SHOCKER: Government paying millions of US$ to two foreign service suppliers through lawsuits

* A whopping US$28.990 million as court claims to Africa Investment Group Limited over fertilizer deal gone sour

* A further US$8,280 million to Victoria Pharmaceuticals Limited, also gone through the courts

By Duncan Mlanjira

Agreed to by Attorney General, Thabo Chakaka Nyirenda, representing the government in the court of law, the Malawi Government is paying millions of US$ to two foreign service suppliers, first a whopping US$28.990 million (US$28,990,537.00) as court claims to Africa Investment Group Limited over some fertilizer contact.

The second is US$8,280 million (US$8,280,614.37) to Victoria Pharmaceuticals Limited, also gone through the courts, over services provided to the Ministry of Health through Central Medical Stores Trust.

According to court papers that have gone viral on social media, the Attorney General, Thabo Chakaka Nyirenda, representing Malawi’s Ministries of Agriculture and Finance, agreed to in July 2024, for the government to be paying the whopping US$28.990 million following a case heard in the Commercial Division of the High Court of Malawi in a commercial cause number 51 of 2024.

In the case Africa Investment Group sued resistered trustees of Smallholder Farmers Fertilizer Revolving Fund of Malawi (SFFRFM); Ministries of Agriculture and Finance through the Attorney General, and Malawi Fertilizer Company Limited as 3rd party.

The court document indicates that terms of settlement agreement was reached by the parties on terms that were presented and thus Justice Msungama adjudged that it be paid “in full settlement of all [Africa Investment Group Limited’s] claims against [SFFRFM] within 90 days” from the date the agreement that was made on July 22, 2024.

The sum is US$28,990,537.00 as principal debt as of January 25, 2024 and the sum of US$2,174,335.00 as interest on the debt for Africa Investment Group at the agreed rate of 6% per annum from May 1, 2023 to July 5 2024.

A further US$2,175,716.68 is in Malawi kwacha equivalent, being costs of the action including statutory collection charges to be paid to legal practitioners for Africa Investment Group (Wapona Kita of Kita & Co), who also represented Malawi Fertilizer Company Limited as 3rd party.

It was directed by the court that the final payment for the 3rd party be made into a new account, which is MK17,124,643,194.06 (MK17.1 trillion) as “money had and received by the 3rd party under the Modified Forward Exchange Contract Facility executed between the 3rd party and NBS Bank Plc in respect of which there is a total failure of consideration.

MK1,138,123,709.09 (MK1.1 trillion) is being paid as interest on the MK17.1 trillion at the rate of 8% per annum accruing from November 15, 2023 up to July 5, 2024 as well as MK638,435,153.26 (MK638.435 million) statutory collection charges on the refund including VAR payable to Africa Investment Group’s legal practitioners, Kita & Co.

The court also directed that a bank account be opened at CHD Investment Bank, Blantyre Banking Centre by legal counsels Kita & Co for Africa Investment Group for their joint control as the funds to be paid shall not be released to Africa Investment Group but direct to the new account and that no payments were to be made until expiry of the 90 days.

Justice Msungama made special direction to the Attorney General that, through the Ministries of Agriculture and Finance, the Africa Investment Group should be “funded to the extent of the total liability under the judgment for the company to fully settle the judgment debt due within the 90 days set from July.”

In the event of failure on the part of government satisfy the judgment date due within 90 days, the court said the funds in the new account at CDH Investment Bank shall remain in it until the judgement in favour of claimant is satisfied.

Meanwhile, the government also attracted funds-claim lawsuit of US$5,303,895.86 sued by Victoria Pharmaceuticals Limited against Ministry of Health.

It attracts interest of US$1,343,895.43; an indemnity of discounting interest of US$1,196,550.41 and a total sum of MK644,890,293.33 being the unpaid balance on the Malawi kwacha account.

The background of the matter, as explained to the Secretary to the Treasury by the Attorney General in a letter dated August 23, 2024, is that the claimant supplied pharmaceutical products to Central Medical Stores Trust and there was an unpaid claim of US$5,303,895.86 and there was also a Malawian kwacha claim that initially stood at MK1,725,718,750.00.

This was reduced by the downward payment of MK1,520,718,750.00 by  a promissory note leaving the balance of MK205 trillion, whose US$ claim dates back to 2016 under the Democratic Progress Party (DPP)-led government.

In the August 2024 document, the Attorney General explained that after commencement of the claim, he sought instructions from both the Ministry of Finance and the Central Medical Stores Trust and both admitted liability — and additionally, the office of the Auditor General certified the claims of US$5,303,895.86 and the sum of MK205 million by the Victoria Pharmaceuticals Limited.

He explained that the two parties entered into an agreed order for the payment of US$5,303,895.86 and the sum of K205 million and that they also agreed to the payment of an indemnity of collection costs on sliding scale and also agreed to agree within 45 days to agree on the rate and payment of interest on the principal sums agreed to be payable.

“The Agreed Order was executed by the court on 27th June, 2023. By a Promissory Note dated 16th August, 2023 and expiring one year from that date, the Government of Malawi paid the sum of MK205 million.

“It was agreed by the parties that this payment should go towards reducing the US$ claim. Therefore, the US$ claim was reduced from US$5,303,895.86 to US$5,116,681.25.

“By a further Agreed Order of 12th August, the parties agreed that the rate of interest on the US$ claim be 12% whilst the Reserve Bank of Malawi policy rate be applicable on the Malawi kwacha claim.”

It was also agreed that the US$ be converted to the Malawi kwacha at the rate ruling at the time of the payment and after factoring in the interest and the collection costs, the Attorney General gave the summary of the amounts due as follows:

* US$ claim: a) balance on the principal amount US$5,116,681.25; b) interest US$2,922,750.17; c) indemnity of collection costs on the principal sum US$153,500.44; d) indemnity of collection costs on the interest IS$87,682.51 — bring a total of US$8,280,614.37.

In accordance with the terms of the Agreed Order, the Attorney General indicated that this amount must be converted to the Malawi kwacha at the time of effecting the payment at the current rate of K1,750 to a US$ — coming to a total of MK14,491,975,147.50 (MK14.491 trillion).

* The Malawi kwacha claim: a) balance of principal amount MK295 million; b) interest therein MK1,554,204,255.00 (MK1.554 trillion); c) indemnity of collection costs on the principal sum MK6,150,000; and indemnity of collection costs on interest MK46,626,127.68 — total being MK1,811,980,382.68.

The Attorney General that requested the Secretary to the Treasury in the Ministry of Finance “to facilitate payment of the said sum of MK15,303,055,530.18 to Messrs Golden & Law”, lawyers for claimants, Victoria Pharmaceuticals Limited, through the Attorney General’s office.