Transglobe defrauded RBM of K6 billion – Report

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Export Development Bank (EDF), a subsidiary of the Reserve Bank of Malawi (RBM), gave private-owned Transglobe Produce Export K6 billion which it is feared may never be paid back.

This has been revealed by an audit report conducted by accountants Fletcher and Evance.

EDF is a Reserve Bank of Malawi subsidiary established in 2012 as a private development finance institution for export businesses.

EDF management introduced Commodity Market Making (CMM) initiative in 2017 to assist local enterprises which could not access loans from commercial backs but had capacity to secure export supply contracts

According to the audit report, about K12.8 billion was lost at EDF between 2017 and 2020 because management was running CMM without adhering to the laid down procedures.

Out of the amount, K6 billion was money given as loans to Transglobe, a produce trader based in Malawi.

Platform for Investigative Journalism (PIJ) reported that in September 2016, Transglobe applied for a loan amounting to US$3 million (about K2.7 billion).

In 2018, EDF, through CMM reached a deal with Transglobe to purchase pigeon peas and process them into Indian food.  In December 2018, Transglobe and EDF entered into a joint venture agreement under CMM amounting to US$6 million (K5.4 billion).

A loan through the venture was approved by RBM through EDF even though at the time Transglobe was failing to pay back a K2.8 billion loan.

Auditors, Fletcher and Evans, noted that there were red flags ignored by the board of EDF when approving the joint venture with Transglobe.

According to the audit report, one red flag was the non-payment of the previous loan and another was the K26 billion maizegate scandal in which Transglobe was implicated but later cleared by a court.

“We noted that at the time of the approval of the Transglobe-EDF joint venture under CMM, Transglobe had a non-performing facility with EDF of about K2.8 billion. This was a red flag that was ignored by both management and the EDF board. In our interviews, we were told that management proposed additional financing to Transglobe to help it pay its non-performing loans under the Credit and Lending department,” reads part of the report.

The report further says: “The Transglobe loan was approved on 3rd December 2018, and the loan agreement was signed on the 19th December 2018. Surprisingly, two days before the loan contract date—19th December 2018—Transglobe requested a drawdown of US$127,760 and K78,664,153.80.

“Why a borrower would request a drawdown before signing a contract could potentially be a red flag to the whole Joint Venture agreement between EDF and Transglobe with the benefit of hindsight, the fundamental element that seems to have existed in this loan process is an awareness of control weakness that could be exploited for financial gain. This can only happen where insider loan fraud situations arise due to the presence of bribes and kickbacks arising from the lending activity.”

PIJ reported that the board of EDF, which approved the loan on December 3, 2018, during a 42nd special meeting included Prince Kapondamgaga (who was alternate chairperson and he is now Chief of Staff for President Lazarus Chakwera). The board also had Noel Mkulichi, Kenneth Matupa, William Matambo, Beyard Matambo, and Tim De Borde.

According to the audit, the commodities traded by the joint venture were stored by Bridge Shipping Company and the company released commodities valued at over US$1 million to Transglobe without authorization by EDF.

“The release of the commodities was confirmed by Mr. Hamza Tayub, a Director of Transglobe. The act by Bridge Shipping Company was in breach of contract, indicating some collusion with Transglobe behind EDF. Bridge Shipping Company should be investigated as an accomplice to Transglobe.

“Transglobe acted with dishonesty in the joint venture with EDF. Transglobe used EDF funds without approval, which was a breach of contract. Transglobe and its Directors must be investigated for dubious and fraudulent dealings and possibly forex externalization,” the auditors say.

The auditors have since advised EDF Board to consider conducting disciplinary action against Mr. Chifuniro Kaimapanjira, who was the head of CMT unit and other CMM employees responsible for various operations under the CMM unit.

EDF in March this year summoned Kaimapanjira for disciplinary hearing but he refused to appear before the hearing saying he needed to be furnished with a copy of the audit report first.

Transglobe director Rashid Tayub refused to comment on the PIJ story while RBM said the issue is now in court and could not comment.

Meanwhile, Director of Public Prosecutions (DPP) Steven Kayuni  on Thursday wrote Malawi Police instructing the law enforcers to commence criminal proceedings against people involved in the looting of the K12.8 billion.

 

Transglobe, Tayub loses lawsuit against ACB

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