costs about $800 000 (K3.2 billion) at present K400 exchange rate, to build a kilometre of M1-like highway.
On the other hand, Roads Authority (RA) publicist Portia Kajanga said it costs K4.1 million to gravel a rural road on the minimum.
So, with K7 billion, government would be able to grave and make passable roads to a length of 1 556km. The longest distance between Malawi towns is Nsanje to Chitipa at 1 083km.
While a number of individuals may have been or will have to be rightfully paid for wrongs inflicted on them by government, some payouts are controversial.
For example, government is compensating Glens Waterways with K900 million for breach of contract.
In 2008, government terminated a 20-year long concession to run the country’s water transport system with Glens Waterways after six years of operation because, according to director of Marine Services Leston Makuzula, the concessionaire had breached the contract.
But Glens Waterways owner, business tycoon Kassam Okhai, sued government for the move, also citing breach of contract.
Glens also claimed they had purchased land meant to be developed into a port at Ngala in Nkhata Bay and other places which required compensation.
Initially, they demanded K3 billion, which was rejected by the government’s Compensations Committee. The committee pushed the ball back to the Ministry of Justice to renegotiate, hence the K900 million.
But Makuzula thinks that the company was in more breach of contract because they had not managed to do a number of agreed items.
“In the concession, there were obligations for both parties. Key among them was the issue of maintenance of assets and investment into the subsector which was not done by the concessionaire,” he said.
“After a review, it was found that the obligations were not being met. In brief, the concessionaire was not operating according to conditions of the concession,” he added.
Glens Waterways also left debts which, in the new concession entered into with Malawi Lake Services Company, will have to be sorted out by the Malawi Government.
The water transport management concession was in March 2012 given to Malawi Lake Services Company owned by Mota Engil for a 35-year long agreement based on the similar conditions as Glens Waterways.
But Glens Waterways lawyer Mauya Msuku brushed aside any argument that the company was not performing, arguing that “at the start of the 20-year concession [in 2002], Glens found only one vessel running, but there were 10 running when government terminated the contract.”
He added that his client has made “massive investment” and “it will be surprising to hear any more arguments because to us, this is a closed matter.”
During the court hearing, government, through office of the Attorney General, brought five witnesses who all failed to prove any wrongdoing on the part of Glens, according to the lawyer.
So far, Msowoya confirmed that Glens has already been paid K350 million, leaving a remainder of K550 million.
Glens Waterways is second of the top three supposed victims of government misconduct in terms of awarded damages.
Topping the list is Deco—the company stopped from constructing the New Parliament Building when Malawi switched diplomatic ties from Taiwan to China. It was awarded about K2.9 billion.
On third position is Victoria Forex Bureau who sued for loss of business after Reserve Bank of Malawi closed down private forex businesses. They have already been paid K840 million.