…Chakwera pisses off World Bank to please party donor
…no work until K70 billion extra is paid
…claims devaluation costs need to be included
Malawians, after borrowing and paying a total of K105 billion to Khato Civils of Simbi Phiri, a major donor and friend of President Lazarus Chakwera, the company has not started any work as it claims the money is “too little” and requires an extra K70 billion to account for the recent devaluation.
President Lazarus Chakwera’s priorities are apparent: pay all his campaign debts, award family and friends’ contracts, and keep in touch with those who paid for his ticket to State House. At the same time, millions of Malawians go without food and medication, and hundreds of poor children cannot afford school fees in University and Secondary schools.
The same month, the President declared a national disaster to beg for international and local support for up to four million Malawians facing severe food shortage; his administration found it paramount to borrow “K105 billion for the Lilongwe Salima Water Project.
The government has been struggling to pay salaries for public servants and drug stocks in public hospitals are low. However, all MCP donors Zuneth Sattar and Simbi Phiri have been paid billions of kwacha for non-priority projects.
The Investigator Magazine can reveal that within the Malawi Congress Party (MCP), there has been talk of replacing Chakwera with Simbi Phiri, a move the businessperson is reported to have rebuffed. However, others in MCP claim he supports Vice President Saulosi Chilima in pressuring Chakwera to “pay up” the contract money.
“The pressure has worked. The Veep and the Speaker of Parliament attended the 60th birthday of Simbi last year. The President was unusually absent, so too many Cabinet Ministers in what was interpreted as a fallout between the two. Out of 350 invited guests, only 70 turned up. That was a snub. But now Simbi is happy but not going to start until he gets paid in full,” said a close associate of Simbi Phiri.
Paid but expect no work soon
The CDH Investment Bank and the NBS Bank have coughed up K105 billion, which was supposed to be paid to the Lilongwe Salima Water Company, which the government set up as a vehicle to implement the project after donors rejected it.
Despite reports that mobilisation has started, there is nothing of the sort at any of Khato’s sites in Malawi. The project will likely face more delays after the billionaire changed tune. He now wants Malawians to borrow more before he can put boots on the ground.
“It’s like a proper con show. After getting the first trench, they now need K70 billion, which they say will cause the devaluation value of the project to rise,” revealed a Treasury official who said CDH Bank and NBS Bank had put up the initial amount.
It was still unclear if the National Bank had put its K35 billion share into the project.
Bankers at NBS and CDH said the Reserve Bank of Malawi, Treasury and some influential figures joined in lobbying for the approvals of the loan, which have been categorised as “very high risk.”
Khato Civils, according to the original contract on its website, was supposed to raise its own financing. Still, in April 2023, the Government bulldozed a bill to authorise the borrowing of K105 billion from National Bank and NBS Bank. The International Monetary Fund and the World Bank have warned Malawi that borrowing for the project would raise the national debt, which is already considered unsustainable.
Attorney General Thabo Chakaka Nyirenda, who has so far displayed panic over the matter, has a long list of documents to supply, which he is likely to object to as he does not want the public to get information on deals that are not in the public interest.
Forum for National Development Director Fryson Chodzi dragged the company to court to try and stop the payments before the Supreme Court jumped on the matter and granted leeway to the government to proceed with the controversial project.
In late March, Parliament approved the addition of CDH Investment Bank as a lender to bring the amount to K150 billion. The project required at least K400 billion but now is estimated to escalate to K600 billion after the sharp devaluation of the kwacha in November 2023.
More money, yet Malawi has no electricity to pump 100m2 of water
Experts and the World Bank have questioned the heavily politically generated project feasibility after it was started without any studies and only based on a paper some junior officials in the Water Department had developed as a possible option for the water supply project.
After being listed in a compendium of projects, Khato Civils jumped on it and put a US$500 million tag to put a water pipeline from Salima to Lilongwe. It was reduced after public outcry and donor protests that the costs did not make sense.
Simbi Phiri has been open about his political donations to the MCP and former ruling party, the Democratic Progressive Party (DPP), which paid him K14 billion for mobilised equipment borrowed by the Lilongwe Water Board.
The government trashed a US$300 million water project at Diamphwe, opting to pursue a white elephant, which is now becoming costly to the taxpayers.
“To pump 100 million cubic litres of water, there is a need for own generation capacity or look for low electricity demand times. The project will next be delayed by this excuse, and money will be gone, leaving taxpayers with a K105 billion egg to clean up,” explained an expert who tried to advise against the project’s feasibility.
The water project intake at Leopold’s Bay at Lifuwu in Salima is now home to an eco-Lodge that Khato would need to find an alternative intake for the project, or taxpayers cough extra billions to compensate the Belgian owner.
“The option has been to pay him off, but that will add costs to the project. Whichever way you look, the taxpayer has been dragged in avoidable mud just because elections are coming and someone is desperate for the funds,” said a source in Salima.
Chakwera could raid pension funds next
Last year, senior Treasury officials sounded an alarm asking Malawians with pension funds to be vigilant as President Lazarus Chakwera is set to raid pension funds to finance the Lake Malawi Water Project.
The Investigator Magazine was shown the three finance options where the people of Malawi will borrow on behalf of the nation to finance a project riddled with controversy and secrecy.
Ministry of Finance officials claimed they are under pressure from the Office of the President and Cabinet to roll out the project, which has yet to have feasibility studies on its viability.
“We are literally being asked to break all public financial management rules. Money bills are supposed to originate from us. Ask AG where he got one that went to parliament,” said an official last year.
He challenged the government’s inability to make the Khato Civils contract public as it contains many loopholes that could not have been passed. He said borrowing money from a private company was wrong.
“There were no approvals as it was supposed to be. Change in contract of that magnitude should be advertised. PPDA should have published notice of intention to award the new public financing model. None of that happened. The Attorney General is at the forefront of breaking all the rules,” charged another official.
He dropped the bomb, “If the banks approve that loan, the next stage is to utilise pension funds. You are looking at K300 to K400 billion, which is a lot of money. It will be karma. It happened with Alliance Capital, which looked solid. This one is one shaky area. Everyone with a pension could be affected. This madness should be stopped,” said an official.
He said that apart from pension funds, the government would also try to borrow more from outside sources to meet shortfalls.
“Malawi is already choked in debt. Why the President is adamant about sinking the nation into further debt is baffling. He is like he doesn’t care unless his friend gets the money,” said an angry official.
World Bank, IMF expected to react over Chakwera’s defiance
A Former senior Treasury official said the project proceeding as President Chakwera’s wish is a middle finger to the World Bank and the IMF, who approved Malawi programmes based on debt restructuring premise.
“The World Bank has already expressed its concern. The IMF should be livid. This is the opposite of what the Minister of Finance promised regarding public debt. The project is almost 6% of the national budget. Borrowing such a huge sum will push the country into more debt,” said the official.
The project, which was supposed to start seven years ago, still needs an official start and completion date.
