Govt clarifies on water project ‘financier’

M

inistry of Finance says government conducted thorough due diligence to ascertain the ability of the Australian firm proposed to finance the Salima-Lilongwe Water Project, saying it is an “arranger of the financing”.

In a statement signed by the ministry’s public relations officer Taurai Samuel Banda yesterday in apparent reaction to social media concerns on how the firm was picked and its capacity, the ministry said despite being registered in 2021, Quay Energy Corp (Aus) Pty Ltd has the capacity to carry out the assignment.

Reads the statement in part: “Despite being established in 2021, there is no negative feedback on its directors and affiliates. Thorough due diligence was conducted on the arranger of the financing.

“Additionally, Quay Energy has indicated that it would be working with reputable international financial institutions in arranging this financing hence the financing shall be syndicated. Thus, Quay Energy is not the financier but the arranger for the loan.”

Online records show that Quay Energy is a registered private firm in Australia incorporated in September 2021.

In an interview yesterday, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the question of how long the firm has existed does not hold as long as it demonstrates capacity to deliver what is required.

He said there is nothing strange in having an intermediary arranging for financing, arguing that this was normal international practice.

Said Tchereni: “That is what happens, you have to go through someone to connect you to others who may not know you. As a country, we are so unworthy to get credit from some financiers, so what we do is to look for people who have connections with others to assist us.

The statement said the proposed loan amount is $313 447 757 (about K255 billion) and has a calculated Grant Element (GE) of at least 40 percent “which is above the required minimum GE of 35 percent for loan concessionality”.

Other terms of the loan include a repayment period of 25 years with a six-year grace period.

Government, according to the statement, is also expected to pay an interest rate of 1.5 percent and a one-off payment for structuring fees of 2.5 percent.

In 2015, government initiated a project to source water from Lake Malawi to address water shortage in Lilongwe and surrounding areas. 

On December 19 2016, Lilongwe Water Board (LWB) signed an Engineering, Procurement and Construction (EPC) contract with Khato Civils (Pty) Ltd and South Zambezi Joint Venture.

Despite a positive environmental and social impact assessment report issued in respect of the project in 2018, works could not start because Khato Civils identified a financier who could not meet government set conditions.