Germany takes Malawi to task on funding

Germany has taken the Malawi Government to task after noticing financial irregularities in the 10 million euro (K5.2 billion) Social Cash Transfer Scheme that Berlin finances.

On January 14 2013, the scheme’s co-fund managers—KfW Development Bank—wrote, on behalf of the German government, to the Secretary for Gender, Children and Social Welfare Dr Mary Shawa, expressing concern over alleged irregularities.

Reads the letter in part: “We understand that Ayala Consulting, who have co-responsibility in terms of managing project funds according to their contract and in line with our separate agreement and financial agreement, are unable to reconcile the project accounts due to irregularities in financial management procedures and supporting documentation.

“We are extremely concerned about this. We request you to clarify the situation and provide us with a financial report and supporting documents immediately.”

The letter, signed by KfW Development Bank vice-president for central and southern Africa Thomas Wollenzien and director Bettina Tewinkel, further reads: “We hereby inform you that according to our General Treaty with the German government, we are obliged to notify the German Ministry of Development and Economic Cooperation, BMZ, upon the possibility of irregularities in the management of German funds as soon as these are brought to our attention; which we have done.”

However, Shawa said in an interview last Monday that she has already given a written explanation to the fund managers that the alleged financial management irregularities was just a confusion with another scheme run in Balaka with funding from other partners.

But Shawa could not take further questions through a telephone interview, preferring a questionnaire which was immediately sent to her but she is yet to respond to the same.

Verification process in complete

The KfW Development Bank office in Malawi’s capital, Lilongwe, has declined to give more details on the issue, saying the process of soliciting clarification from the Malawi Government was not completed.

Said director of KfW Malawi office, Dr Patrick Rudolph, in a questionnaire response: “We appreciate your interest in governance issues of Malawi’s Social Cash Transfer Scheme which KfW Development Bank is supporting with funds provided by the German government.

“However, we would like to ask for your understanding that in the course of the current clarification and verification process, we are not in a position to provide any information on the below mentioned issues”.

But in the letter, the bank says the financial management irregularities noted by Ayala Consulting were a concern and that it was important for the ministry to give a “close clarification of facts in this urgent matter.”

It further informed the ministry that the letter from Ayala Consulting, dated January 9 2013, regarding the use of KfW funds in the dedicated operational account held at Standard Bank was copied to them.

Ministry of Finance spokesperson Nations Msowoya said the issue had not yet been brought to the attention of Treasury, but confirmed that KfW Development Bank disbursed 10 million euro for the scheme.

According to sources familiar with the scheme, Ayala Consulting were alerted after it was noted that the Ministry of Gender, Children and Social Welfare had used German funds for a similar scheme outside the financing agreement without seeking permission.

The source alleged that during the launch of the Balaka scheme, money amounting to K4.8 million (about $13 333) was withdrawn from KfW funds without authority and used for the function, despite the sponsors of that district’s Social Cash Transfer Scheme already providing resources for the same.

Said the source: “In a nutshell, money meant for the [German-funded] programme has been diverted for other unrelated activities in the name of borrowing; but it is never returned to the programme.”

How the programme works

The cash-based social transfers are regular payments of money provided by government or nongovernmental organisations to individuals or households, with the objective of decreasing chronic or shock-induced poverty by addressing social risk and reducing economic vulnerability.

The Department of Poverty and Disaster Management Affairs provides leadership and coordination, technical assistance and oversight of the design and implementation of the cash transfer pilot scheme while the Ministry of Gender, Children  and Social Welfare has the mandate to deliver social assistance to the ultra-poor and most vulnerable.

Under the scheme, the monthly cash transfers vary according to household size and also considers if the household has children enrolled in primary or secondary schools.

For instance, for a household with children enrolled in primary school, a bonus of K200 (about $0.56) is added while K400 (about $1.11) bonus is given for the children in secondary schools.

“This bonus is meant to encourage school enrolment and retention as well as investment in the children’s health and nutrition status and as protection of children from exploitation and abuse such as child labour or early marriages,” reads the scheme concept document.

The scheme works in the way that a single-person household gets K600 (about $1.67) per month while the one with two people is given K1 000 (about $2.78) and a three-person household gets K1 400 (about $3.89) with the one with four individuals receiving K1 800 (about $5).

According to Minister of Gender, Children and Social Welfare Anita Kalinde, as monitored on MBC Radio One, the 2012/13 budget had a K100 million (about $277 777) allocation for the scheme to cover seven districts and that after extending the scheme to other eight districts, it is expected that another K100 million would be added during the mid-year budget review.