THE R54-MILLION PAID OUT FOR A TIMBER MILL THAT WAS NEVER BUILT? WHEN THE CORRUPT PETER MWANZA DIRECTS
Malawi’s current finance minister, Goodall Gondwe, helped to facilitate a 1.8-billion Malawi kwacha (R54-million) state loan for a timber processing factory that, three years later, has still not been built.
This week, neither the wholly state-owned Malawi Savings Bank, which made the loan, nor the treasury’s Export Development Fund (EDF), which guaranteed it, would answer questions about what has happened to the money.
The directors of the company that received the loan, Sterling Timber International, did not respond to queries about why the factory has not been built.
Gondwe, one of Malawi’s best-known economists and the International Monetary Fund’s former Africa director, confirmed that he had lobbied for the loan but said he no longer had any connection with the company.
Sterling has strong political connections: one of its directors, Peter Mwanza, is a former agriculture minister and senior member of the ruling Democratic Progressive Party.
The loan was purportedly extended in terms of a state pre-finance and loan guarantee scheme that explicitly targets exporters of “nontraditional exports”, including gemstones, wheat, pigeon peas, soya and paprika. But the scheme does not cover timber.
Good intentions
Sterling was launched on February 9 2011 to add export value to pine cut in the Mzimba district, home to a 53 500 hectare area once touted as one of Africa’s biggest exotic plantations.
It was the brainchild of a group of 400 small sawmill owners, the Timber Millers’ Co-operatives Union. Despite having no track record, it landed the 1.8-billion kwacha loan from the Malawi Savings Bank.
The intention was for the union, which had a 63% stake in the company, to supply timber to a newly built plant that would add value for export to the United Arab Emirates, South Africa and East Africa.
But Dick Kachipande, a sawyer from the Chamatete Co-operative, told amaBhungane that no factory has been built. In November last year the union withdrew its support for the venture, saying it has seen no benefit and has no idea what happened to the loan.
“We do not know how Sterling is going to repay the loan because the major source of revenue for the company was supposed to be the union through its contribution of timber,” he said.
The union’s vice-chairperson, Paul Nyirenda, said: “We have repeatedly asked for financial reports but we have never seen them. Where is the factory?”
No company offices
Sterling does not appear to have offices. The only signs of its continued existence are new pick-ups emblazoned with its logo.
The company’s managing director, Paul Makolosi, claimed on the Lilongwe-based Zodiac radio station earlier this year that the company’s exports of value-added timber were generating billions of kwacha a year.
The Nyasa Times has reported that, when Sterling was registered, internal wrangles broke out over stock allotment and the lack of financial accountability and transparency, leading the union to withdraw its backing.
The company was launched after the Malawi government raised the price of state forest timber more than sixfold, from 1 100 kwacha to 10 000 kwacha a cubic metre. The hike meant that, for the majority of small-scale sawyers, production was no longer viable. Gondwe and Mwanza then entered the scene, advising the union to acquire a bank loan to boost their businesses.
“The union then sought a loan guarantee from the Malawi government and was asked to form a company so that government could back it,” Nyirenda said.
Gondwe and Mwanza, who justified their involvement in the company by saying it was to be based in their home region, were among its initial directors.
Mbane Ngwira, the Reserve Bank of Malawi spokesperson, did not say whether the factory had been built but insisted that Sterling is still operating.
“The responsibility for repaying the loan still remains the responsibility of Sterling Timber,” he said in an emailed response.
Millions paid in commission
According to union minutes, Mwanza told a union meeting in Mzuzu in May 2012 that he received 12-million kwacha in commission for facilitating the loan. Contacted last week, he confirmed receiving payment.
In a phone call this week, Gondwe denied any involvement with Sterling. “Jesus, I do not know these people! I don’t even know this company. They are lying,” he said.
He said he had not even known about EDF until a few days ago “when they came to introduce themselves to my office”.
He referred all questions to the Sterling chief executive and board chairperson, but said he did not know their names.
Malawi Savings Bank spokesperson Brenda Chilima acknowledged that the bank had made the loan.
Asked how much it had recovered in repayments, and how it would claw back the money in the event of a default, Chilima said in an email: “I would like to advise you that the bank has a confidentiality policy on information relating to all its customers … divulging any piece of information … to a third party is in breach of this commitment.”
The EDF referred amaBhungane to the Reserve Bank.
Sterling’s spokesperson, Tiwonge Mtegha, also one of the company’s directors, declined to answer questions, saying he needed time to consult others.
that a joint operation with their fellow law enforcers in Mozambique brought the commotion to an end.
“There were indeed ugly scenes at Tsangano, a trading centre which lies on the border between Malawi’s Ntcheu district and Mozambique’s Tsangano district in Tete Province. When quelling the violence, which saw Malawians attacking Burundians plying their trade on the Mozambican side of the border, we forgot about the national boundaries and entered each other’s purpose with one sole aim of restoring law and order,” said Gondwa.
He added:
“We could not just stand and watch Malawians roughing up Burundians, looting property and damaging buildings on the Mozambican side of the border.”
Gondwa also confirmed that one Burundian trader had abducted a Malawian boy, who has since been rescued.
“We will find out what happened for the Burundian trader to kidnap a boy from Malawi and in the process ignite the confrontation,” said Gondwa.
The attacks in Mozambique came almost a week after neighbouring Zambia witnessed several xenophobic attacks against Rwandan and Burundian traders.
The violence in Zambia was sparked by rumours that foreigners were carrying out ritual killings.
Ritual killings were a problem in parts of Africa where, some people believe magic potions or ceremonies can bring them success in business and life.
Malawi, Mozambique and Zambia hosted a number of political and economic refugees from Africa’s Great Lakes region.
Most economic refugees from Burundi, Rwanda and Ethiopia operated successful small shops to the annoyance of the locals.
One Burindian guy commented:
“Border town between Mozambique and Malawi then Malawians crossed over and attacked Burundian traders because I had abducted a Malawian boy”
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