Malawi Electoral Commission (MEC) says the K690 million it invested with Alliance Capital Limited is at risk because the investment and portfolio management firm is not giving inspiring feedback.
MEC chairperson Chifundo Kachale disclosure this in a meeting with the Budget and Finance Committee of Parliament in Lilongwe yesterday when the electoral body appeared before the committee to explain its funding issues for 2020/21 financial year and requirements for constituency redemarcation exercise.
He told the committee that the K690 million was generated from candidates’ nomination fees for various electoral activities and the previous cohort decided to invest it with Alliance Capital Limited to earn profits.
Kachale, a judge of the High Court of Malawi, said: “The commission has learnt recently that Alliance Capital has had problems paying back investors.
“The commission has, therefore, been engaging Alliance Capital to disinvest these funds. However, from the correspondence, it is unlikely that these funds will be made available on time.”
He said the funds were earmarked to supplement the budget for the constituency redemarcation exercise which MEC planned to undertake in the current 2021/22 fiscal year.
In his presentation to the committee, Kachale said MEC needed about K1.2 billion to complete the constituency redemarcation exercise, but it has K700 million in the budget, leaving a shortfall of K563 million.
He said MEC will be rolling out its redemarcation programme on August 23 using the available K700 million.
When quizzed to explain the commission’s plan B of funding the activities if government fails to commit to finance the deficit, the MEC chairperson said there was no alternative.
Said Kachale: “Where government has committed to fund an activity and it fails, it doesn’t lie in the face of MEC to find alternative plan because we are a public institution, created under the Constitution of Malawi and, by law, our business is intended to be funded by public resources, so we cannot work to find our own resources.”
Budget and Finance Committee chairperson Gladys Ganda said it was shocking that MEC decided to invest the K690 million at a time it was looking for finances from the government.
Responding to Kachale’s assertion that the idle resources invested with Alliance Capital needed to be appropriated by Treasury as MEC would not decide on its own to spend, she said such issues needed to be corrected.
Ganda said: “The K690 million invested into Alliance Capital Limited is a mind boggling issue in the sense that the funds were staying idle yet we are also asking government to fund MEC.
“If MEC had their own way, they would probably channel the funds into the constituency re-demarcation exercise, but as we speak they cannot be able to get the money and that is an issue that we should look into.”
She said the funding deficit was a cause for concern for the committee as it was a sign of distress for MEC.
Ganda said the nation cannot wait for the Alliance Capital Limited investment, stressing that MEC should be funded to facilitate smooth implementation of planned activities.
MEC has joined a list of organisations and individuals whose savings are in jeopardy following Alliance Capital Limited’s failure to pay its clients.
In March this year, Reserve Bank of Malawi (RBM) suspended the portfolio manager’s licence for Alliance Capital Limited for breach of technical operating requirements as required by the financial services law.
Reads the RBM statement of March 31 2021: “The registrar’s decision to suspend the licence is intended to safeguard the interests of investors and the general public and to ensure that the company honours its existing obligations to its clients and other creditors.”
The central bank said during the 12 months of the suspension of the licence, the company shall not be allowed to accept new business. RBM said Alliance Capital should, during the suspension period, concentrate on repaying liabilities to investors and other creditors.
The central bank’s decision followed several complaints from investors about failure by Alliance Capital Limited to pay off clients at the end of the investment period as such the company was dragged to court.
Earlier this year, the High Court Commercial Division ordered Alliance Capital Limited to settle in full K373 513 566.31 it owed one of its clients.
In his ruling, Judge Masauko Msungama ordered Alliance Capital to pay the full amount owed to the investors by March 31 2021, a determination that was arrived at after considering that there was no information on how the average monthly sum of K500 million, which Alliance Capital Limited claimed it collected from its debtors, was being utilised.