18 March 2019

Malawi: Goodall Says Khato Seeks New Financier in K400bn Lilongwe-Salima Water Deal

Minister of Finance, Economic Planning and Development Goodall Gondwe who dislosed last year that government has signed a deal with a financier of the K400 billion Lilongwe-Salima Project, effectively putting on course the project that faced several hurdles, has said the contractor Khato Civils is negotiating with new financier.

Gondwe is on record to have said last year that Khato Civils of Simbi Phiri identified a financier, Trissag Espanola of South Africa, but headquartered in London, to finance the K400 billion project.

"An agreement has been entered that 35 percent of the loan will be granted without interest," Gondwe said last year as quoted in the local press, saying the loan would no longer require approval from International Monetary Fund (IMF), as previously required, as it was not a sovereign guarantee anymore, but rather, a bank guarantee.

However, speaking in parliament last Thursday, Gondwe said Khato Civils is negotiating with a new financier.

"I have to tell you that this is a project that government will only have to guarantee because it is a statutory corporation project. It is not part of this budget except that at some point, we will have to come back to this House and inform you about its progress," Gondwe said.

So far, Gondwe said the Cabinet has approved according to the law governing guarantees that government can go ahead with "guaranteeing the resources when we find them."

He explained: " The understanding is as follows: That the contractors will find the appropriate amount of resources which can be borrowed by the Statutory Corporation in question [Lilongwe Water Board] and we will guarantee that; that is what the procedure is like.

"We have passed through a number of stages as far as negotiations of the finances of this project is concerned. In some cases, the so called financiers have, after due diligence, found to be non-existent. That is why up to now, we have not been able to go ahead with the project."

Gondwe said government has asked Khato Civils to look for some more sources and they are doing so.

"As soon as they decide that this is a credible source of finances, we will come in and look at it ourselves.

"The other thing that we are doing, though this is a suggestion from the contractor himself, is that some of the projects may have to be subcontracted and they are discussing with the people who could assist in the construction of the pipe," said Gondwe.

He said as soon as these two aspects have been completed, government will come in and finalise it and when that happens, the water project will start.

" It does not need an authorisation bill," he pointed out.

"Some of you have asked why it is not coming to Parliament. It will not require your approval, all we have to do is to tell you what we are doing and we will tell you why. That is what the law says and this is what is going to happen. This project can start anytime when these two conditions have been satisfied," said the Finance Minister.

Khato Civils spokesperson in Malawi, Taonga Botolo, confirmed they met with a potential financier in South Africa last week but could not give details.

Malawi government had already paid Khato some money in billions as part-payment for the works which include mobilising and assembling equipment and works on Environmental and Social Impact Assessment (Esia).

LWB's initial project of the Diamphwe Multi-purpose Dam Project, which was earmarked to avert the looming water crisis, hit a snag after the World Bank withdrew its financial backing.

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