Malawi government paid 90 percent of a renegotiated controversial $145-million defence deal signed in 2013 with South African-based arms company the Paramount Group, Treasury spokesman Alfred Kutengule has confirmed.
The deal was signed during the administration of former president Joyce Banda but the Peter Mutharika administration had renegotiated it, saying the contract was “too expensive” and not subjected to “proper analysis”.
Finance Minister Goodall Gondwe said after talks with Paramount, a 2013 credit agreement covering the supply of seven interceptor boats to patrol Lake Malawi was scrapped and replaced by a supply agreement worth the far lower amount of $17-million.
The new agreement covered only goods under manufacture at the time of cancellation and “their accompanying services”, Gondwe said.
“The government has paid almost 90 percent of the renegotiated amount of $17 million,” Kutengule said.
It has not been established how many of the 8.5m patrol boats were ultimately supplied, as Treasury spokesman said Malawi Defence Force is better placed to comment on the matters.
But the army and Paramount would not disclose this.
Former president Banda defended the 2013 deal by saying the boats were needed because of a long-running border dispute with neighbouring Tanzania, which was rekindled in 2012 by Malawian plan to explore the lake for oil.
However, the deal was also criticised as a misdirection of scarce resources in one of the world’s poorest countries.
Questions were also asked about the relationship between Banda and Paramount, said to be Africa’s largest private defence contractor.
In 2012 the company purchased the presidential jet for $15-million.
Gondwe however charged that the contract was illegal and “bypassed” the finance ministry. He also said the deal damaged Malawi’s credit line to the International Monetary Fund.
Paramount’s director of global marketing, Nico de Klerk, said the group could not comment on the details of the contract due to confidentiality agreements.
De Klerk referred to a joint government-Paramount statement in September 2014 that described as untrue reports that the original deal was illegal and had been terminated.
At the government’s request, the company “was engaged in constructive dialogue to replace the old contract in order to meet the government’s needs”, the statement said.
It said the original deal “was concluded according to Malawian government processes and signed by the former minister of financeand former minister of defence”, while Malawi’s attorney-general had confirmed its legality.
According to its website, the Paramount subsidiary that supplied the boats, Nautic Africa, has an office at Monkey Bay, in Mangochi, on the southern shores of Lake Malawi.
Its address is given as “Malawi Defence Force – Marine Unit”.
De Klerk said as part of the sale of the interceptor boats Nautic was contracted to provide training for the operation of the vessels and their service and maintenance.
However, this had been concluded and the company no longer operated in Malawi.
University of Malawi economist Ben Kalua said Malawi was not at war at the time the contract was signed and remained on peaceful terms with its neighbours.
“We are not an economy that needs such contracts,” he said. “We have other priorities: we are in an economic mess and couldn’t repay this loan at the expense of the education and health systems.”
However, Banda’s spokesperson, Andekuche Chanthunya, is on record insisting that Malawi was in danger at the time of the deal and needed to bolster its security.
Banda’s former ruling party, the People’s Party, does not regret the decision to sign the boats contract, he said.
“We needed the patrol boats on our lake, to keep the country safe. It is routine to have borders checked, even across water. If we just leave the issue we will find our lake gone.”
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