AG weighs in on Khato deal
Government has put the fate of the Lilongwe-Salima Waterway in the hands of the Attorney General (AG) whose legal opinion will provide direction on whether to proceed with the K400 billion project.
The project is currently shrouded in controversy, including demands by the contractor, Khato Civils, to be paid for preparatory works done.
An impeccable source disclosed that government sought legal opinion from the AG Kalekeni Kaphale on how it should handle the future of the project following the demands Khato Civils made through its lawyers.
Khato Civils, in an event that government was to decide not to allow it continue with the project it duly signed with Lilongwe Water Board (LWB), was demanding $71.2 million (about K56.2 billion at the current exchange rate) for works the firm implemented as they prepared to execute the project.
But following a high-level meeting on Wednesday chaired by Chief Secretary to the Office of the President and Cabinet (OPC) Lloyd Muhara, and attended by officials from Ministry of Agriculture, Irrigation and Water Development, Ministry of Finance and LWB, government resolved to seek a legal opinion from the AG on the future of the project.
The AG confirmed, in an interview yesterday, being requested to provide the legal advice.
“I’ve already done that, I’ve given them the legal advice,” Kaphale said.
He, however, declined to disclose the content of the legal advice, explaining that it is “privileged information” to those that sought it.
But the impeccable source claimed that the AG urged government to carry on with the project as terminating the contract would even be costly.
The AG reportedly advised that terminating the contract would still require government to pay the South African-based engineering firm huge sums of money, having duly signed the contract.
Minister of Agriculture, Irrigation and Water Development Kondwani Nankhumwa, who attended the Wednesday meeting, confirmed in a separate interview yesterday that they sought the AG’s legal opinion but were yet to be briefed of its content.
“We discussed two critical issues, one was about the $17 million loan (about K12.5 billion) LWB took from National Bank of Malawi (NBM) and the second issue was about the future of the waterway project.
“On the future of the project, it’s where we sought the legal opinion and we have another scheduled meeting this Wednesday. It’s at this meeting we’re going to be briefed about the legal opinion,” he said.
But a legal opinion remains an opinion, it’s not binding as a judgement of court is. A client who seeks one may decide to take the advice or ignore it.
Government, which appeared not interested to pursue the Lilongwe-Salima Waterway project, finally decided to do something about it and also to take LWB out of the sludge as it was choking with the $17 million loan.
In an interview yesterday, Chancy Gondwe, one of the lawyers for Khato Civils, said they were anxiously waiting to hear from government on the way forward, stressing that a financier of the project was ready.
Government directed LWB to obtain the $17 million loan with an assurance from Treasury that it was going to take it up when finances for the project were ready.
According to sources, the board of LWB was told by management that the parastatal, whose monthly turnover is K2.3 billion, could not afford the $17 million loan.
Regardless, government authorised the loan that LWB obtained to meet some preparatory works for the K400 billion water project, requiring it to pay NBM close to K600 million monthly.
The board’s chief executive officer (CEO) Alfonso Chikuni confirmed in an earlier interview last week about challenges they are facing to repay the loan and subsequent consolidation of the board’s bank accounts by NBM to recover repayments.
On the other hand, the CEO also confirmed the decision by Khato Civils, which had written them through their lawyers, expressing an intention to terminate the contract and a demand of $71.2 million (about K56.2 billion at the current exchange rate) for preparatory works the firm implemented.
Chikuni also confirmed that after the board of LWB met and approved the $17 million loan, Treasury guaranteed them that it would come in to take responsibility, but that had not been the case.
According to documents we have the $17 million loan approval for LWB was made by former Finance minister Goodall Gondwe.
Sources disclosed that the water board started repaying the loan in June last year, coughing K200 million a month up to last December as loan interest. But the LWB could not afford when principal was added on the interest, requiring them to pay around K600 million per month.
The LWB had to negotiate with NBM to hold on repayments, but this has resulted in the board incurring arrears of over K2 billion.
In worst case scenario, ministries, departments and government agencies (MDAs) owe the country’s water boards K23.1 billion as of May 30, according to a letter dated July 22 2019 which Water Employees Trade Union of Malawi (Wetum) wrote to Comptroller of Statutory Corporations.
Based on the letter to the Comptroller of Statutory Corporations, LWB is owed K6.70 billion.
Lawyers representing Khato Civils, in their claim letter dated August 18 2019 to LWB, say their client met all obligations to the execution of the contract and they expected the board and government to meet their obligations as well.
The lawyers say it was clear LWB and government were no longer interested in the execution of the contract, as such, consider the contract terminated due to frustrations, unless otherwise stated.
