The Anti-Corruption Bureau (ACB) has implicated Malawi’s former finance minister Goodall Gondwe and two senior officials in a 2005 fertiliser subsidy deal the bureau claims wasted billions.
The bureau’s investigations claim Gondwe and the officers—the then Secretary to the Treasury (ST) Dr. Milton Kutengule and director of Public Enterprises Reform and Monitoring Unit Nebert Nyirenda—conducted themselves “in a manner conducive to corruption” in the process of awarding Pioneer Chemicals of Saudi Arabia the first fertiliser subsidy contract meant for the 2005/06 farming season.
But the decisions the trio took may have cost the country $6.9 million (about K2 billion at present exchange rates) in the 2005/06 national budget, according to our reading of the ACB investigative report on allegations of corruption against Ministry of Finance (MoF) officials in the award of the contract.
Procedures were flouted
ACB alleges in the report that Gondwe, one of the most influential and respected ministers in the Bingu wa Mutharika administration, and the two officials flouted procurement procedures.
It also accuses the trio of ignoring technical advice from the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM) to the effect that the Saudi firm lacked capacity to handle the demanded quantities and that the South African industry was the best supplier for Malawi.
The involvement of SFFRFM was based on donors’ condition that procurement of the subsidy fertiliser be done through a different entity other than government itself, so MoF settled for the SFFRFM to help Capital Hill import 70 000 metric tonnes of fertiliser for the programme. SFFRFM boasts core competencies in the fertiliser business.
According to the report, Kutengule, who left the ministry in 2008 in connection with a bank account he opened as ST at Finance Bank; and Nyirenda, who is now Principal Secretary at the Ministry of Trade and Industry, reportedly worked with Gondwe to influence SFFRFM management to procure 35 000 metric tonnes of Urea fertiliser and 35 000 metric tonnes of 23:21+4s fertiliser against the country’s set public procurement laws, regulations and procedures.
The ACB claims it established coercion in every step and decision the three undertook at different levels of the transaction to make sure the fertiliser was bought from Pioneer Chemicals “no matter what.”
ACB investigations allege that in March 2005, Gondwe called for a meeting with SFFRFM management where they were told of the fund’s involvement in the fertiliser procurement process.
After the meeting, claims ACB, government organised a fertiliser surveillance trip to Saudi Arabia, the United Kingdom (UK), Ukraine and Russia to check fertiliser prices, production capacities and other logistics pertaining to procurement.
Nyirenda was leader of delegation, which reportedly included SFFRFM general manager Bester Ndisale, operations manager Bizwick Chinguwo and Alex Namaona from the Ministry of Agriculture.
But the report says: “The surveillance trip, identification, discussions and negotiations and finally the awarding of the contract to Pioneer Chemicals was against Malawi’s public procurement laws, regulations and procedures.”
It alleges Nyirenda identified Pioneer Chemicals while in Saudi Arabia and the team decided to visit the company’s plant.
What they found, claims the report, was that Pioneer Chemicals had a small factory and did not have the capacity to meet the requirements of Malawi’s subsidy fertiliser programme. This was communicated to Kutengule.
The delegation also recommended that prices in Saudi Arabia were generally not different from those prevailing in South Africa.
But, according to the ACB investigative report, the team’s recommendations irked the minister.
“Gondwe ordered the SFFRFM management not to do anything in relation to the decision-making process with regard to where the subsidy fertiliser would be bought,” claims ACB.
This decision allegedly defeated the technical advisory role of SFFRFM management in the procurement process.
“…Goodall Gondwe, Dr. Milton Kutengule and Mr. Nebert Nyirenda then decided that the subsidy fertiliser would be bought from Saudi Arabia, specifically from Pioneer Chemicals,” claims the report.
It says SFFRFM went on to award Pioneer Chemicals a contract to supply 35 000 tonnes of Urea and another 35 000 tonnes of 23:21+4s fertiliser.
This was done between April 22 and 25 2005.
To cover up the unprocedural manner the contract was issued, a tender was floated by government inviting interested eligible suppliers to supply and deliver 70 000 tonnes of fertilisers, according to the ACB.
Pioneer Chemicals failed to deliver
But the worst was still to come. Pioneer Chemicals only managed to supply 35 000 tonnes and failed to supply the other half, effectively putting the programme in jeopardy.
In the race against time, between June and September 2005, Brian Bowler, then Malawi’s ambassador to Belgium, was requested to push Pioneer Chemicals to supply the fertilisers as per agreement.
The ACB claims Bowler found an alternative supply from a company called Akta Alliance, which supplied fertiliser to Pioneer Chemicals at a lower price.
Since Bowler could not get any joy from Pioneer Chemicals, he recommended that government buys from Akta Alliance at a much lower price, but the Ministry of Finance never showed interest, according to the ACB claims.
When that failed, government was forced to source the remainder within the country. The Accountant General proceeded to award contracts to five local companies.
“[As a result], the Malawi Government incurred a loss of $6 898 150 for procuring locally the 35 000 tonnes of Urea that Pioneer Chemicals failed to supply,” claims the ACB in its findings.
Gondwe could not be reached for comment this week. He is said to have travelled to the United States where his family lives.
But when The Nation called him on the matter in September 2010 when the ACB instituted the inquiry, Gondwe said he was not aware of the investigation and that the bureau had not queried him on anything to do with the programme.
Said Gondwe then: “They are doing their job. We will see what they come up with.”
Kutengule declined to comment on the matter on Thursday.
But Nyirenda said: “I am not aware of the report [by ACB] you are talking about. It’s true I was at the Ministry of Finance at that time. As a public officer, you have several layers of reporting. If you are an officer, you report to a senior officer until the matter reaches the PS and minister.”
Nyirenda said Pioneer Chemicals was one of the fertiliser suppliers they recommended.