K50bn AIP debt haunts govt
Government is under pressure to settle a fertiliser debt of $28 million (about K50 billion) for the 2021/22 Affordable Inputs Programme (AIP) after being sued by the supplier, a Seychelles-based firm.
Attorney General’s spokesperson Frank Namangale confirmed last week that Africa Investment Group Limited (AIG) sued but declined to divulge further details.
He said: “The matter is in court. We have filed necessary defences to the claim by Africa Investment Group.”
However, a source privy to the issue said following negotiations, government has agreed to settle the debt within 90 days from July 22 2024.[an1]
AIG lead lawyer Lusungu Gondwe confirmed the development in an interview saying: “Indeed the matter has been settled and that’s the most I can say.”
AIG is one of the traders government contracted to supply AIP fertiliser during the 2021/2022 agricultural season.
Government, through the Ministry of Agriculture and the Smallholder Fertiliser Revolving Fund of Malawi (SFFRFM), contracted AIG on February 10 2022 to supply and deliver 50 000 metric tonnes (MT) of the commodity.
AIG is part of the Mauritius-based Meridian Group of Companies which specialises in manufacturing and distribution of fertilisers and other agricultural commodities across Malawi, Mozambique, Zambia and Zimbabwe.
The fertiliser, worth $37 215 325.65, comprised 30 000 MT of NPK and 20 000 MT of Urea.
However, according to court documents Weekend Nation has seen, government “defaulted, refused, neglected, ignored, or otherwise failed to pay the price” in terms of the contract.
But after negotiations the parties entered into an Acknowledgement of Debt dated December 20 2022 where the Malawi Government acknowledged owing AIG $38 990 537.
According to the acknowledgement document signed by Ministry of Agriculture principal secretary responsible for Technical Services Medrina Mloza Banda and SFFRFM chief executive officer Richard Chikunkhuzeni, the total debt comprised $37 215 325.65 as principal contract value and $1 775 212.00 being accrued interest for the period from August 2022 to April 2023.
Under the instrument, SFFRFM and government through Ministry of Agriculture, would have made final payment of the debt by July 31 2023.
“The debtor hereby agrees and undertakes to make provision for repayment of the debt in the 2022/2023 government financial year and further undertakes to start repaying the debt in the month of May 2023 and to settle the total debt within the 2022/2023 financial year.
“The debtor acknowledges at the rate of 6 percent per year on the amount outstanding from time to time as calculated from the first payment [May 2 2023] to the date of final payment [July 31 2023],” reads in part the Acknowledgement of Debt.
Government further agreed that all payments will be made to the Mauritius Commercial Bank and, in the event of any default, government agreed and undertook to make payment of all collection and legal fees and disbursements incurred by the AIG to its collection agency or attorneys in regard to the commencement of legal proceedings against it.
“The debtor further acknowledges that the certificate of account signed by the chief executive officer of the creditor reflecting the existence of the total debt due to the creditor at any time shall be sufficient proof of the contents thereof of the purposes of enabling the creditor to obtain provisional sentence,” it reads.
However, despite the acknowledgement and agreement, the Malawi Government only paid about $10 million, leaving a balance of $28 million.
Although government failed to pay AIG, during the financial year 2021/2022 Parliament allocated K142 billion to AIP which was expected to benefit not less than 3.5 million farming families.
AIG said despite numerous requests to settle the remaining debt, government, even though made assurances of payment to the firm including setting deadlines, either “deliberately or intentionally declined, neglected, ignored or otherwise failed to oblige”.[an2]
This forced the Seychelles-based firm to drag SFFRFM and Attorney General (AG) to court, demanding around $33.4 million. The company is being represented by Ritz Attorneys at Law.
The amount comprises outstanding balance (the principal), compound interest on the principal, statutory collection costs, legal collection costs, value added tax (VAT) and Malawi Law Society (MLS) levy.
According to the statement of case under the Commercial Cause number 51 of 2024, AIG is claiming loss of use of money constituting the actual debt and interest thereon as well as disruptions in the firm’s cash flows occasioning inconveniences in business.
An agreed judgement issued by Judge Masauko Msungama of the High Court Commercial Division and signed by Chakaka Nyirenda and legal representatives of SFFRFM and Africa Investment Group, indicates that the Attorney General has been directed to ensure, through both the Ministries of Agriculture and Finance, that SFFRFM is funded to the extent of the total liability to fully settle the judgement debt.
