Rbm, Malswitch in verbal war

The Reserve Bank of Malawi (RBM) and Malawi Switch Centre Limited (Malswitch) have clashed over the introduction of a new national switch that Malswitch says threatens its survival.

At issue, according to written exchanges we have seen, is the RBM’s decision to facilitate the setting up of a World Bank-funded parallel switch to be run by the Bankers Association of Malawi (BAM).

The move could financially cripple Malswitch—a project in which the central bank invested K1 billion in 1999 before weaning it in 2006—as  it depends on switching services mainly to banks for 64 percent of its revenue stream, documents show.

According to Malswitch, if this revenue line is cut, jobs of most of Malswitch’s 75 employees are at stake.

Documentation we have seen indicates that the recommendation to start a new national switch came from a World Bank consultant, whose findings and recommendations have been faulted by Malswitch.

Malswitch chief executive officer Gideon Kalumbu-Phiri wrote RBM on January 25 2012 that his company was disturbed with the misrepresentations in the consultant’s report.

“During the fact-finding mission made by the consultant, management of Malswitch cooperated without reservation with the consultant and indeed on more than one occasion indicated openness to engage with or provide additional information to the consultant on any arrears of Malswitch’s strategy, operational plans and indeed its operating processes.

“In the context of this level of co-operation, we are disturbed that the report bears such significant misrepresentations of facts. As responsible management and professionals, we shall not indulge in conjecture and intrigue, but instead wish to put on record our corrected perspective on the areas that we consider beg for clarification and comment from us,” Kalumbu-Phiri.

Malswitch was not amused at the consultant’s assertions that the company lacks competences in some operating systems, lacks skillful human resource and that it abused its dominance of the market.

“We believe that investment decisions made on the back of consultations are best informed by a respect for factuality and coordinated verification of the input of those that had the privilege of being consulted.

“Recommendations from reports that lack a substantive link between findings and base data risk placing such recommendations, no matter how well-meaning, into questionable light. It is in the interest of ensuring that this national investment is made on the basis of correct background data and information that we felt compelled to record our comments to the interim report,” said Kalumbu-Phiri.

But in its reaction, the central bank said the consultant came up with the assessment of Malawi’s payment system after consulting a number of players and that the concerns would be forwarded to the consultant.

Wrote RBM director for national payments system, Fraser Mdwazika: “Please note that Mr Abib Gaye, the World Bank consultant produced the report after consulting a number of stakeholders from October 26 to November 7 2011 and the report, therefore, reflects his assessment of Malawi’s payment system.”

However, Kalumbu-Phiri did not relent as he wrote RBM again on February 8 2012, saying Malswitch held a meeting with Gaye who had indicated that the report the central bank sent was a wrong one.

“We would like to inform you that we met Mr Gaye at Malswitch in Blantyre on Tuesday January 31 2012 in the office of the head of technical services where Mr Gaye agreed that the report you had sent us is the wrong one and that he was to send us the correct and final one as the one you sent us is still labelled draft,” said Kalumbu-Phiri in the letter.

On the same day, Mdwazika wrote Malswitch back, saying: “Please be advised that according to our records, we sent the latest version of the report which the Reserve Bank is also currently using. We just thought we needed to put this on record for the benefit of all parties.”

In one of the correspondents to the RBM governor, the Malswitch boss feared that the proposed arrangement would take away about 64 percent of the business from Malswitch.

As an option, Malswitch had proposed that it manages the BAM national switch, but the association rejected the suggestion.

Said then BAM president John Biziwick in his response to Kalumbu-Phiri: “We write to acknowledge receipt of the proposal Malswitch submitted to Bankers Association of Malawi for the interoperability project. We would like to advise that BAM technical and business committees scrutinised the proposal and due to the high management, BAM will not afford to engage Malswitch as project manager.”

Also, in his letter to Malswitch, RBM Governor Charles Chuka concluded the matter by saying BAM would be the owners of the national switch and would operate independently with its own premises.

Said Chuka in his August 7 2012 letter: “As indicated in our communication of July 20 2012, the national switch will be owned by Bankers Association of Malawi. In this regard, BAM was advised to identify its own site for the national switch.”

RBM spokesperson Mbane Ngwira last week rejected assertions that the central bank has abandoned its own initiative in favour of a new public-private sector partnership.

He said Malswitch was delinked from RBM in 2006 and is now an independent company with its own management and board of directors.

He said the national switch and Malswitch are two different entities in that Malswitch was established in 2002 with the aim of acting as a platform upon which electronic-based payment products and services could be implemented in the country.

“On the other hand, the national switch will only connect Auto Teller Machines and Point of Sale devices, among others. As such, if Malswitch was to operate the national switch service, this would have been just one of their lines of business which, as the case is now, will be operated by Bankers Association of Malawi,” he said.

He also parried fears that the investment made in Malswitch will be wasted, saying “it is believed that the return on investment was already made and what may need to be done is to completely replace the existing switch which Malswitch management, as an independent company, may consider including in its strategies without necessarily resorting to public funds.”

Malswitch is an integrated technologies business with core activities in the areas of electronic payment, information technology infrastructure and data communication services.

The company was established as RBM fully funded project in 1999 and was later incorporated in March 2006 after a prior five-year gestation period during which the operations of the company were run as part of the central bank.