Government has nationalised Malawi Cargo Centres Limited (MCCL), a private-sector led consortium operating port facilities in Dar es Salaam and Mbeya in Tanzania.
Capital Hill built the facilities on land given by the Tanzanian government.
The Malawi Government largely lost control of the facilities in 1995 when it surrendered them to private control under a 95-year lease agreement that Attorney General (AG) Thabo Chakaka-Nyirenda now says is invalid.
Minister of Transport and Public Works Jacob Hara confirmed in an interview last week that Cabinet has approved the termination of the lease following a “strategic review”.
Said Hara: “The Cabinet gave a directive to terminate the lease agreement, which was signed in 1995. Since the directive was issued, the Ministry of Transport with support from other public stakeholders has been working on the modalities, including future operations of the Malawi Cargo Centres facilities. The lease agreement will cease on May 31 2025.”
will cease on May 31 2025
He added that the decision stemmed from a broader review of the Dar es Salaam corridor’s efficiency, which also led to revised bilateral transport agreements with Tanzania in December 2023.
How it started
The country’s first president Hastings Kamuzu Banda stood side by side with his Tanzanian counterpart Ali Hassan Mwinyi in October 1991 to commission a visionary port facility in Dar es Salaam.
That asset was the Malawi Cargo Centres Limited (MCCL), which promised to secure economic independence for landlocked Malawi.
It was to be a fully Malawian owned facility to handle cargo to and from the country and its neighbours.
But three and a half decades later, foreign firms control the facility with the country only owning 18 percent through the National Oil Company of Malawi (Nocma), documents show.
The reduction in Malawi’s shareholding in MCCL started in 1995, when MCCL signed a 95-year lease agreement with foreign and local firms, according to interviews with various officials.
An energy expert, who is also former general manager of Petroleum Importers Limited (PIL) Robert Mdeza, said in an interview this week that the privatisation drive in the 1990s saw Malawi selling 82 percent of its shares in the facility.
French giant Bolloré Logistics now has 47 percent shareholding in MCCL, while smaller foreign firms and staff own the rest.
Said Mdeza: “The original plan was for all Malawian freight forwarders to own shares, but instead MCCL became a ‘private club’ for a few foreign players.”
MCCL is now stuffed with cargo from Zambia, the Democratic Republic of Congo (DRC) as well as Zimbabwe, but very little for Malawi, according to our own physical observations and interviews with officials.
A legal opinion on the MCCL lease agreement by AG Chakaka-Nyirenda we have seen, says the deal with foreign and local firms violated Malawi’s laws.
He also declared the lease agreement “illegal, void and a deal that gave foreign entities control of strategic ports while bleeding the nation dry”.
According to the AG, the agreement from the beginning was that the Government of Malawi would always remain a major shareholder in MCCL and that this was not just a business decision, but part of a formal treaty between Malawi and Tanzania.
He said having failed to comply with the Public Private Partnership Act, the lease is null and void.
“Accordingly, in line with the applicable law on leases, if a tenant enters into possession under a void lease, he thereupon becomes a tenant from year-to-year upon the terms of the writing.”
The AG also declares in the legal opinion that because the lease agreement was never stamped or registered, it is invalid under Malawi’s laws.
Among other things, the opinion says the lease was also signed without feasibility studies and competitive bids and that MCCL failed to share profits, submit financial reports, or notify the Malawi Government of shareholding changes.
Reads the legal opinion in part: “Following termination, no financial obligation would be accruing to the government in favour of MCCL. Instead, MCCL would be required under Clause XI (b) to perform ‘all its outstanding obligations under this Agreement.’
“Should MCCL decide to challenge the termination in court or before any tribunal, the matter would be easily defended.
“However, reasonable notice of termination of the lease should be
given as the lease regrettably does not provide for the period of notice of termination. A notice period of three to six months would be appropriate in the circumstances.”
The AG also observes in the legal opinion that there is evidence of the majority shareholders and the directors of MCCL failing to act in the best interest of the company or its minority shareholders.
“Consequently, the Government of Malawi may also mount a derivative action under Section 337 of the Companies Act.”
A derivative action is a mechanism for a minority shareholder to bring a claim against a director on behalf of the company in circumstances where the majority shareholder is wrongly damaging the company.
The mechanism is provided for under Section 337 of the Companies Act, 2013.
Experts say Tanzanian ports remain the most reliable for Malawi given that Mozambican ports are constantly hit by cyclones. Armed conflicts in Mozambique have also disrupted Malawi’s ability to move cargo securely into the country, especially from Beira.
Said Mdeza, who is also a former CEO of Nocma: “Given the recent weather issues, including cyclones that have disrupted traffic at the ports in Mozambique, the Port of Dar es Salaam offers Malawi security of access to the sea.
“This is in line with the original intention behind the setting up of the Northern Corridor following the signing of the Kyela Protocol by the Tanzanian and Malawian governments in 1987.”
In a separate interview, PIL general manager Martin Msimuko said both PIL and Nocma were required to route 30 percent of their stocks through MCCL. But he said the facility was underutilised because “suppliers have their own facilities, and so they were not using MCCL. It would have been double-handling. [Otherwise] this was a strategic reserve, and we should have maintained it”.
In an earlier interview, MCCL managing director Patrick Jere said they decided to open the facilities to other countries because Malawians were not fully utilising them.
But according to the AG’s legal opinion, if the government of Malawi decides to end its lease agreement with MCCL, it will need to pay $1.9 million (about K3.3 billion) to cover a financial shortfall in a special account called the ‘amortisation account’ as of June 30, 2021.
Government also has to pay $1.5 million (about 2.6 billion) for a loan that Nocma took over in 2019 for repairs of fuel facilities called fuel farms and fixing 22 railway tankers that carry fuel.
Former Nocma deputy CEO Helen Buluma, in an earlier interview defended the loan, describing the tanks a “buffer zone” for fuel security.
The AG was also yet to clarify how private companies that sold their shares and diluted the government’s stake violated the original treaty or agreements.
Reacting to the termination of the lease, Parliamentary Committee on Climate and Natural Resources chairperson Werani Chilenga said on Monday that losing control of the port was a huge mistake, but ending the lease is good.
He said: “It’s good that the government has taken a bold step, a positive one and our own plea as a committee is that no stakeholder should be left behind in the decision-making process, including Parliament.”
