Under the governorship of Dr. Dalitso Kabambe, the Reserve Bank of Malawi (RBM) used fictitious and twisted rules and regulations to authorize and justify payments deemed by the Office of the Auditor General (AG) as suspicious and illegal.
Nyasa Times also understands that using the same distorted legal provisions, the Central Bank issued letters of credit to companies without due diligence, procured contracts against procurement laws and paid FDH Bank huge sums of money.
The AG’s audit forensic audit, released a few days ago, indicates that between January 1, 2019 and June 30, June 2020, RBM – under the stewardship of the Democratic Progressive Party (DPP) presidential hopeful for the 2025 General Elections, irregularly issued letters of credit to Mulli Brothers Limited (MBL) to supply fertilizer to the Government of Malawi.
In their key findings, the auditors state that RBM did not follow necessary risk mitigation procedures in issuing Letters of Credit for supply of fertilizer to the Government of Malawi, a development that left the central bank financially exposed.
To cover up the syndicate, a senior RBM official staged an invitation to MBL through an e-mail dated October 22, 2014, where the company was supposed to be guided MBL on how to access the facility for the 2014/15 Farm Input Subsidy Programme (FISP).
This was despite the fact that RBM directors had overruled the Central Bank’s deputy governor Henry Mathanga’s advice to issue the said letters of credit.
On the other hand, RBM made an upfront payment of 60 percent to a certain company only identified as Mitra, which was also dubiously awarded two contracts of K1 billion and K757 million contrary to RBM policy.
Furthermore, the audit report discloses that K9.7 billion was siphoned in January 2020 through dubious purchase of overpriced materials for the Prisons Department worth US$18 million.
“K2.2 billion went out for building maintenance, rentals, school fees allowances, recall of diplomats, but there are no supporting documents for these transactions. K4.1 billion paid to the Pensions and Gratuity Account without an approved funding instruction from government. FDH Bank is connected to this,” the audit reads in part.
Because of these irregularities, the report says K6.5 billion went to FDH Bank between December 2018 and December 2020, which auditors found suspicious.
There were further K3.9 billion costs payable to FDH Bank, which were not disclosed to the board for approval.
An additional USD$769 million was disproportionally channeled through FDH Bank while K27 billion was paid to top managers who are retiring, who in turn, gave K7 billion to the then governing DPP.
Sadly, K2.8 billion paid to various law firms of which auditors did not trace any supporting documents.
The report says the auditors followed up on several allegations by whistleblowers, including Human Rights Defenders Coalition (HRDC) led by its chairerson Gift Trapence, which alleged abuse of office in the procurement of information and communications technology hardware for a Flexcube upgrade at RBM with Mitra, the supplier allegedly awarded two contracts worth K1 billion and K757 million contrary to RBM policy that restricts award of two big contracts to the same company.
The report also says RBM also ignored several red flags such as Mitra’s requirement that RBM pay 60 percent of the contract sum upon placing orders for the equipment despite RBM’s clear instructions in the bidding document that they would only enter into a contract with a vendor who would receive full payment upon delivery.
The forensic audit also probed how Ministry of Homeland Security was allegedly embroiled in a corruption scandal that saw K9.7 billion siphoned from the Prisons Department through RBM in January 2020 through purchase of overpriced materials worth $18 million from the United Arab Emirates (UAE).
The report indicate that RBM was allegedly stealing huge sums of money using the country’s embassies and a review of transactions between January 2019 and June 2020 to the Ministry of Foreign Affairs noted transactions made for building maintenance, rentals, school fees allowances, recall of diplomats and others amounting to K2.2 billion. However, there is no documentation for the said transactions.
Other suspicious payments found include payment of K4.1 billion to the Pensions and Gratuity Account without an approved funding instruction from government. This, according to the auditors, is connected to payments through FDH Bank plc.
Some of the findings surround RBM’s market interventions between December 2018 and December 2020 with auditors querying a treasury note programme with Afrexim Bank in 2018 and 2019 and K6.5 billion payments made to FDH Bank plc.
The auditors said RBM did not disclose details of a $30 million proposal to the board, including that the key objective was to fulfil International Monetary Fund (IMF) requirements over its reserve levels.
Reads the report in part: “Furthermore, costs payable to the local custodian bank for the securities (FDH Bank) totaling K3.9 billion were also not disclosed to the board for approval nor presented for ratification by the board.
“…According to the Tripartite Agreement and Custodian Agreement, RBM was responsible for and would assess for reasonableness, the fees and costs of FDH bank. However, there was no evidence that RBM assessed FDH Bank’s fees and costs for reasonable and value for money.”
The report also highlights disbursement of $769 million for market interventions which the auditors say was disproportionally chanelled through FDH Bank inconsistent with its size.
According to the report, the auditors also noted that the timing of the transactions coincided with the time when Malawians were awaiting the results of the Presidential Election following the polls on 23rd June 2020.
“Notably, the poll results were declared on 27th June 2020 with a change in government,” reads the report in part.
This has prompted the Fiscal Police to pounce on Kabambe for alleged abuse of office when was he on the driving seat of the Central Bank.
The National Police spokesperson James Kadadzera said the police will give more details later, including the day and time the suspect is expected to appear before the court.
In spite of all the exposed rot, DPP continues accusing the Tonse Alliance administration of persecuting its rank and file using law enforcement agencies.
But the new administration insists it is stamping out on corruption and abuse, a key Tonse Alliance campaign promise.
Kabambe is also embroiled in a legal battle with government over the legality of his demands for terminal benefits from his job estimated at K1 billion.Follow and Subscribe Nyasa TV :