The Reserve Bank of Malawi (RBM) has sued five local companies for failure to repay about K3.2 billion in loans connected to subsidised fertiliser deals they signed with the government, Court documents show.
The companies are Mulli Brothers Limited (MBL), which allegedly owes the central bank around K1.5 billion; Rock ba Rock is accused of dodging repayment of over K1 billion; Webb Commercials and FF Trading, face K308.2 million and K233.2 million claims respectively.
The other company is JF Investments Limited, which allegedly owes the central bank K152 million.
The court records show that the five companies were accessing the loans as part of a trade finance facility agreement known as Dual Tranche Strategic Structured Commodity and Trade Finance Facility, which they signed a couple of years ago.
The agreement was that RBM was sourcing forex and paying foreign-based fertiliser manufacturers on behalf of the local firms in the hope that they will refund later.
The application by RBM lawyer Thabo Chakaka-Nyirenda says MBL got K2.1 billion loan to facilitate supply of fertiliser to government under the Farm Inputs Subsidy Programme (Fisp).
The RBM claim filed in the High Court Commercial Division on March 2 2021 reveals that MBL had only paid back K709.6 million by December 20 2020, when the company was supposed to finalise servicing the loan.
Reads the summons of claim: “In further breach of the express and/implied terms of the contract and the undertaking made on September 8 2020, to pay the outstanding balance by December 20 2020, the defendant failed, refused or neglected to pay the claimant the said sum of K1 401 989 682.71.”
About Rock ba Rock, RBM alleges that it got a loan of K1.4 billion in 2019 to supply fertiliser. Currently, it has allegedly only paid back about K479.9 million, leaving a balance of slightly above K1 billion. Full payment was agreed to be paid in March 2020.
Reads the summons: “Furthermore, or in the alternative, the claimant pleads that the sum of K1 035 917 939.85 is a commercial debt or that the transaction between the claimant and the defendant was commercial in nature and the claimant claims compound interest at five percent…”
FF Trading, the summons reads, borrowed K600 million promising to pay back once it received its fertiliser supply payment. However, it only paid K374.8 million.
“In breach of the express and/or implied terms of the contract, the proceeds of sale of subsidised fertiliser which the defendant assigned to the claimant were never remitted to the claimant. However, on February 25 2020, the defendant paid the claimant the sum of K374 880 000.00, leaving a balance of K233 281 504.98,” reveals RBM.
On its part, Blantyre-based Webb Commercials was awarded a K1.2 billion loan and it has paid back K900 million.
In all the four deals, RBM says the companies were supposed to pay back once government paid them supplying the fertiliser, but they all failed to fulfil the promise.
“As a result of the matters set out above, the claimant (RBM) suffered and continues to suffer loss, damage and expense,” the bank says.
High Court registrar Gladys Gondwe confirmed the development in an interview on Friday, saying: “Matters have been filed separately against the five defendants before the Commercial Court in Blantyre.”
MBL managing director Leston Mulli acknowledged owing RBM, but said the company was struggling to service the loan because government stopped awarding it contracts.
He cited government’s decision to bar him from supplying subsidised fertiliser last year as one of the financial setbacks. The Ministry of Agriculture struck MBL off the list of supplies of Affordable Inputs Programme.
“Where do you expect us to find money to repay loans when government has stopped giving us businesses? This should be a reminder to government that some of the decisions it makes have serious consequences,” said Mulli.