Government is grappling with a demand of a whopping K72 billion interest from suppliers of fertiliser for an initiative that was established without Parliament approval during Joyce Banda’s reign and whose total cost was just about K26 billion then.
The current administration suspended the Farm Input Loan Programme (Filp), one of Banda’s signature programmes, in September 2014 due to various legal and financial challenges.
Treasury, according to information Nation on Sunday has, a fortnight ago paid four firms; namely Export Trading Company, Sealand Investments Limited, Midima Produce Limited and Bosveld Phosphates $9 million (about K6.5 billion) for the contractual sums owed to the companies.
However, the companies through their representatives have filed a claim of interest demanding more billions in local currency.
Finance Minister Goodall Gondwe confirmed in an interview yesterday that the companies have made the claim, but said it was unlikely that government will honour the demand.
“The sum is the principal plus interest; that is what they are saying. I understand we have paid the principal and we are now discussing the interest. What is being discussed is the question of the interest rate because nowhere did they indicate that we will pay interest. It is unlikely we will pay,” said Gondwe.
The disagreement over payment has led to a legal tussle with the Attorney General (AG) objecting to a submission of claims by the companies for interests which is being made in local kwacha currency, alleging that the contracts with the companies were quoted in US dollars.
Attorney General Kalekeni Kaphale also confirmed, in an interview, both payment of the contractual sum owed to the companies and the fresh demand of interest payments.
“I have received a claim. As far as I am aware, their contracts were quoted in dollars for supply of fertiliser. They have been paid the full sum amounting to $9 million through zero coupons for two years. It has been negotiated and it is legally binding,” said Kaphale.
However, Kaphale said disagreements now lie over the issue of the interest claim with Treasury asking for the AG’s advice on the matter, which he confirmed he has provided.
“They negotiated with the Treasury on the issue of the claims, but the legal question is whether their claim, which has been quoted in Kwacha, is legal and I have provided my opinion on the matter. The dollar currency is not an inflationary currency, so, if they claim interests on the local currency rate, it will be a very huge sum. I am still waiting for further instructions, but I have shared my legal opinion with Treasury,” added Kaphale.
According to Kaphale, the four companies—one South African and three local—are being represented by Sealand Investment in the negotiations and the first payments have also been made through the same company after an agreement by them.
The Malawi Rural Development Fund (Mardef) was mandated to run the scheme, which it said was not meant for the people—targeting about 750 000 beneficiaries during the programme’s first year growing season.
Controversy dogged the initiative from its inception due to concerns that Banda bypassed Parliament while establishing the financial institution.
Weekend Nation of October 26……. reported that through the programme, the Office of the President and Cabinet used about K25.4 billion in buying fertiliser for Filp behind Parliament’s back.
Minister of Finance Gondwe disclosed in his 2014/2015 budget statement that the Democratic Progressive Party (DPP) government had discovered that suppliers of the 75 000 metric tonnes of fertiliser for the programme were yet to be paid and also almost 42 000 metric tonnes was still in the suppliers’ warehouses.
Gondwe also said another anomaly with the facility was that the fertiliser was bought on credit without parliamentary approval and “does not appear to have been sanctioned by the Treasury”.
South Africa-based Bosveld phosphate supplied 18 000 metric tonnes; Midima Produce Ltd supplied 13 000 metric tonnes; Export Trading Co. Ltd supplied 24 000 metric tonnes whereas Sea-land Investments Ltd supplied 20 000 metric tonnes. n