Illovo’s multibillion Kwacha fraud case back in court

The high profile civil case in which Illovo Sugar Malawi (ISM) is being accused defrauding its local shareholders returns to court on Monday and Tuesday.

The High Court in Blantyre

Illovo Sugar is being accused by its minority shareholder Prudential Holdings Ltd (PHL) of presenting doctored financial statements to mask huge payments made to its parent company.

The trial under the Commercial Court in Blantyre was postponed six months ago and is being presided over by Justice John Katsala.

At the time the case was adjourned, Senior Counsel Shabir Latif, representing Illovo, had been grilling Gordon Tembo, a partner of KPMG, whose firm had produced an assessment of the disputed payments on behalf of PHL.

ISM is listed on the Malawi Stock Exchange; and its minority shareholder, PHL, is disputing a litany of payments ISM made to Illovo Sugar South Africa and also to its UK based parent company Associated British Foods (ABF).

PHL filed a lawsuit last year and 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.”

Illovo is Africa’s largest sugar company in Africa, boasting agricultural and manufacturing operations in six southern African states including Malawi.

It employs thousands of people in those countries, “playing a significant economic role,” says Illovo.

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Hlabezulu Ngonoonda
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Hlabezulu Ngonoonda

This court case of Illovo Sugar Malawi (ISM) of being accused defrauding its local shareholders is similar to what the board trustees of Kasinthula Sugarcane Growers, as reported in one the local papers several weeks ago, that they are reaping off local sugarcane growers of their profits. The trustees have never released audited reports of the accounts to the farmers. What they get from the project as “profits” has never improved their lives.

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