More rust in Indian loans

Ten years ago Malawi got a loan from India, used part of it to buy 100 water pumps under an irrigation component estimated at $15 million (around K11 billion) then left the equipment to rust in a warehouse.

It is the kind of reckless borrowing and spending similar to the infamous Tractorgate and the scandal that was the Youth Enterprise Development Fund (Yedef).

All the three initiatives were India-linked loans that have yielded little multiplier effects on the economy, but are burdening Malawi as part of a K1.6 trillion external debt.

The purchase of the pumps was part of the $50 million credit line from India obtained to improve Malawi’s agriculture through mechanisation.

Out of this credit line, $15 million was for irrigation equipment, more than 90 percent of which has been idle in a warehouse in Lilongwe.

A confidential report from Ministry of Irrigation and Water Development to the Office of President and Cabinet (OPC) we have seen wants direction from Cabinet on how to handle the consignment of pumps dumped at Plant Vehicle Hire and Engineering Services (PVHES) warehouse in Lilongwe.

“Almost the entire consignment is at PVHES, except for some few pumps that were issued to Greenbelt Initiative [GBI], Lilongwe University of Agriculture and Natural Resources (Luanar) and Blantyre Water Board. The pumps are a burden to government; hence, the need to put them to use so as to defray the storage costs and avoid further deterioration,” reads the report in part.

The problem is that government bought wrong water pumps not fit for the targeted farmers due to their high operating and maintenance costs, according to irrigation authorities Nation on Sunday talked to.

Even after staying idle for that long, new Minister of Irrigation and Water Development Charles Mchacha, during a tour of the warehouse a few weeks ago, said the equipment will soon be put into use.

Said Mchacha: “You have seen the water pumps bought from India in 2010, which up to date are not in use. It is an issue under discussion. Malawians are in need of such machinery for farming. We must find a way of taking this equipment to the people for the betterment of our economy.”

But an irrigation engineer familiar with the operations of the pumps in question doubts the minister’s sincerity when he says the equipment must be taken to the people, arguing that no farmer in Malawi can easily operate these pumps, which consume a lot of fuel and have high maintenance cost.

GBI, one of the beneficiaries confirmed that it failed to run the water pumps.

The organisation’s spokesperson Maganizo Mazeze said the motorised pumps were given to them in 2013.

“Yes, we received two pumps [at different intervals] from the Ministry of Agriculture upon our request under a Government Second Crop Project, which the Greenbelt at the time was implementing.

However, because the pumps had technical defects, and regularly broke down, we further requested for another pump, which gave similar problems. In total, we received three pumps from the Ministry of Agriculture,” he said.

According to Mazeze, the pumps were initially deployed to Salima Sugar farm in the early stages of the project. Once the sugar project started developing high-tech irrigation system, the pumps, which he said became a huge liability, were redeployed to GBI Nchalo Cotton Project in 2016.

“However, the mechanical problems continued and only one pump was able to function with regular repairs but, that too, could not last long. So, all the three pumps have not been functional over the past few years and they remain at our cotton project in Nchalo,” he added.

When we checked with Nchalo GBI office, we were told only one pump is working after “massive modifications, which were expensive,” according to one farmer.

Luanar received one pump, which is still running, according to Professor Kenneth Wiyo who is an expert in water and irrigation.

“I do not think the machines have defects, but high running cost for smallholder farmers. These are big machines and because of the high operating and maintenance costs they are not suitable for smallholder farmers, that is the only performance is good,” he said. challenge; otherwise, the

A report by the Auditor General indicates that in 2010, after President Bingu wa Mutharika visited India, government signed three credit lines, which included the $50 million facility.

The loan was split into four parts—$19 091 491 for three cotton ginning plants with accessories; $9 091 491 for 177 tractors and allied implements, 90 trailers, 144 maize shellers, and 48 seed-cum-fertiliser applicators; $5 950 500 under Ovop for four dal processing equipment and assorted accessories and $15 000 000 under GBI, for irrigation equipment.

Both tractors and pumps were supplied by Appolo Inc following an international bidding process. According to Treasury spokesperson Williams Banda, procuring this equipment from India was part of the loan agreement with Exim Bank that materials should only be bought from India.

The tractor scandal was part of this loan arrangement that also fathered idle water pumps.

The Ombudsman’s investigation into Tractorgate established that this loan was obtained with little thought and involvement of key ministries and departments. The loan for the pumps was said to have been obtained under GBI, which was never involved.

“In addition to the poor performance of the tractors, all pieces of equipment and services supplied by Apollo International that I came across during the investigation are problematic and do not function properly without extra costs,” reads the Ombudsman’s report.

Specifically on pumps, the public protector corroborated the GBI version of the story, saying the machinery was faulty.

“They had engineering faults and GBI had to re-engineer them at a cost. One of the pumps no longer functions and cannot be repaired. The irrigation equipment being installed at GBI scheme in Salima [for smallholder farmers who will be supplying sugar cane to Salima Sugar Company] are faulty and the installation is problematic,” further reads the report.

Meanwhile, the Auditor General’s 2019 investigative report faults Ministry of Finance for signing credit lines before determining use.

“The lines of credit were signed when the ministry had not specifically determined on how they were to utilise the lines of credit,” reads the report in part, which indicates that Ministry of Finance did the procurement without involving the responsible ministry.

The confidential report to OPC also indicates that procurement was done by Ministry of Finance instead of the responsible entity— Department of Irrigation.

In 2014, Cabinet had recommended that the pumps be sold, but the response was poor, according to the confidential report prepared by Ministry of Irrigation and Water Development, which further recommended price cuts to attract people to buy them.

“Following the Cabinet directive, the pumps were advertised for sale. However, the response was very poor as only three were bought. Due to poor response in 2014, Cabinet approved that the selling price be subsidised so as to make them affordable. Applications were received, evaluated and recommendation to issue pumps to responsive applicants submitted for ministerial approval, which has not been granted to date,” reads the report to OPC prepared in February this year.

Principal Secretary for Ministry of Irrigation, the custodian of the pumps, Henri Njoloma said he could only respond next Friday.

“This is a weekend we cannot help, give us time up to next week Friday we will respond,” he said, asking for a week more after two weeks expired without a response to our questions even with daily reminders.

But a source within the ministry said following the backlash on Tractorgate, government is not interested in talking about the pumps or anything in relation to them.

Asked on what they intend to do with pumps occupying their space for years, PVHES acting director Dixy Kwatani said they were waiting for direction from the responsible ministry. He refused to take any questions, asking us to talk to Ministry of Irrigation or Finance.

“We are just a warehouse, we cannot say anything and your question on whether they are 100 or not I cannot say anything because I have no information,” he said.