Malawi government to pay firm over k5bn

As Treasury is struggling to finance several development projects and fund institutions that provide essential services, billions of kwacha are being channelled to a contractual dispute government could have avoided, Nation on Sunday has learnt.

Government is expected to make an out-of-court settlement of about K5 billion to Deco and Terrastone Engineering, a joint venture that sued Capital Hill for illegal termination of contract on construction of the Parliament Building in Lilongwe.

The Ministry of Justice and Constitutional Affairs confirmed that government agreed to an out-of-court settlement, but that the figure may rise as negotiations continue on how much interest the firm should be granted.

Government contracted the joint venture to construct the Parliament Building in Lilongwe with funding from Taiwan, but was dumped after Lilongwe switched diplomatic ties from Taiwan to Republic of China.

The contractors successfully sued government for damages; illegal termination of contract and losses suffered and the company was awarded K7 billion by the High Court which further ruled that government also pay interest.

Ministry of Justice and Constitutional Affairs spokesperson Apoche Itimu confirmed that the court awarded the firm the K7 billion damages.

“The court awarded K7 billion in that case. We negotiated with the party and reduced to K4.9 billion. They [the contractors] have since been paid just over K500 million. There was also interest awarded to the plaintiff and we are still negotiating on the same.

“Please note that the figures I am giving you are estimates as the officer dealing with the matter is not in office to access to the case file,” said Itimu.

The venture’s managing director De Costa, who is also managing director for Terrastone Limited, confirmed so far they have only been paid K500 million as at December 2014.

He said the contractor is only aware of government’s commitment to paying K4 billion, but said the company has not yet been communicated on the interest accumulated.

“What I know is that government has pledged whatever is owed to us in promissory notes. They say they do not have money at the moment. They promised they will consider some interest as for three years we were not paid anything. So, the figure will be less and it’s us who will suffer losses,” he said.

De Costa, who was not sure on the actual amount government will pay once the interest is factored in, said the venture is still waiting for government to inform it on the matter.

But Minister of Finance Goodall Gondwe, while acknowledging that government is ready to make the payout as ordered by court, said Treasury cannot make any payment beyond the figure settled in court.

“Yes, I know they are owed the money and we agreed to pay them, but we cannot pay them all that money,” said Gondwe.

Asked on what Treasury is doing to avoid government losing money through compensations arising from breaches of contract, Gondwe said government has introduced a zero-coupon system for all debtors to ensure that all payments are strictly vetted.

Treasury recently confirmed it owes various debtors over K700 billion.