..fuel ankers held in Dar es salaam
…NOCMA procured expensive fuel to finance bribes
…MERA’s ineptitude costing taxpayers billions
Contractors are threatening to seize the Kalinyeke and Chingeni toll gates, and suppliers are withholding services, while Malawian tankers have been stuck in Dar es Salaam for two weeks as suppliers demand their dues. Fuel arrears now have hit K1.1 trillion, the highest ever since 1964- but they speak of corruption at the highest levels of government.
President Lazarus Chakwera seems to be running a government for the corrupt, by the corrupt and of the corrupt, that is slowly turning Malawi into an economic mess.
But President Chakwera is unperturbed. He is soon flying out of Malawi, draining the few remaining dollars while spending over K100 million every day on local travel. Government agencies’ funding has dried up, and trillions more are accumulating in arrears for allowances and entitlements in all government agencies.
The Office of the President and Cabinet (OPC) and associates of State House are key players in expensive fuel contracts. The Malawi Energy Regulatory Authority (MERA) under Henry Kachaje has now depleted the Price Stabilisation Fund—mainly for political gains—and allowed NOCMA to accrue billions of kwachas in arrears over price differences payments, while roads and electricity programmes have come to a halt.
Corruption, Rent-seeking and kickbacks is the genesis of the K1.1 trillion debt
The Anti-Corruption Bureau (ACB), The Investigator Magazine can reveal, is sitting on a ton of evidence over the 2022/2023 procurement process. An individual directly linked to the President’s family was recorded boasting that he had insider information and that three of the suppliers were his deals.
The other suppliers belong to another State House official and another to a senior figure in the Office of the President and Cabinet who has been pushing to award contracts to their associates and gain kickbacks.
The average payment by suppliers to gain contracts at NOCMA is around US$ 1 million (K2.2 billion) before the contract is awarded and monthly payments between US$50,000 (K125 million) and US$200,000 (K500 million) are paid as bribes to the officials.
To cover these prices, NOCMA opted for highly expensive suppliers or asked them to raise their prices so they could remit the difference to the officials’ accounts in Dubai, the Caribbean, and Serbia.
In the recording The Investigator Magazine, the individual can be heard boasting that he is paid K80 million monthly, which is equivalent to US$50,000. These are payments that politicians, their associates, and senior government officials are getting, costing the public billions and raising fuel prices.
Same quantities of Fuel, NOCMA corruption claims a K600 billion loss
A report from a Parliamentary committee makes startling revelations that are explained by industry experts as pointers of how corruption at NOCMA and aided by MERA will punish Malawians in the short and long terms as trillions of kwachas in arrears being accumulated without any solution in sight.
Malawi adopted a flexible exchange rate and pricing mechanism, which means a certain percentage in foreign exchange or prices will adjust fuel prices. However, under President Chakwera, corruption and ineptitude in managing the economy have led to a totally bizarre way of managing fuel pricing.
Apart from NOCMA getting more expensive suppliers than private sector Petroleum Importers Limited (PIL), NOCMA mysteriously has incurred a huge under-recoveries bill, now at K600 billion, which is more than the entire Affordable Input Programme and Ministry of Health budgets.
An expert explained that when importers import fuel, the MERA has a set selling price, and if the importer makes losses, they claim the difference from the Price Stabilisation Fund (PSF), which it operates. But MERA has drained the PSF and is failing to raise fuel prices on political grounds to pretend President Chakwera is delivering.
“It’s the biggest joke. We have a grossly incompetent President, a clueless Finance Minister and unqualified MERA CEO making K1.1 trillion decisions that will affect the whole economy and everyone. The kwacha has fallen, there is no forex in Malawi, and they want to pretend things are okey when they have no idea how to fix it. All they are doing is to borrow and borrow, sinking the economy further,” challenged a senior government economist.
UTM presidential hopeful Dalitso Kabambe, who was Governor of the Reserve Bank of Malawi, agreed with this observation in his recent interview with Times TV’s Brian Banda. He said the administration has no idea what it is doing with the economy.
A fuel expert told The Investigator Magazine that NOCMA imports only 50% of the required fuel stocks 487/the PIL is only owed K156.3 billion. The other companies are Mount Meru K22.2 billion, SIMSO K5.7 billion, Puma K5.3 billion, Energem K1.3 billion and Petroda K740 million. For other unclassified suppliers, MERA owes K615 million.
“One can tell that 50% of NOCMA is resulting in a K593 billion loss, while 50% of PIL is only K156 billion. Fuel is sourced from the same areas. Only NOCMA opts for expensive suppliers like many we have now, and they can charge more, so they pocket the difference. PIL and other companies show from the same quantities the amounts can be less. Malawians should stop this corruption at NOCMA and delink it from the control of OPC where all the bad deals originate from,” said another fuel professional.
Former NOCMA Boss Helen Buluma named Secretary to the President and Cabinet Colleen Zamba as having tried to force her to allocate fuel to traders connected to her. Recently, we exposed another K128 billion deal that OPC was forcing on the NOCMA’s throat to cash out K50 billion and deposit it at a foreign exchange bureau.
The deal has been delayed due to a query by the Anti-Corruption Bureau (ACB), but as usual, nobody will be held accountable for this blatant attempt to steal public funds.
Reality catches up with corruption
The honeymoon over fuel funds is over, and fuel supplies are erratic. Tankers have been detained in Dar es Salaam for over two weeks with no foreign exchange available to pay for them, and, more importantly, they are imported by NOCMA.
The same reality of pretending to have the economy in control has resulted in the accumulation of arrears, as politicians who have no idea of economics compete to run down the economy and accumulate unmanageable debt.
The three key players are President Chakwera, SPC Zamba, who chairs NOCMA and Henry Kachaje, the CEO of MERA, who is entrusted by law to manage the country’s fuel funds from levies and for the Price Stabilisation Fund.
In terms of new debt- overall under Chakwera, Malawi’s debt has reached K15 trillion from an average of K6 trillion in 2020 and under Zamba, NOCMA has accumulated arrears worth K600 billion and while MERA on its own has now a good K1.1 trillion debt or arrears to be paid to suppliers and remit as levies.
Interestingly, there is no money. Only the trio owes Malawians an explanation as to why they find it fit to play politics over reality and delay the inevitable as the economy sinks further.
For a layman to understand- the K2,740 that a motorist pays for 1 litre of petrol, there is payment for the product (including financing charges), transportation (including insurance), storage and levies.
Levies account for almost K400 per litre (some are a percentage of price while others are straight amounts), which MERA collects and distributes as Rural Electrification Levy (Ministry of Energy), Road Levy (Road Funds Administration about 140/litre), Malawi Bureau of Standards (MBS) Cess (K3/litre), Energy Regulatory Levy (to MERA – about K12/litre)) and the Price Stabilisation Fund (PSF) (5 per cent) at MERA.
Last year, the IBLC Loss Recovery levy was introduced and pegged at K72.35/litre) to supplement the PSF. There are also other levies namely Strategic Fuel Reserves Storage (K10 per litre), Distribution Margin Fund (K4 per litre) and Malawi used to have Carbon Tax levied at K5 per litre payable to Road Traffic.
This means for 1 million litres of fuel which are estimated to be consumed per day, at least K400 million is raised, and for Roads Fund, MERA was supposed to remit K140 million every day or K4.2 billion. Malawi Rural Electrification programme the amount is over K102 billion.
“The problem starts from how contracts were negotiated. The suppliers bribed some people in the administration, and they continue to collect the bribes, MERA can’t explain where the PSF funds went apart from the devaluation and used MAREP and Roads Funds for other things. They stopped remittances to Roads Funds and Marep, but they don’t have the money. The question is where the money went. K1.1 trillion is quite a huge bill to accumulate in a short period of time,” asked a fuel professional.
No money in government, parliament or executive
The financial crisis is so deep that public services have almost come to a grind as arrears keep accumulating and suppliers are cutting services to government agencies.
Directors and Principal Secretaries at Capital Hill last received fuel allowances in May. As funding has dried up for the past months, Parliament is now relying on external donors to run its affairs.
“The arrears are accumulating. Only things that are for the President seem to see Treasury pay. But other institutions, including local councils, have no money,” said a senior public official.
The situation is likely to get worse as the President shows no sign of slowing down on his expensive travels and offers no solution to manage the economy at a time when the major foreign exchange earner tobacco market is closed, and imports for agro-industries such as fertiliser are in high demand.
Malawians face a bleak future as corruption goes untamed.
