More woes on K400bn project

Prospects of finding a solution to the anticipated water woes of Lilongwe City are looking dim after a contract government signed with a financier of the K400 billion Lilongwe-Salima Waterway Project fell off.

Government, according to Finance and Economic Planning Minister Goodall Gondwe, did not agree with some terms in the signed contract and had to withdraw.

But Khato Civils said the Finance minister is using the issue of funding as a scapegoat.

Said Gondwe on the financier: “It just didn’t work out, we are looking for other financiers,” was what the minister, sounding disappointed, had to say Wednesday when asked in an interview for an update.

“Some terms in the contract were not appropriate. I cannot explain everything, but it [the deal] was supposed to be concessionary, with a grant element, which we discovered was not there.”

In this context, concessionary is a deal offered at a lower price than usual for certain individuals or institutions, for example developing nations.

Khato Civils spokesperson, Taonga Botolo,however, said his company has always been ready to kick off the project from 2016.

He alleged there are some individuals in government that do not want to see this project kick off for their own interests.

“But what they must know is that they have an obligation to have this project implemented. We signed a legitimate contract. We will do everything possible to have this done, seeking legal redress will be a very last thing we would do. If we take that path, government will end up paying us for a job not done, and we are avoiding that at all cost. But further delays may compel us to,” Botolo warned.

The minister said the Malawi government promised the International Monetary Fund (IMF) that government would settle for a deal that is concessionary.

In October last year, Gondwe, after years of no progress on the project, broke the news in an interview with Nation on Sunday; “We had discussions and finally signed a contract with a financier Khato Civils (executor of the project) identified. The financier is Trissag Espanola of South Africa.”

The government-facilitated contract was signed between the owners of the project, Lilongwe Water Board (LWB), Khato Civils and the financier, according to Gondwe.

But in the Wednesday interview, the disappointed finance minister said government is convinced the project is good and government would not tire but continue asking Khato Civils to find another financier as per contract agreement.

The news that the project was finally starting after the signing of the loan contract came as a big relief to Lilongwe residents who are only less than two years away from having less than three days of tap water a week if alternative water sources are not developed to complement those from its two dams on Lilongwe River, according to expert projection.

Asked about set timeframes for the project, as it should have been completed last year if these were met, Gondwe said there was nothing government could have done in absence of a financier.

“The signed agreement between Lilongwe Water Board and Khato Civils is that Khato is the one to find a financier. They are looking around and I am confident we will get one,” he said.

The finance minister had indicated that the signed agreement that was entered had a clause that 35 percent of the loan would be granted without interest, with a repayment period of 30 years, from the initial 15 years.

He had also indicated that what was remaining was Cabinet approval following the changes in the loan agreement.

But a civil engineer, Newton Kambala, who previously worked with Electricity Supply Corporation of Malawi (Escom) for five years in the power generation department, cautioned the Malawi government to be extremely careful with this project.

He warned that taxpayers may end up paying a huge debt even for work not done, looking at what is happening and the machinery already mobilised by Khato Civils.

Kambala said his expert opinion is that Malawi was not ready for such a massive project.

“If we fail to generate power to light up bulbs in our homes, where are we going to get power to lift water from Salima to Lilongwe?

“Ask Blantyre Water Board, they spend not less than K500 million a month to lift water from Walkers Ferry to Blantyre, and levels for Salima and Lilongwe are very high as compared to Walkers Ferry and Blantyre,” he said.

Kambala said if the contract agreement is for Khato Civils to identify a financier, that then has nothing to do with government and the contractor must fulfill its obligation.

The civil engineer said the Lilongwe-Salima Waterway Project has been controversial in a manner the contract was awarded and these delays plus government failure to update Malawians in detail on what is going on raises a lot of suspicion.

“If it is not you asking government on the update of the project, we have not seen government coming up voluntarily with an update, it is just silent despite major developments, bad or good,” he said.

But Gondwe insisted the project is important and doable.

Even after the finance minister confirmed in October about the new financier, by last month, there was no movement on the project, including government’s failure to fund a company set up to oversee the implementation of the work, Lilongwe-Salima Waterway Project.

The company’s chief executive officer (CEO), Modesta Kanjale, appointed on December 12 2017 to oversee the project, said in an interview in February that works have not started as government was yet to approve changes that were made in the loan agreement.

She said her office had not received funding to enable them to start implementation works, adding that only little paperwork was done, but the office was yet to get funding for operations.

Project owners, LWB, when asked in February about progress, said in a written response by CEO Alfonso Chikuni, that things remained as they were last October.

The deal, according to the Ministry of Finance, no longer needed endorsement of the IMF, as previously required, because it was no longer a sovereign guarantee, but rather, a bank guarantee.

The funds were supposed to come from commercial banks.

Gondwe had also earlier confirmed that government had made some part-payment to Khato Civils, headquartered in South Africa, for the preparatory works, but he could not provide the actual figure.

He had disclosed that LWB asked government for the payment towards preparatory works the contractor has done so far.

The works, according to Gondwe, included mobilising and assembling equipment and works on Environmental and Social Impact Assessment (Esia).

LWB’s initial project of the Diamphwe Multi-purpose Dam Project, which was earmarked to avert the looming water crisis, hit a snag after the World Bank withdrew its financial backing.