No Holds Barred! What is the truth on China money?

Malawi President Peter Mutharika said in his State of the Nation Address on Friday that the much-touted $600 million Kam’mwamba Coal Fired Power Project will be funded by a loan from a Chinese Bank called Exim.

All along, government has not come clean on the nature of the financial arrangements for this project, and made it sound as though it were a donation from the People’s Republic of China.

Here is how MBC reported the news in December last year: “The governments of Malawi and People’s Republic of China have signed a $600 Million pact for the Development of the 300 megawatts Kam’mwamba coal fired power plant generation.

“Speaking at the signing of the Memorandum of Understanding in South Africa, Finance Minister Goodall Gondwe hailed the project which he noted will have a huge impact on Malawi’s economy looking at the electricity demand the country has. He said he is happy with the trust and confidence China has in Malawi and expressed hope that there will be an improvement in transmission lines and electricity supply through this project.

“President of the China Gezhouba Group Company Limited Lu Zexiang hoped the project would help in meeting Malawi’s electricity generation gaps. Lu reiterated his organization’s commitment on the use of local manpower in their projects and looked forward to more cooperation with Malawi.”

From the above, it sounds as if this money is a donation from one government to another, not a loan.

However, on Friday, the president said it is a loan from a Chinese bank.

It is essential that the government is clear from the start what we are getting ourselves into here.

The country is already reeling from the abuse of $156.5 million Malawi borrowed from Export-Import Bank of India between 2007 and 2014, which has never been fully accounted for. Economist, Henry Kachaje, breaks it down for us as follows, in one of his Facebook posts:

1) 14 May 2008: $30 million to finance “supply of irrigation, storage, tobacco threshing plant and One Village One Product (OVOP) project”.

2) 1 February, 2011: $50 million for the purpose of cotton processing facilities, Green Belt Initiative, and OVOP.

3) 13 December 2012: $76.5 million for the development of an irrigation network under the Green Belt Initiative and development of fuel storage facilities.

Of these, so far, only the fuel storage facilities can be pointed at with certainty. The rest we only hear of in speeches.

To be fair, this article does not aim at apportioning blame on President Peter Mutharika as an individual. Rather, the government machinery as a whole lacks a mechanism for properly accounting for the numerous loans it takes from banks in India, China and elsewhere.

On Friday, Mutharika said that his government will ensure that foreign loans are obtained primarily to finance development projects that are thoroughly appraised and are of strategic importance to the country. He stressed that projects must be justified to be of high rate of return.

However, the main problem has always been failure to audit and account for the loans once they are taken, and not insufficient justification at the time of borrowing.

If you were to read the Hansard, you would realise that all the loans with the India bank were thoroughly justified in parliament at the time of borrowing. However, nobody, not even parliament, made an adequate follow-up to establish whether the money that was borrowed was utilised for its intended purpose.

This system is flawed. Why should the government be using parliament only to authorize the borrowing, and yet see no need to update parliament once the money has been used?

Because of loopholes like this one, part of the money borrowed from India was used to buy 177 tractors, 144 of which were sold for a pittance to top civil servants, politicians and other well-connected individuals who have nothing whatsoever to do with the Greenbelt Initiative.

There has also been no accountability for the K600 million proceeds realised from the sale of those tractors.

In all likelihood – given all the thieving that is going on – our very corrupt controlling officers at Capital Hill, either with or without cooperation with their political masters, steal this money without difficulty, knowing that in the end no one will hold them accountable.

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Critical issues Mutharika shied away from addressing

President Peter Mutharika said a lot of things in his State of the Nation Address on Friday. He said, for instance, that the terminal building of the Kamuzu International Airport in Lilongwe will be refurbished, while Chileka will have a new airport.

He also said the feasibility study of the Shire-Zambezi Waterway has been completed, and the river system has been found navigable. He said that further meetings were in the pipeline to map the way forward.

However, when it came to national security, Mutharika’s speech failed to propose a robust solution for protecting people living with the condition of albinism. Scores of people with the condition of albinism have been killed since December 2014, eliciting both a national and international outcry.

With regard to corruption, Mutharika vowed to pursue cases pertaining to the K20 billion Cashgate Scandal that occurred on former president Joyce Banda’s watch, but avoided any mention of the K577 billion Cashgate that spans his brother Bingu wa Mutharika’s tenure and the two-year presidency of Joyce Banda. Mutharika also avoided any mention of the K300 million plundering of funds at Ministry of Foreign Affairs, using Ethiopian Embassy as a conduit.

The president also touted the imminent review of the National Anti-Corruption Strategy, although Experts, including members of the diplomatic corps and opposition parties, agree that the independence of the ACB – which he gleefully opposes –  is key to ensuring a meaningful fight against corruption.

In the information sector, President Mutharika said that the Access to Information (ATI) Bill has already been submitted to Parliament. However, Mutharika did not address concerns the media fraternity has against his government’s watering down of the ATI bill, which, if passed, will significantly reduce the relevance of the law.

And though at the end of the 2015 Malawi Investment Forum Mutharika said in a press statement that the forum had yielded deals of $1.1 billion, in his State of the Nation Address on Friday he said that the only deals realised were valued at $124 million. Does the president always tell us the truth?