On the Fast Lane of Malawi: Govt should do more to restore donor confidence

The onus is on government. The rules of the game were already defined for it to either follow religiously or make development partners continue to support it off-budget. The solid message is that government must proactively and conscientiously do what is on the dotted lines for its development partners to shed off the layer of mistrust in the government’s financial systems.

On the Fast Lane: Steven Nhlane

On the Fast Lane: Steven Nhlane

The good news is that the ultimate beneficiaries of the increasing off-budget support are Malawians. But perhaps the difference is that off-budget support is not exactly what government desires.

Of course, government has a good reason to be wary. It has little or no control over what is not in its budget. So why does it look like taking eternity for it to align its financial systems with the requirements of its development partners?

For me, the problem is foot-dragging on the part of government. It does not require rocket science for one to see the mess in government’s financial systems. The discovery of the looting of K24 billion from the public purse by some unscrupulous civil servants and business accomplices in September 2013 is no doubt a good starting point.

When this came to light, swift measures in form of an action plan were put in place to plug the holes and bring sanity to the financial system. The British auditing firm Baker Tilly was engaged to carry out a forensic audit—a scientific examination and evaluation of government’s financial information—was done. The result of that good work was the successful prosecution and conviction of several people, some of whom are now serving jail terms. Others are yet to have their cases concluded. Over 50 bank accounts were restricted.

Other reforms included the approval for the introduction of independent Audit Committees for Government Ministries and Departments to enable independent analysis and advice of financial management, procurement and audit queries. Ifmis was patched up to close the loopholes and strengthen the system and prevent further abuse.

But little did Malawians know that the K24 billion looting was just the tip of the ice-berg. For no sooner had the prosecution of the suspects started than Malawians learned that there was in fact a more damning audit report involving K92 billion, which would reveal more looting of the public coffers from 2009. And if a forensic audit was expeditiously conducted on the report more people and businesspersons would by now have seen the wrath of the law.

But a forensic audit does not come cheap. So to rule out the lame duck excuse that government would have given that it had no money to conduct such an audit on the K92 billion audit, the German government offered to fund the exercise at K9 billion. That was over a year ago.

Unfortunately, there has been foot-dragging by the powers that be to expedite this second forensic audit. But you can’t stop the sun from rising. On the behest of many players, government contracted PriceWaterCoopers (PwC) of South Africa to carry out the exercise.

The audit firm is yet to do a forensic audit on the K92 billion heist, but the preliminary work PwC has issued is more damning about the Malawi government’s financial system. The preliminary work dubbed the Cashbook Reconstruction Report has revealed that it is no longer K92 billion that government lost from 2009 to 2014, but that some suspected civil servants and private sector players pulled off a sizzling K577 billion from the public purse during this period.

Meanwhile, as Malawians were counting the cost of the loss of donor support as a result of the Cashgate, the National Audit Office (NAO) suspects that more billions of Kwacha were lost between January 2014 and February this year. This was done by manipulating the government Human Resource Management Information System (HRMIS) as well as the Integrated Financial Management System (Ifmis) even as it was being revised, reformed or suspended. Ghee! As for the forensic audit, the audit firm has said it can only be ready after 10 months.

But what was surprising is that even the Cashbook Reconstruction Report only came to light when opposition Parliamentarians who have a controlling majority in Parliament dug in their heels that they would not pass the 2015/16 budget unless government released the forensic audit on K92 billion.

So, Malawians will wait for another 10 months for a forensic audit, this time round not on the K92 billion but on the K577 billion. What is 10 months after all?

That is the background in a nutshell if you ask me why Malawi’s Development Partners are hesitant to trust the government’s financial system. This mistrust comes against the backdrop of Government’s systematic action plan focussing on investigations and prosecutions, accounting and auditing systems, administrative measures and reforms in the Malawi Public Service to uncover acts of fraud and corruption as well as to put corrective measures to permanently avert any future attempts to defraud the Government.

It is clear from the magnitude of the fraud after the K24 billion Cashgate that while the action plan was a good starting point it did not do enough to seal the loopholes while the foot dragging to contract an audit firm to conduct a forensic audit on the K92 billion, worsened the situation.

From the tone of the statement by the Development Partners (DPs) this week during the High-level Forum on Development Effectiveness in Lilongwe, it would not come as a surprise that government has to wait a little longer to start getting direct budget support. Perhaps not until the forensic audit on the K577 billion is done.

The statement by the chairperson of the Troika, Jen Marshall, who is Head of Britain’s Department for International Development (DfID) clearly shows that government will have to do a few more things to convince the group against its off-budget support to Malawi. Marshall hailed the sheer scale at which off-budget support delivers national priorities such as towards procuring essential drugs, HIV and Aid treatment, construction of schools and clinics, child care centres, social assistance and support to small and medium businesses.

She also minced no words in stating that all Malawi’s DPs share the commitment to principles of good donorship as referred in the Paris Declaration on Aid Effectiveness, Accra Agenda for Action and Bussan agreement.

But when all is said and done, the message from the Troika is that government needs to do more in the implementation of the reforms which are critical for donor confidence in national systems.

  • ‘On the Fast Lane’ is a column on Nyasa Times
  • About the author: He is a PhD candidate in Business Administration. He also holds qualifications in journalism education and agriculture.
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Kaziulika Chimugonda
Guest
The problem we have in Malawi is: we are divided mind. How can we attract investors when some condon cashgate. This mind say, forget about donors. If Malawi was united against cashagte, donors and investors would see seriousness in us. We have rooted donor funds and we have the chick to say: to hell with donors. Does it make sense? What this mind forgets is that: with this mindset (of stealing from public coffers) we cannot develop not matters how many mines, oilwells etc. The solution is: let us get rid of fraud first then go forward as a nation.
Mhesha
Guest
Stop thinking of donors please. All is not well in Europe. These pipo are also facing financial problems. They have stopped budgetary aid not only to MW but also Rwanda, TZ, Uganda, Zimbabwe, etc. Their own Eurozone friend Greece is struggling. Another reason is that they no longer have much interest in these countries I have mentioned, not just because of the so called governance issues, no. Think about the worst governance issues taking place in Egypt, but look, right now, Egypt is receiving extremely heavy budgetary support ever seen in the past. Reason being that Egypt draws much of… Read more »
Nkhwatakwata
Guest
No system is 100% full proof, it is even worse when people entrusted to run government are the architects of embezzlement plans. Why is it that Bingu’s first term was a success economically. In the second term he replaced performers like Victor Mbewe and Goodall Gondwe by his homeboys in all strategic positions just to embezzle from government coffers, where there is political will even with weaker systems the leakage can be controlled. As long as appointments are by tribal/political patronage do not expect any improvement because after Dr. Banda all the presidents are accidental and opportunistic, they are there… Read more »
Mbowe Mulambia
Guest

Steve the main problem donors knows who stole money. Unless donors are mad to give money to the same people who looted the money those ministers who are on the list are in believe me donors will give us money

Jastasi
Guest

I realy apreciate Hlane’s writing realy deep but my worry. Is even now as there will be off budget support good but the current crop of politicians and business people are such politically connected that I don’t see this government if DPP solving issues they are the ones preaching a whilst doing b unless something. Is done we will crush

Professor Dr. James Napwiri Phiri
Guest
Professor Dr. James Napwiri Phiri

Steve Nhale, this is a very constructive piece of work!! Keep it up

mbani
Guest

writings are on the wall

Samuel Lwara
Guest
For me, its the type of people that we send these messages to, who are at the helm of our finances. I do not see our Minister of finance familiar with modern financial securities that emerge from good governance policies of the day. We need to energize new generation to take charge of our finances. Our Minister should only assist in overhauling financial systems of the day that are only bent to the benefit of brutal politicians of the day that we all know. Steve you have a point that I appreciate, but I wish you come up with a… Read more »
bongozozo
Guest

Very intuitive article Steve. Government just needs to set priorities right. It has to move from being a mapwevupwevu government to a development conscious one. I strongly believe that with our locally generated revenue, development partners support and hard work we can move out of this mess called poverty. Change of mindset has to start with government and the citizens will surely follow suit. Malawi’s poverty is by choice and government is the main culprit. No apologies for saying this.

Man R
Guest

gvt should try hard to make sure that we sufficiently rely on ourselves to avoid wat has happened to greece- greece is worse than malawi!!

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