Illovo Malawi in court over multibillion Kwacha fraud against shareholders
High Court’s Commercial Division in Blantyre resumed trial in which the country’s sole sugar producer, Illovo Sugar Malawi is being accused defrauding its local shareholders by presenting doctored financial statements to mask huge payments made to its parent company.
Illovo Sugar Malawi is in court after one of its shareholders Prudential Holdings Ltd (PHL) filed a lawsuit last year, accusing it of a series of fraud related charges including making undisclosed payments to Illovo South Africa and its UK-based parent company, Associated British Foods.
In the lawsuit, PHL chairperson, Ramesh Savjani is demanding the sugar producer and its 11 directors to disclose commission payments of K355 million ($500,000) and K603 million ($900,000) and the details of transactions and procurement services that attracted a K300 million ($450,000) with Illovo South Africa.
Other transactions under the spotlight include K122 million interest being payable to Illovo South Africa; selling of sugar worth K10.878 billion and K10.846 billion to Illovo England; management fees of K2.063 billion payable to Illovo South Africa; procurement charges of K9.854 billion and K9.854 billion payable to Illovo South Africa.
PHL is also questioning why a five year management fees agreement signed in 2011 which was to see the local company paying $30,000 every month to Illovo South Africa was revised to $4.5 million per year.
Illovo Sugar Malawi is further being accused of failing to disclose excessive borrowing which resulted in a bank overdraft which increased by K1.2 billion. PHL claims the borrowings had no ” commercial rationale and were without any adequate or proper consideration by the board.”
The Trial
On Tuesday, Savjani was called to the witness box to testify against Illovo Sugar, and he accused the company of making unjust and reasonably unfair revision of from $30,000 a month to $4.5 million which was not considered and approved by Illovo Sugar Malawi board but by the management team of Illovo South Africa.
Grilled by PHL lawyer, Davis Njobvu supported by a legal team from Savjani and Company, Savjani argued that the value of the agreement was quoted in US dollars- a deliberate ploy to defraud local shareholders more considering that the country’s inflation rate has a major impact on exchange rates.
“The fee fixed in US dollar is different to a fee in Kwacha terms. Inflation rates are different. Its zero in USD,” he argued.
Savjani said there was no board resolution or minutes endorsing the management fees’ revision, made in 2013, adding that it was Illovo South Africa who was the beneficiaries.
He revealed that said it was executives of Illovo South Africa who were members of the audit committee for Illovo Sugar Malawi who made decisions, saying it was “not normal for that to happen.”
Savjani argued that Illovo South Africa managing director was not supposed to chair an audit committee of the local company, but there was need to elect an independent chair among Illovo’s non- executive directors to chair the audit committee.
He highlighted that the function of an audit committee is to act as an independent check on management regarding the conduct of financial affairs of Illovo Sugar Malawi.
He said Illovo Sugar Malawi was “being treated as a branch of Illovo South Africa.”
Despite Malawi Revenue Authority (MRA) not approving the revised management fees, Savjani revealed, Illovo South Africa continued to receive revised management fees of K2 billion and procurement fees if K10 billion in 2013 and 2015.
“These were pretty significant proportion of turnover of the company.”
The case continues on Thursday before Justice John Katsala with Illovo Sugar Malawi senior legal counsel Shabir Latif is expected to start parading witnesses.
Latif said the defence will parade 13 witnesses .
Illovo Sugar Malawi which is listed on the Malawi Stock Exchange recently hiked sugar prices after just months after the country experienced a worse sugar scarcity since 2011/12 due to the company’s failure to produce enough to meet the demand on the market.
The company keeps on monopolizing the sugar market a situation which consumer watchdogs, economists and investors have described as not health.
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Malawi is rich in resources koma many Malawians will remain poor. We are not good at negotiating with these multinational companies. Imagine tax holidays up to 10 yrs koma local companies are burgeoned with heavy taxes and more paper work. Look at these shareholders of Illovo, mostly ndi amwenye, azungu plus few or no fully indigenous Malawians. Let’s work on our negotiations komanso zomafuna ma commissions from these evil multinational companies zithe.
We are a rich nation with best resources koma poor people in thinking omaganiza zalero not in the future. Rip us more Inu a Illovo
This is the reality of the fine print of multi national company agreements. We don’t scrutinise. Authorities should look deeper into all these companies which are owned by multinationals
We need to put a blame on ourself ,,,because we act as if we are better off pazilizonse pomwe sitikuziwa kuti tikulakwisa,,,now see where we are heading too,,, where is that malawi yemwe anzungu ankamsilira ,,,nkumachita kuzaza muma hotels anthu ,,,where is chilungamo nanga y mukulolera kuti osauka azisaukirabe ,,,zimandikhudza nkumamva boma lakweza mitengo ya katundu pomwe ndalama mukuitsitsa nokha value mulungu akukantheni musanafike ndikomwe kumwamba
Exploitation at best! The british, the colonialist aided by his apathaid master from RSA is exploiting Malawi. The MRA and the shareholders have been sleeping. Malawi contributes more than 40% of all Illovo profits (Malawi, Zambia, Tanzania, Mozambique, Swaziland and South Africa). Zambia that produces more than 400000 tons of sugar contributes no more than 20% of the profits versus more than 40% from 300000 tons of sugar. Make your own conclusions!! Malawi sleeping all the time. Compare this monster with National Bank in investment in the country. Compare the offices of NB and Illovo offices in Limbe. Illovo will… Read more »
I totally agree with you bwana. This company (illovo) makes me sick.. It makes a lot of money that does not even stay here. They even underpay comparing to the input workers put in.. SHAME!
They are professional thieves. The MRA has been sleeping and the shareholders have slept for too long as well. Malawi contributes not less than 40% of Illovo profits from 300000 tonnes of sugar and zambia contributes about 20% from about 400000 tones of sugar. Make your own conclusions on how Malawi has neen sleeping! Shame that after more than 50 yrs of independence, the colonial master is here exploiting us again aided by the apathaid masters from south africa. A pity
Psychologists shld assist in changing mind set of every Malawian coz this country is full of thieves and yet it’s known as a God fearing nation ku sewera naye Mulungu.
The price of sugar in Malawi is the most highest expensive in the world.
Why the hell government is shelling them open the importation of sugar and see the price going down to half the value of ilovo and will benefit
12 million Malawians and regarding the taxes ilovo pays to government it clearly shows how much they have stole from Malawi so even if they close down the local companies will run it let them pack n go
if the big big bulls
are fighting like this
what will happen to
usipa (bonya) .??
those at the national registration
buerro ??
and below ???
Kwakhora ada!
KWAKHORA ADA