Malawi Government-owned Salima Sugar Company has lamented a K23 billion bank loan, saying it is frustrating its efforts to expand sugar production as its revenue is only enough to clear interest payments.
The company has urged government to seriously consider bailing it out by settling the debt and devise a flexible repayment arrangement to have breathing space.
Briefing the Parliamentary Committee on Commissions, Statutory Corporations and State Entities in Lilongwe on the status of the company’s shareholding and rumours that it was being sold, Salima Sugar Company acting chief executive officer Charles Thupi stressed the need for a bailout.
He described the company as a viable business, but burdened with the loans as the money it makes is absorbed by the interests on the loans.
Said Thupi: “We are paying the loans but what is happening is that, for example last year alone the interest on the loan was K5.3 billion and what we paid was K3.8 billion. It means we are only paying the interest and not the principal.
“We made a presentation to the shareholder to say as it is now, with the way things are, the best is bailout otherwise we are just paying interests not the principal and the bank may wake up one morning to say we want to invoke the clauses term sheet, to say we want to take back the company. That is the risk.”
In 2018, the company obtained two loans from commercial banks to develop its land. The loans, totalling about K23 billion, are due for clearance by 2028.
Thupi said the company has 4 000 hectares (ha) but only developed 1500ha.
Further, the company is seeking K4 billion for starting the season or allow it to collect advance payments from the distributors.
Thupi disputed rumours that the company was being sold, saying there are no such plans.
On shareholding, he said the Malawi Government holds an 88 percent stake and AUM Sugar Company of India has 12 percent.
AUM Sugar challenged the termination of the initial shareholding agreement and took Malawi to International Chamber of Commerce Court demanding that it should be compensated the 51 percent invested, but later the matter was withdrawn to be settled outside the court.
Committee chairperson Sylvester Ayuba James said they will first have to establish that indeed the company is not being sold before it can recommend a bailout.
He directed Salima Sugar Company to place a statement in the media, preferably daily newspapers, disputing allegations that the company was under the hammer. He gave the company seven days to have the statement published in the papers.
James, a lawyer, said the committee is also interested to see how the conflict on shareholding will be resolved, fearing that there might be some fishy dealings behind.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha and the ministry’s spokesperson Williams Banda did not pick their phones when called for comment.
Salima Sugar Company was established in 2015 as a public private partnership between the Malawi Government with a 40 percent stake and AUM Sugar and Allied Limited of India with 60 percent stake.
However, in 2023, Malawi Government terminated the shareholding due to alleged breach of contract after a forensic audit revealed that $35 million (about K61 billion) invested in the company could not be accounted for.
