Delays in the appointment of Roads Fund Administration (RFA) and Roads Authority (RA) boards is threatening $50 million (about K15.5 billion) loans and grants Malawi can access for the agricultural sector.
The World Bank (WB) and the Malawi Government on March 26 2012 signed a loan agreement amounting to $30 million (about K9.3 billion) for rural roads project under the Agriculture Sector Wide Approach-Support Project (ASWAp-SP).
Later, UKâ€™s Department for International Development (DfID) showed interest to top up the facility with $20 million (about K6.2 billion) for a project that would ease transportation of farm produce from five districts.
The project is to promote production and marketing of cotton, wheat, rice, groundnuts, cassava, pulses, vegetables, fruits, species, sorghum and millet in Chikhwawa, Chitipa, Salima, Mwanza and Ntcheu districts.
According to the projectâ€™s concept paper seen by The Nation, selection of the target districts was based on:
(i)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Potential to produce at least one cash crop as an alternative to tobacco
(ii)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Reasonable proximity to major towns or agro-processing facilities;
(iii)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Existing interventions promoting the adoption of recommended agricultural technologies
(iv)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Accessibility to input dealers, in particular those involved in [Farm Input Subsidy Programme (Fisp)].
Productive agricultural areas within each of these districts will be identified by the Ministry of Agriculture and the selection of individual roads to serve these areas will take place during project implementation.
A major condition under the World Bank K9.3 billion loan is that the Ministry of Finance, RFA and RA should sign a tripartite agreement that would spell out their respective roles in the financing and implementation of the project.
Normally, in such arrangements, the Ministry of Justice (MoJ) is supposed to give its legal opinion.
The Nation established that MoJ refused to do so, cautioning that RFA and RA cannot sign this agreement because legally, the two are dysfunctional as they do not have boards.
Principal Secretary for Justice and Solicitor General Anthony Kamanga confirmed this on Monday, saying the ministry has its own ethics and cannot issue an opinion when legally things are not in place.
â€œIt is an internal challenge, but we are addressing it. We will be processing the legal opinion,â€ he said.
World Bank conditions for funding
Paragraph 50 of World Bank project document states, among others, that the RA will be responsible for the implementation of the project.
â€œThe Ministry of Agriculture will continue to be responsible for overall coordination of the project. Implementation responsibility will lie with the line ministries in charge of their respective sectors,â€ reads the document in part.
It further says: â€œA tripartite Project Implementation Agreement will need to be signed by the MFDP, the Roads Authority and the Roads Fund Administration to set out their respective responsibilities.â€
Sources, however, said it is only the boards that can sign this document on behalf of RA and RFA; hence, the hitch in implementation of the project.
In an interview last week, World Bank communications manager Zeria Banda said the bank is not interested in the boards. Rather, it is interested in what can only be done by boards at the two institutions.
Said Banda: â€œAs per project financing agreement, the Malawi Government shall enter into a Project Implementation Agreement with the Roads Authority and the Roads Fund Administration. The RA will be the government agent carrying out day-to-day activities, while the RFA handles financial management issues for the project. If there are any board issues for these executing agents, they are not part of the effectiveness agreement with the World Bank.
â€œParagraph 50 outlines the effectiveness conditions. These are the conditions that government should fulfil before the bank can start disbursing funds. Most of them have already been fulfilled, but you can get details from the PS for Agriculture Dr. Luhanga.â€
Initially, implementation of the project was meant to start on October 17 2012, 90 days from the day the agreement was signed with the World Bank.
This period elapsed and government has had to ask for an extension from the bank, which has given Malawi a last chance until December 17.
World Bank loan agreement policies limit the extent to which effectiveness can be extended.
â€œThe legal agreements terminate if the conditions established for effectiveness are not met by the date specified in the legal agreements, normally 90 days after the signing, but this date does not normally exceed 18 months after the loan approval,â€ reads the policy in part.
It adds: â€œHowever, if the borrower shows satisfactory reasons for the delay, the bank may set a later date on the basis of the time required to fulfil the remaining conditions of effectiveness.
â€œIf the legal agreement[s] have terminated for failure to become effective by the effectiveness deadline, the bank may, in exceptional circumstances, agree to reinstate the terminated legal agreement[s].â€
The RFA has been without a board since 2010 when the mandate of the last board expired, while RAâ€™s board ended its tenure in August this year.
Under the RFA Act, it is only the board that has power to â€œallocate financial resources for the construction, maintenance and rehabilitation of roadsâ€¦â€
The board is also responsible for, among others, arranging for the collection of money assigned to the Roads Fund; identifying other sources of funding and coordinating and ensuring total and timely accountability of Roads Fund.
On the other hand, the RA Act in Section 12 gives powers to a board of directors to:
(a) Advise the minister on the construction, maintenance and rehabilitation of public roads, and the prohibition of any act that may lead to damage to public roads
(b) Monitor the operations or activities undertaken by any road agency in the construction, maintenance and rehabilitation of public roads.
RA spokesperson Portia Kajanga could not immediately respond to our questionnaire, but inside sources agreed that the board issue has affected progress of the project because of the need for a Tripartite Project Implementation Agreement among RFA, RA and the Ministry of Finance.
The three were expected to have signed the agreement before October 17 2012.
â€˜Govt addressing boards issueâ€™
The RFA spokesperson Masauko Ngwaluko said government is addressing the issue of the board and â€œis expected in any time from now after the legal formalities of appointmentâ€.
â€œThe bank extended the deadline from 17 October to 17 December 2012. Our expectation is that the funds from the World Bank will be available before December 2012. We hope by then, the boards will be in place,â€ he said.
In an e-mailed response, Ministry of Finance publicist Nations Msowoya acknowledged that the project could not start on October 17, â€œbecause the government has not yet met all the conditions required by the World Bank to access these funds.
â€œWorld Bank has already committed funds towards the project, but DfID has not yet committed funds mainly because they have to seek approvals from their government in the UK. The delays are largely because the government is still putting up the legal documentation that is required by the World Bank when loans are involved.â€
DfID programme manager Andrew Massa acknowledged their interest in co-funding the project, saying DfID has held discussions with the Government of Malawi and the World Bank about contributing to a rural roads programme.
â€œBut at this point, the programme is still under design and has not been approved internally, so we are not in a position to discuss details,â€ said Massa.
Ministry of Agriculture spokesperson Sarah Tione also acknowledged that government has not completed required documentation to access the funds.
In an interview, comptroller of statutory corporations Nwazi Mnthambala said the delay to appoint the RFA and RA boards is due to â€œprocedures in government systemâ€.
â€œBut they [the boards] will be appointed shortly, be assured,â€ she said.