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EXECUTIVE SUMMARY
The President instituted the Commission of Inquiry following allegations of
malpractices in the way the maize was purchased from Zambia and how the whole
transaction affected maize prices on the local market. The Commission was
requested to release its findings and recommendations within a period of thirty days
from the date of appointment. The Commission started its work on 10th January,
2017. In order to discharge its mandate, the Commission endeavoured to fulfill
three key roles.
(ii) to ascertain whether there was value for money in the maize procurement; and
(iii) to investigate and make findings and recommendation on any matter incidental
to and connected to the procurement of the maize.
In terms of value for money, the Commission does not find fault in the pricing of
maize. The purchase price from the local market was influenced by market forces
including the tendency of local traders who hold stock to influence maize prices as
well as forming a maize price cartel. Further IMF proscribes Government subsidies.
The Commission however concludes that ADMARC was grossly negligent in failing to
negotiate a lower contract price for the purchase and delivery of maize under the
ZCF contract after removing Kaloswe the middle man from the equation and also
considering that the maize was to be sourced from Eastern Province of Zambia
which is closer to Malawi. Finally, the Commission finds the conduct of the Minister,
Hon. George Chaponda, in his dealings with Transglobe, a locally registered
company and trader of maize, most inappropriate, suspicious and raising issues of
corrupt practices.
Introduction
Following an outcry from certain segments of the public, including the media, on the
manner in which ADMARC Limited procured maize from the Republic of Zambia, His
Excellency the State President Professor Arthur Peter Mutharika, in exercise of the
powers conferred upon him by Section 89 (1) (g) of the Constitution of the Republic
of Malawi as read with Section 2(1) of the Commissions of Inquiry Act
(Chapter 18:01 of the Laws of Malawi), appointed a Commission of Inquiry to
investigate the procurement of maize by ADMARC.
The Commission, whose appointment was effective 1st January, 2017 was expected
to finalise its work and submit a written Report to His Excellency the President by
31st January, 2017. This deadline was later extended to 9th February, 2017. Among
the allegations in the public domain was that the incumbent Minister of Agriculture,
Irrigation and Water Development Hon. Dr George Chaponda, M.P., in collusion with
ADMARC officials, corruptly sourced maize from the Republic of Zambia for sale in
Malawi by ADMARC.
It was further alleged that as a result of this corrupt transaction, Malawians have
had to buy maize from ADMARC at an inflated price to cover for the sums that the
Honourable Minister and other officials benefitted from the deal. The Commission
consists of the following persons (a) Retired Chief Justice Anastasia Msosa, S.C.-
Chairperson; (b) Dr Janet L. Banda, S.C. - Member; and (c) Mr Isaac Kayira - Member.
2 Further, the State President appointed Mr Mike Chinoko as a Secretary to the
Commission.
CHAPTER 5
Findings
This Chapter presents the findings of the Commission. The findings are based on the
testimony of witnesses interviewed by the Commission both in Malawi and Zambia;
the observations of the Commission as it interviewed the witnesses; and on the
analysis of the documentation made available to the Commission. The Commission
also found helpful some of the interviews conducted by the Joint Committee of
Parliament tasked to investigate the surroundings concerning the purchase of maize
by ADMARC from Zambia.
5.1. The Reports on Crop Estimates 2015/2016 The Commission found that there
was a genuine belief by both Government and Development Partners that the
country would face acute food shortage in 2016 due to adverse weather conditions
caused by the El-Nino phenomenon. This belief was supported by the 2015/2016
Agricultural Production Estimates Survey (APES) conducted by MoAIW which
projected 8 million as the number of people that would face hunger. Further, the
Report of the Malawi Vulnerability Assessment Committee projected that 6.7 million
people would face hunger and, hence, shall require humanitarian response. The
Reports gave conflicting figures of the number of people who would require
humanitarian aid and the tonnage that would be required. This scenario led
Government to overestimate the tonnage of maize to be sourced for both
humanitarian aid and commercial purposes. The scenario further resulted in MoAIW
over providing for, in the Budget Estimates for 2016/2017, the financial resources
required for 28 the procurement of maize by NFRA for humanitarian aid. The
exaggerated sum of MK29.5 Billion was committed.
The Commission found that the Ministry of Agriculture did not assess correctly the
number of people who may need humanitarian aid and as a result of that anomaly,
excessive maize was sourced for humanitarian aid through NFRA and WFP, and for
commercial purposes. In view of this, currently maize procured by ADMARC locally
has no market since people have access to humanitarian maize and private traders
have offloaded maize on the local market at lower prices than what ADMARC is
offering.
The Commission also found that the two visits taken by the Minister to Zambia were
necessary. The first one was to hold negotiations with his counterpart to persuade
the Zambia Government to allow the importation of maize by Malawi. The second
visit, which happened in the midst of non-performance of contract by ZCF due to
allegedly the maize export ban in Zambia, was as a special envoy to persuade the
Government of the Republic of Zambia to lift the ban. However, the Commission
established that the role of the Minister went beyond these two official mandates
and bordered on interference with the procurement process. First, the Minister
attempted to influence ADMARC as to who should supply maize under the ZCF
contract from the Zambian side.
The Commission also established that when Hon. Chaponda went to Zambia as a
special envoy, a Tayub of Transglobe was also in Zambia meeting with officials in
the Ministry of 31 Agriculture. The Commission found two notable things about this
development. First, the export ban was lifted. Second, the Ministry of Agriculture in
Zambia issued export licences to both ZCF and Transglobe splitting the contract
tonnage of 100,000 metric tons that was contracted between ZCF and ADMARC in
equal share of 50,000 metric tons with Transglobe.
The Commission concludes that this process was invalid. Correspondence available
to the Commission indicate that ODPP was formally approached for a no objection
to the Kaloswe contract on saturday the 18th June, 2017 after the Kaloswe contract
was signed the previous day. The approval was granted on the same 18th July, 2016
despite the documents submitted to ODPP not complying with the requirements of
the PPA.
Further, the Commission noted that there was unnecessary haste in processing the
no objection which created undue pressure on the office of the ODPP and
compromised the proper scrutiny of documents by that office. 5.7.2. Addendum to
the Kaloswe Contract The Commission noted that ADMARC entered into an
agreement with Kaloswe assigning proceeds under the contract to ZCF.
This formally brought ZCF into the tripartite arrangement. Consequently, a Letter of
Credit was established in favour of ZCF on 26th July, 2016. After the letter of credit
was established, ADMARC and ZCF started engaging to the exclusion of Kaloswe.
ADMARC finally terminated the contract with Kaloswe on 11th October, 2016. The
Commission was not satisfied with the reasons given for terminating the Kaloswe
contract.
The Commission found the 36 conduct of ADMARC and ZCF in this regard in bad
faith, most unprofessional and liable to expose ADMARC and ultimately Government
to a civil suit. 5.7.3. ZCF Contract The Commission noted that the contract between
ADMARC and ZCF is dated 17th June, 2016. The contract was for the supply of
100,000 metric ton of maize. However, the Commission established that this
contract was signed after the Letter of Credit was established in favour of ZCF. The
Commission concluded that the contract was backdated, a fact which was also
confirmed by ZCF.
The Commission established that for the price of US$345 per ton the maize was to
be taken from various distant locations in Zambia including North Western Province.
However, under the ZCF contract the whole maize was to come from Eastern
Province, which is closest to Lilongwe, and therefore should have significantly
reduced the contract price in relation to the cost of transportation from US$80 to
US$40 per ton, creating a saving of US$4 million.
The Commission therefore finds that ADMARC was grossly negligent for not
negotiating a lower price under the ZCF contract. The Commission also established
that for the ZCF contract, ADMARC did not inform the Board and did not seek a
specific approval from ODPP on this contract. Rather, the approval sought from
ODPP, which was also irregular in similar fashion 37 to the Kaloswe approval, was
for the assignment of proceeds from Kaloswe to ZCF. T
he Commission further established that by October, despite the export ban, ZCF did
not have maize to supply to ADMARC due to financial constraints. Following the
lifting of the maize export ban by Zambia, ZCF entered into a contract with
Transglobe to supply 50,000 metric tons of maize to ADMARC on their behalf at a
price of US$337.50 per metric ton.
The Commission has established that, as at 31st December, 2016, ADMARC had
taken delivery of only 4,512 metric tons of maize under this contract. ZCF has
therefore failed to perform under the contract.
5.7.4. ODDP The Commission found that the office of the ODPP did not act
professionally in this maize procurement transaction by not adhering to the
requirement under the Public Procurement Act in their assessment of the
applications for no objection on the Kaloswe contract submitted by ADMARC. The
Commission noted that the documents from ADMARC were submitted by email
containing minutes of IPC that lacked crucial information from which the ODPP could
base its decision. Nevertheless, ODPP granted approval in the absence of such
crucial information.
39 CHAPTER 6 Recommendations
In view of the findings made in the previous Chapter, the Commission makes the
following recommendations
6.1 MoAIW should improve on the way they conduct crop estimates so that the
findings of these surveys should not be misleading but facilitate Government correct
and effective response.
6.2. Government must ensure that the strategic grain reserves under the custody of
NFRA are always stocked with a minimum of 75,000 metric tons. 6.3. The dealings
between the Minister of Agriculture, Hon. Dr George Chaponda M.P., in this
procurement process should be further investigated by the ACB as the manner in
which Transglobe obtained an export permit from the Ministry of Agriculture of
Zambia to supply maize to ADMARC raises suspicion.
6.4. Government should put in place mechanisms to prevent maize price fixing by a
private traders cartel.
6.5. To the extent that procurement procedures were not followed and contracts
were fraudulent entered into by ADMARC Management, the Commission
recommends that disciplinary proceeding should be instituted against senior
management of ADMARC.
6.6. ADMARC must at all times ensure that corporate governance structures should
be adhered to.