Malawi Maizegate: Failure to pay Zambia Corporative Federation cost Kaloswe contract to supply Maize to Malawi

Fresh details have emerged showing that Kaloswe Commuter and Courier Ltd, the Zambian firm contracted by Zambia Corporative Federation (ZCF) to export maize to Malawi had its contract terminated after the company failed to pay ZCF.

This prompted the country’s Agricultural Development and Marketing Corporation’s (Admarc) to terminate the contract on October 11, 2016 and opted to look for another supplier as hunger loomed in Malawi.

Information released by The Maravi Post shows that on May 31, 2016 Kaloswe approached the Zambia Corporative Federation (ZCF) and signed a contract to buy the maize at US$ 215 per tones from its depots dotted across the country.

Among the terms in the contract, ZCF was only going to release the maize after Kaloswe made a full payment in advance per multiple load prior to the commencement of uplifts and collections from the sources.

Kaloswe was also subject to incur 1.5 percent surcharge on contract value if it failed to perform the purchase within seven days of signing the agreement in order to avoid time-wasting and getting ZCF to incur unnecessary costs.

In order to raise money to facilitate the maize purchase, Kaloswe entered into another contract with Malawi’s grain marketer, Agricultural Development and Marketing Corporation (ADMARC) to supply 100,000 tones of maize without the knowledge of ZCF June 17, 2016.

On June 24, 2016, Kaloswe entered into another contract with Zambia Business Horizon Solution Ltd of Lusaka West to handle logistics for the transportation of 100,000 tones of the same maize to Malawi.

Unfortunately, among the terms of the contract with ADMARC was a provision that Kaloswe was to supply maize first before ADMARC could issue any payment through a confirmed Letter of Credit (LC) from a mutually acceptable bank.

Faced with the dilemma, Kaloswe failed to pay ZCF for the maize and therefore, could not export the commodity to Malawi and as a result of this delay, ADMARC terminated the contract on October 11, 2016 and opted to look for another supplier as hunger loomed in the country.

Consequently, the Malawi government quickly arranged with the Zambian government to get the supply of maize and ZFC was recommended, and the contract with ADMARC was signed after which PTA bank wrote an LC to ZCF to commit to the payment once the transaction was made.

Both ZCF executive director James Chirwa and Malawi’s Minister of Agriculture, Irrigation and Water Development, George Chaponda, confirmed that no payment has been made to the maize that has already been ferried into Malawi because one of the terms on the contract was that ADMARC will only start paying when ZCF deliverers 10,000 tones.
And as of last week, ZCF had only exported 5,000 tones of maize to Malawi.

However, Kaloswe, according to ZCF court documents, mistook the LC for the money transfer and applied for an order of interim injunction from the High Court to restrain ZCF from spending, transferring, administering or dealing with the US$34, 500, 000.00 allegedly paid into its account by the PTA Bank over its contract with ADMARC.

But according to an affidavit in opposition to application for interim injunction, ZCF finance manager Allan Malisawa submitted that under the failed contract between ZCF and Kaloswe, the parties understood that the process of gathering the maize commodity through collections from provinces involved ZFC having to pay the farmers.

According to the addendum to the contract, Malisawa revealed that Kaloswe was supposed to pay a surcharge of 1.5 percent against its contract value after going into a contract with ZCF on May 31, 2016.

Malisawa told The Maravi Post that Kaloswe therefore entered into another contract on June 17, 2016 with the hope of raising money that was required to pay without the knowledge of ZCF but could not do so because one of the terms of the contract was that Kaloswe had to deliver the maize before getting the payment.
“Having found himself in this predicament as a result of speculative pursuits in business deals, the plaintiff (Kaloswe) failed to deliver the maize to ADMARC of Malawi who then cancelled and terminated his contract,” Maliwasa said.

“The Malawian government then quickly arranged with the government of the Republic of Zambia to get a supplier of the white maize who then recommended the defendant (ZCF) to supply the badly needed commodity (white maize) in Malawi”, he said.

Admarc however still insists that it is buying the staple grain from ZCF, a government agency; documents show that Admarc may have used a private Zambia company that may be more expensive than if the deal were government to government.

The Country’s grain marketer has reportedly paid US$34.5 million (MK26 billion) for the maize, which is US$13 million (MK9.5 billion) more than the US$21.5 million (MK15 billion) it could have paid had it bought the maize from Zambia government.

On Thursday the High Court in Mzuzu ordered Agriculture Minister Chaponda to stop from executing his duties until a probe into the Zambia maize import is over.
Eventually, the development has divided legal minds in the country while others describe the decision as “extremely unusual for the court to issue an injunction against the Executive, arm of government.

Both Edge Kanyongolo, an associate professor of law at the University of Malawi’s Chancellor College, and Malawi Law Society (MLS) president John Suzi-Banda observed that the court’s decision under the country’s laws is valid, and as long as it is, it does not matter whether somebody disagrees with it or is aggrieved with it, until it is discharged.
Minister Chaponda, who gave a ministerial statement in last Parliament sitting on the saga’s procurement, has been refusing to resign arguing that his hands are clean and that those wanting him to leave the office are doing it out of jealousy.

Meanwhile, the Journalists Union of Malawi (JUMA) has slammed some “invisible political machinations” behind the action  by the Malawi Revenue Authority (MRA) to seal the headquarters of the Times Media Group because of outstanding tax payments.

JUMA strongly believe that, in a frantic effort to save the battered image of the government, authorities are using the state machinery in trying to muzzle the media group from further providing the local and international community with information regarding the belligerent purchase of maize from Zambia.

“JUMA would like to point out to government the serious consequences of such a decision, which may lead to loss of employment by staff of the media company, loss of livelihoods for their dependents, as well as loss of their socio-economic contributions to the societies where they belong.

The statement further reads that to avoid plunging the nation into further misery, poverty and inequality, JUMA would like to encourage the leadership to reconsider its decision, re-open and engage in a dialogue with the Times Media Group as it does with all other tax defaulters.