13 September 2017

Malawi: Blantyre Water Board Choked By K10bn Debt - Suspends Cash Outflows

Water utility lantyre Water Board (BWB), which was blacklisted by European Investment Bank (EIB) rom being a recipient of financing from the institution after an audit revealed irregularities ranging from fraud to poor documentation of project fund, is now carrying a debt burden of nearly K10 billion forcing the firm to suspend all outflows of non-essential items.

According to an internal memorandum to members of staff dated September 8 2017 seen by Nyasa Times, said BWB had been forced to pay Electricity Supply Corporation of Malawi (Escom) K1.8 billion of its outstanding electricity bill to avoid Escom from switching off their power.

The memorandum signed by BWB acting chief executive Henry Bakuwa said the payments to Escom need to be paid from September 15 startingw ith K1 billion and K8000 million to be paid on weekly instalments of about K200 million per week by 30 September " and thereafter as monthly instalements to December 2017."

Bakuwa described in the communication that the instalments arrangement as "tall orders" for the BWB to fulfil.

"We had no choice but to accept to avoid the disconnection," HE WROTE.

Bakula believes the board can "negotiate" with government for a bail out with K1 billion payment dues Friday.

In the memorandum, Bakuwa also informed staff that BWB paid K200 million to Old Mutual Malawi to reduce pension contribution arrears.

In the communication, Bakuwa said BWB has suspended items such as staff loans, travel and meeting allowances, conferences, furnuiture and general payment to creditors, among others, until its financial status improves.

BWB was also demanded to start repaying the eight million euro (about K6.6 billion) loan from European Investment Bank.

The bank commissioned a PIR of the inspectorate general of the bank after BWB failed to explain on some of the issues which were raised.

According to the report, there was absence of original bid documentation, noting that 50 percent of the procurements examined were not supported by original bid submission documentation.

BWB employees were also reported to have been unable to trace and locate all documents for all the procurement files requested.

On strong indications of collusion, EIB found that bidding documents revealed similarities in the submissions of two successful suppliers and that the bid submission documents provided by the two were fabricated; hence, should not have been successful.

The loan had a maturity period of 33 years, including a grace period of 10 years.

EIB gave the loan to BWB in 2009 with a maturity period of 33 years, including a grace period of 10 years but because of the bank's concerns of mismanagement of funds, it has asked the board to start prepaying the loan before the actual commencement dates.

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