Government, through Attorney General (AG) Thabo Chakaka-Nyirenda, has written a Turkish company demanding payment of $15 million (about K26 billion) for tobacco it bought in 2013, but never paid for it.
The AG has given the Turkish company, Star Agritech International, 21 days to provide full compensation, failing which he will initiate civil proceedings and criminal prosecution against its directors.
According to the demand letter dated November 1 2024 and addressed to the company’s managing director Ambassador Ahmet Semseddin Arda, the matter dates back to October 2011 when Malawi Leaf Company Limited (MLCF) and Star Agritech International (then known as Star Tobacco International) entered into a treaty.
MLCF is a State-owned enterprise incorporated and established by government in 2006 as an indigenous tobacco buying company to stabilise the country’s tobacco industry which was then dominated by multinational companies.
According to the AG, Star Agritech, domiciled in Turkey, entered into the agreement in its own right as well as on behalf of its subsidiaries, namely Star Tobacco International Hong Kong, Star Tobacco International Mauritius Limited and Star Tobacco International Pvt Limited, South Africa.
So, in February 2013 MLCF and Star Tobacco International Hong Kong entered into a contract of tobacco purchase and the latter agreed to purchase 3 492 600 kg after issuing various purchase orders.
MLCF sold the tobacco to Star Tobacco International Hong Kong which it bought from auction floors in Malawi using a credit finance facility obtained from the Eastern and Southern Africa Trade and Development Bank (PTA Bank) now Trade and Development Bank (TDB).
Under the agreement, MLCF shipped all 72 containers of tobacco between April and June 2013 to Star Tobacco International Hong Kong Limited.
However, the foreign company failed to honour the agreement for the ordered tobacco, forcing MLCF to pay off the PTA Bank loan at a rate of 14.64 percent interest.
To date, MLCF, which throughout was dealing with Star Agritech International in Turkey as the parent company, has only been paid $750 000. A payment Star Tobacco International Hong Kong made in September 2013.
Owing to failure to settle the payment, MLCF commenced proceedings against Star International Hong Kong claiming outstanding sum of $9 842 116.11 as well as loss and damages amounting to $3 754 467.33.
There was no immediate reaction from Star Agritech International but in an interview yesterday, the AG confirmed giving the Turkish firm 21 days to pay the compensation or respond to the demand letter.”
