Banks cautious on water project

T

wo local commercial banks are yet to loan the Government of Malawi K105 billion as approved by Parliament on April 6 2023 for the Salima-Lilongwe Water Project.

The only obstacle stopping National Bank of Malawi plc and lead manager of the facility, NBS Bank plc from lending government the funds was an injunction obtained by Forum for National Development (FND), but the Malawi Supreme Court of Appeal on May 22 2023 issued a stay order on the injunction, meaning the banks were now at liberty to release the funds.

But close to three months now, the banks are yet to finance the project, attributing the delays to the court battles and complex processes that are undertaken to complete the deals.

The Supreme Court further sustained the stay order on the FND injunction on July 25 2023, cementing the banks’ liberty to loan the Malawi Government K105 billion.

NBS Bank deputy chief executive officer (CEO) Temwani Simwaka said in a response to a questionnaire on Friday that the passing of the Loan Appropriation Act in Parliament was a crucial step in the governance processes that preceded the loan.

“However, due to an injunction taken against the parties involved in the transaction, including the bank, processes and engagements between the bank and all parties were halted to allow due process of the law.

“Once the stay order was given against the injunction, engagements between the bank and the government resumed,” she said.

Simwaka, however, said lending processes are complex and do take time to conclude.

“But we are looking forward to a successful conclusion of the transaction,” she said.

NBM spokesperson Akossa Hiwa, while insisting in a response on Tuesday that it was not appropriate to comment on confidential customer information, said NBS Bank, the lead manager of the deal, was better placed to comment.

Ministry of Water and Sanitation  Principal Secretary Elias Chimulambe said in a response to a questionnaire that government, through the Ministry of Finance, is leading discussions with the banks to secure the loans.

He said: “Discussions between government…with the respective banks to close out all requisite technical matters for the loan are at a very advanced stage.

“The Ministry of Water and Sanitation is optimistic that the loans will be disbursed very soon for the project to commence.”

Chimulambe said both parties to the loan, government and the banks have been moving with speed in finalising the processes for acquiring the loan.

“However, the processes were halted by the lawsuit and subsequent court injunction issued by the High Court Commercial Division against the banks and the contractor, restraining the former from disbursing funds to the latter.

“Thus, the contractor, Khato Civils, being party to the court injunction, is fully aware of the glitches that slowed the loan acquisition processes,” he said.

Chimulambe said with the injunction now stayed, government and the banks are proceeding with finalising the loan and the government would be engaging the contractor for preparatory works for the project to commence.

Our inside sources both at NBM and NBS Bank disclosed that they wanted to play it safe and were digesting legal opinions they sought from their lawyers on whether to proceed with financing the project.

“The loan is huge and obviously, in the face of the legal battle unfolding in courts, we needed to seek advice from our lawyers, apart from hefty paperwork that is to be completed before proceeding to disburse the loan,” said one source at NBM.

Another source at NBS Bank said they also had to weigh advice received from their lawyers.

Lawyer Chancy Gondwe, representing Khato Civils, said in an interview that his client is just a service provider being the contractor, adding issues of delays can best be addressed by the government which is tasked to implement the law passed by Parliament.

Upon the Supreme Court’s intervention moved by the Attorney General Thabo Chakaka Nyirenda, the apex court granted the stay order on the FND injunction and sustained it on July 25 2023, meaning the two banks had now a leeway to finance the waterway project.

The Supreme Court in Blantyre on July 25 2023 ordered that the case surrounding the loan authorisation by Parliament to the Malawi Government for the water project be filed and continued at the High Court Civil Division after establishing that it was not commercial in nature.

Justice of Appeal Dingiswayo Madise ordered that the case be brought to the High Court Civil Division by way of a judicial review, and being public interest litigation, the President, Parliament and Minister of Finance, be made respondents.

FND initially filed the case in the High Court Commercial Division against the Malawi Government and the two banks.

The Supreme Court also removed Khato Civils and the two banks as parties to the case, a plea the two banks had also advanced in the court to avoid being dragged into the political realm.

The loan for the Salima-Lilongwe Water Project was duly authorised by an Act of Parliament. The project was initiated in 2015.

Parliament, in passing the law authorising the Malawi Government to borrow the K105 billion from the two banks, intended to finance the extraction and treatment of water from Lake Malawi at Lifuwu in Salima and transportation of the treated water to Lilongwe City.