Malawis Salima Sugar: The K114 billion scam

…K38 billion Indian loan serviced by tax payers

…no profits, dividends, no sugar in shops
…two murky versions, New Chair Kosamu promises change

A total of K114 billion (US$72) million was borrowed from India and local banks with part of it  raised from shareholders equity to finance the set-up of Salima Sugar company, but the money trail, just like its scarce sugar,  is as murky as its set up.

Salima Sugar company

To save the project, government which had 40 percent of shareholding, borrowed K12 billion and later an additional K6 billion to pay for the land and sugar growing operations. The loans, with interests now stands roughly at K25billion.

Government says the loans have not been paid, associates of  the companys ousted Chairman claim all loans could be repaid within 2 years.

It is difficult to find the truth about the company, but Finance Minister Sosten Gwengwe and Salima Sugar Chairperson Wester Kosamu says the reforms that are being introduced will see Malawians gain, unlike the previous arrangement that has been running it between 2016 and January 2023.

Producing 25,000 tonnes each year valued at K27 billion at today’s exchange rate, neither the sugar not profits have been seen in Malawi, yet the people of Malawi continue to service the loan from India while a few people continue to enjoy the benefits of the plant.

The beginning- India pumped US$35 million, we borrowed US$25 million (K25 billion)

Malawi’s debt profile includes US$35 million debt indicating that was borrowed from India to set up the Salima Sugar factory. However, the story is hazy as to where the money went, who ate it and what it was used for.

This was around 2011, 2012 and 2013.

On 15th August 2016 opening the Salima Sugar factory, then President Peter Mutharika publicly said the initial money was stolen by previous government and his administration had to find resources to save the company.

President Peter Mutharika during the opening of the company

The initial loan discussions were started under the Late President Bingu wa Mutharika’s administration and concluded in 2012 and 2013 under the regime of President Joyce Banda.

It was not clear which “previous government” the President referred to in 2016.

“US$35 million was used to pay for the factory. It advertised for partners to run the company in 2013/14 and Aum Sugar was given the contract. The money from India was paid to Malawi Government and not to Aum Sugar,” an associate of Aum Sugar explained in an exclusive interview granted to The Investigator Magazine.

The total money for the project is therefore, US$35 million from the Government of India, CDH Bank loans worth US$25 million to GBA and US$12 million raised as equity by Aum Sugar out of the agreed US$17 million. Roughly around US$72 million was pumped into the company.

It is how and where this US72 million was used or repaid that has seen its former chairperson arrested and allegations of wild parties with taxpayers funds made.

We could not trace the exact dates the funds went into Treasury, but it could be estimated to be around 2012 for Indian loans and around 2016 for Malawian loans.

Aum Sugar was given the contract in 2015 after the factory had already been built.

Malawi Government- Green Belt Authority and Aum Sugar form partnership

In 2014, Government identified Aum Sugar, a partnership from India to set up and run the Salima Sugar company. 

The shareholding was 60% to 40 percent in favour of Aum Sugar, whose main partners with US$4 million worth of shares in Aum Sugar was Shirieesh Betgiri, he assumes the role of Executive Chairman.

Shirieesh Betgiri the then Executive Chairman of the GBA

According to sources and the GBA chairman Kosamu, the agreement included to raise US$17 million which was to be operations capital, but the company only managed to raise US$12 million until this year when the shareholding had to be restructured to reflect the real contributions.

The GBA has its own 2500 hectares, which at least 1200 hectares have been developed and kept by Salima Sugar. The GBA was the recipient of K25 billion loan from the banks and not the Salima Sugar company, claim the sources.

“There is a forensic audit which we instituted to establish exactly where the company is. All those questions will be answered. As a Board, just like all Malawians, we all have questions, once we get the report, we can push reforms that will make sense that this project benefits the country,” said Kosamu in a telephone interview.

There is a forensic audit which we instituted to establish exactly where the company is – Kosamu

“Government was supposed to guarantee loans to Salima Sugar, but they changed and brought in GBA which had 2500 hectres of their own. Salima Sugar developed 1200 hectres of the GBA’s hectarage and the company has its own 500 hectres,” explained our source.

The Salima Sugar Company claims it invested its US$12 million into the 500 hectres with construction of six dam as the Lake Malawi is 9 kilometres from the plantations six underground pipes.

The GBA states that the US$25 million was used to set up the 1200 hectres of land and start the operations of the company.

There is no certification of the costs, and the anticipated audit report could reveal the real costs.

K25 billion loan, profit or loses?

The company started actual sugar production and its output is now estimated at 25,000 tonnes per year which is from over 130 million tons of sugar cane, according to insiders.

The company sales all its sugar locally, though it is mainly in 50 kilogrammes bags, which is why it is rarely found on the Malawi market, said another source.

“The company has never declared any profit. In 2021 it made K24 billion, but they declared that they had issues with the production, and nothing was declared. You are looking at a whole K24 billion,” said a source.

Again, depending on who you ask, there is a dispute if the company is making profit and loss.

“It is true that no profit or dividends has ever been declared. But as to why and why, I would be wrong to assume anything. Let us wait for the audit report to make an intelligent comment,” said Kosamu.

Our insider claimed that Betgiri run the show and that he could explain where the money realised from the sale ended up.

The former chairman’s backer at the company claims the money went straight into banks to repay the loans.

“In 2016 the interest rates were very high to 2018, the ranged from 38 percent to 25 percent. All payments were done at CDH bank.

 The bank kept 60% and gave Salima Sugar 40% for operations based on invoices. With high interests the loans had soured, but they could be repaid within three years and the company can declare profits,” he said.

However, this is disputed as the loans, paid to GBA, have a life span of around 10 years and at K27 billion a year and even at 60 percent of K24 billion sales being held by the bank, the K18 billion loan should have been settled in a few years.

“If CDH has been taking or holding 60 percent from the sales they should be taking at least K10 billion a year, the K25 billion loan should have been retired within two or three years. It does not make sense that six years later the company is boggled down by these loans,” said our financial expert.

The outstanding loans questions could not be cleared, and the two versions contradict each other, leaving Malawians to ask, where and who got the money and where does the Salima Sugar money really go.

The Investigator Magazine will be tracking the payments and bank statements of the company it has received.

Did Betgiri borrow US$300 million

Betgiri, former Chairman of the company was arrested by the Malawi Revenue Authority, working with the Financial Intelligence Unit and others claiming that he had borrowed US$300 million in Dubai against the company.

Gift Trapence, Chairperson of the Human Rights Defenders Coalition, had written to the FIA and other prosecution agencies alleging making several serious allegations, that as published in local media.

The company worth is less than US$150 million and there is no indication that the former chairman could have been trusted to borrow “US$300 million” against the company.

“We will have to wait for court to get the details, it should be interesting,” said his associate. 
On June 21, 2023, Platform for the Investigative Journalism reported that Betgiri was arrested by Police after he established a clandestine bank account in Dubai under the name of Salima Sugar Company.

The Investigator Magazine has traced a company registered in Dubai by the same name, but not a bank account and former GBA Board member explained to us that nothing came out of the proposed financing from Dubai.

“Just like Bridgin Foundation joke to the President and Government. There was a promise that someone could finance Salima Sugar expansion at a low rate. The said the company should open a company and the money will be paid. Betgiri was given go ahead but the company disappeared, so no money was paid, no bank account opened and GBA was aware of all of this,” said the board member who pleaded for strict anonymity.

Police spokesman Peter Kalaya, according to the PIJ and Betgiri lawyer Wapona Kita confirmed the arrest and was remanded at Lumbadzi Police Station in Lilongwe before he was released on bail.

Among the charges include the alleged US$300 million financing and charges of fraud other than false pretences, obtaining execution of a security by false pretence, trustees fraudulently disposing of trust property and money laundering.

No Malawians, but 150 Indians employed

The start of the company sent shock waves to many agriculture graduates as Indian nationals were shipped into the country and took up most of the top jobs to run the company. The Board agreed.

In July 2020, then Immigration Minister Richard Chimwendo Banda visited the company and expressed shock that there were a lot of Indians at the factory doing jobs that Malawians could do.

The following day Department of Immigration arrested 67 Indian nationals for working at the factory without permit and later the numbers were reduced to 50 after discussions.
Others allege the matter died down after “a tithe” was collected.

Workers of the company, all Indians

The company sources said there is no Sugar training factory in Malawi, despite Illovo operating in the country for ages.

“The agreement was reached, they were reduced to 50, then around 30 could remain with Malawians taking over after training. Otherwise these came to fill skills gap,” said an official at the company.

Who is buying and selling Sugar, where is Salima Sugar

The issue of who is selling Salima sugar, two versions again emerge, from the old Board and the new Board adding more mystery to the whole saga.

Our source claimed the company has had 1 kilogramme packaging machines for a while, while the other side disputes this,  saying it was selling its sugar in 50 kilogrammes bags.

The other claim is that Malawians of Asian origin are the only ones who had distribution contracts which denied indigenous nationals a share of Salima Sugar business.

“Only one or two were black Malawians. The rest operated like a cartel,” charged our source.

Kosamu said his Board which took over in January cancelled all contracts and is now processing new bids.

“I can’t say much about the past. The future is that people will be able to find Salima Sugar at Nkhamenya as well as in Chitipa or Nsanje, the new contracts are being processed to rectify whatever was wrong with the past,” he said.

Hon Chimwendo during one of the tours at the company

Secretary to the President and Senior Government officials are Board members

Apart from the Aum Sugar, The Investigator Magazine has established that Secretary to the President and Cabinet (then called Chief Secretary), Secretary to the Treasury, Principal Secretary for the Ministry of Agriculture and the Green Belt Authority have been board members since inception.

This raises questions as to what role these Board members played as public representatives during the past six years, as resources were being poured into the company.

Both past and present occupants of the position were not willing to engage on what their role was when billions were being borrowed and spent.

“It’s a difficult question. That institution is very political. Very political. Whatever is happening has politics to it. Asking civil servants what happened is like asking them to hang themselves,” said a former Principal Secretary.

He added that the fact that Office of the President and Cabinet was part of the Board, whatever happened might have had the blessing of the highest echelons of power. 

Trips to Dubai, India

Whilst Begtiri associates claim the Board members have never been to Dubai but only India, our sources gave us a trail of several Salima Sugar officials who have been frequenting the United Arab Emirates.

“There are officials that kept travelling to Dubai at one point. Some of them deceased. Even senior government officials at the rank of SPC went to Dubai once or twice,” claimed our source saying the other one was somewhere in 2021.

Kosamu said since January none of Government officials have travelled outside Malawi on Salima Sugar business.

“Not a Minister, not a PS or even myself have been to Dubai on the company business. If it was happening it was before us,” he charged.

The former team disputed the Dubai allegations stating that the trips were made to India four  times to meet other shareholders.

“Being senior government officials necessary approvals were obtained. The company paid for the travel and nothing else,” said the official. 

Can Kosamu deliver the change Malawians need?

“We are pushing reforms, we have managed to increase government shareholding from 40 percent to 49 percent and reduce the old ownership to 51 percent.  The shareholders agreed the company needs more of Malawian hence my appointment as Executive Chairman to see transition,” said the Kosamu.

He said the nine percent was converted from the US$5 million the Aum Sugar failed to raise to meet their US$17 million obligation.

Further changes include expansion of production, availability of sugar in local market and improvement in quality of services.

“Very soon Malawians will see Salima sugar everywhere. We are committed to improving the sector. We will start by making sure the company benefits Malawians,” he promised.

What next for Salima Sugar?

Will Malawians ever know the truth, this depends on the audit said to be almost ready and who is implicated in the scam.

The Investigator Magazine has been informed of a possible K1 billion that an individual borrowed from a private company and paid it with sugar.

The Investigator Magazine will publish more in our next piece due end of this month tracing Dubai and Indian movements of the Salima Sugar board members.

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