Malawi govt unfairly terminated Fisd gravity water schemes rehabilitation contract:  Cost tax payers millions

Malawi government, through the Ministry of Agriculture, unfairly terminated a contract for FISD Company Limited to rehabilitate and expand three gravity fed water schemes in Ntcheu District.

The contract number is 021/SRWIHL/W/2017/015a-LOT 1 and was awarded to FISD under a project titled Sustainable Rural Water Infrastructure for Improved Health and Rural Livelihoods” which was being financed by the African Development Bank (ADB).

Valued at MK2.4 billion, the contract commenced on December 12, 2017 and was supposed to be completed on December 12, 2018.

Nyasa Times understands that towards the contract’s completion, FISD–through the project consultant EMD–requested for extension as the government wanted FISD to do some additional works that were not part of the initial contract.

Those additional works included construction of water points and associated connection pipelines from water points to main lines.

However, according to the copy of the contract which Nyasa Times has seen, FISD was initially supposed to just supply the pipelines and associated water points materials.

Actually, the Water User Association (WUA) was supposed to do the additional construction works as part of their community contribution.

Since the works were implemented during the campaign period of the 2019 parliamentary and presidential elections, FISD was instructed to do the works that had been assigned to WUA in order to fast tract the project.

And as FISD neared completion of the additional works, the company then requested for an extension of the contract period–which government refused–citing “failure” by FISD to complete the works within the agreed contract period and defects on implemented works.

In the initial contract, FISD was supposed to construct seven intakes, three screening tanks, three Slow Sand Filters, rehabilitate 14 old tanks, construct eight new clear water tanks.

Nyasa Times is reliably informed that there are no works under the contract that FISD failed to implement within the contract period.

Actually, FISD went further to construct 473 new water points across the three gravity fed schemes which were not part of the initial contract agreement.

FISD, therefore, contended that the termination of the contract at a stage that the contractor had duly finished its initial work and almost completed additional works, was unfair.

Due to the unfair government decision over the FISD contract, the two parties agreed to go for arbitration.

“The whole process of contract termination which could be seen as the notice of intention for termination and letter of termination, was very vague and did not give the particular reason why the contract was to be terminated.

“The notice of the intention for termination was also irregular and premature in so far as it was issued on the very same date the contract renewal was refused and before the parties had a joint appreciation of the works on the ground and there was a clear indication of a malafide intent on the part of government.

“On the same day of contract termination, even before evaluation of works, the Government of Malawi wrote the bank to evoke performance guarantee. Before the contract was terminated and even after it was terminated, FISD made considerable efforts to meet government but all efforts proved futile. This forced FISD to proceed to arbitration,” read part of FISD arbitration documents.

And on February 17, 2020, an Abitrator was agreed upon–who reportedly undertook matters mischievously without hearing out FISD, much to the disappointment of the company.

This prompted FISD to seek the intervention of a High Court and later another arbitrator was appointed to look at the matter in line with provisions of the contract.

The money Malawi Government was supposed to pay FISD over breach of contract, following court’s determination, was MK912 million–after deductions of advances already given to the company.

In an affidavit dated August 4, 2020, Secretary to the Treasury, Chauncy Simwaka, said government would only effect payment after engaging the office of the Attorney General (AG).

And court records show that on 13 August, 2020–nine days after Simwaka’s affidavit–Treasury paid FISD MK627 million.

This payment was made four months after the court’s determination.

Meanwhile, on Monday, November 2, 2020–Secretary and Legal Advisor for FISD Company Limited, Gift Nankhuni, confirmed that the company received the part payment from government.

However, Nankhuni said FISD will file for contempt of court since government has not yet paid the balance.

Nankhuni is quoted by the local press, as saying, “Our lawyer will go ahead with the contempt of court proceedings until the balance is paid. He will also go ahead to assess the interest and legal costs before the assistant registrar”.

FISD Company Limited is a Malawian company which started in 2005 by Four Bunda College Of Agriculture Graduates, who made a decision then of not seeking employment as opposed to self-employment. The company now has over 300 permanent staff.

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