Salima Sugar Company challenges HRDC to provide evidence on tax evasion, corruption allegations

Salima Sugar Company Limited (SSCL) has challenged the Human Rights Defenders Coalition (HRDC) to provide evidence on the allegations the coalition has reported to the Minister of Trade, Sosten Gwenge, and law enforcement agencies.

Last week, HRDC – a self-styled whistle-blower on corruption and bribery in the public service – alleged that the company is involved in a number of malpractices, including tax evasion, failure to account for the proceeds of the company and failure honour its obligation to remit 12 million shares to the Malawi government.

The company is also being accused of keeping a tight lid on its financial statements while, at the same, not remitting dividends to the government.

“It is alleged that the Malawi Government holds 40% shareholding in SSCL and on the strength of this shareholding; Malawi Government guaranteed a loan of US$18 million from EDF and another loan worth US$6 million from CDH Bank. These transactions were done during the time of DPP Government,” says the letter HRDC leadership wrote to the Minister of Trade Gwengwe.

The letter, which is dated 19th January 2021 and signed by the coalition’s chairperson, Gift Trapence, his national coordinator, Luke Tembo, and regional chaipersons, was copied to the Director General of the Anti-Corruption Bureau (ACB) and the Commissioner General of the Malawi Revenue Authority (MRA).

Trapence and his fellow human rights defenders further allege that while SSCL is licenced to produce brown sugar only, the company illegally imports white sugar from Tanzania, which is then repackaged for sale.

‘It is also alleged that the company sends millions of dollars to India on the pretext of procuring materials. It is also alleged that such raw materials are also procured using inflated prices,” reads the letter in part.

On tax evasion, HRDC alleges that SSCL has not been paying tax for the past five years. This, according to the coalition, has allegedly been done with the help of some MRA officers during the DPP regime.

The coalition further alleges that there is favouritism and corruption in the way the company buys sugarcane from the farmers.

“It is alleged that SSCL was supposed to be buying sugarcane from  local farmers in Salima. However, it is alleged that SSCL has been buying sugarcane from politicians and senior public officers       who are decision-makers in matters affecting SSCL. It is alleged that because of this, the decision-makers do not act on SSCL’s malfeasance. It is alleged that poor farmers were removed from the SSCL land and have never been compensated,” says HRDC.

The coalition requested ACB, Financial Intelligence Authority (FIA), MRA, Ministry of Trade and Ministry of Homeland Security to investigate these allegations and inform the nation on the status of this case.

But in his response to Nyasa Times questionnaire, SCCL Company Secretary, Dr. Charles Thupi, said it is not true that the company obtained an US$18 million loan from EDF and the $6 million loan from CDH.

Thupi clarified that the loan was actually obtained by the Green Belt Authority and was guaranteed by the Malawi Government in order for Salima Sugar to develop irrigable land for the medium scale farmers and small scale farmers.

“SSCL is an implementing agency and so far 1400 hectares out of 2000 hectares have been developed. The land developed will according to the agreement, be given back to the farmers after eight years,” he explained.

On failure to produce financial statements, Thupi said their books are audited by Grant Thonton formerly KPMG and are presented to the Board where the government is represented by Secretary to the President and Cabinet, the Secretary to the Treasury, Secretary for Agriculture and CEO Green Belt Authority.

“To say therefore that we don’t submit financial statements when we have a Board is wrong. On the second allegation, you may wish to know that SSCL does not have import licence and therefore has never imported white sugar from any country and repack for sale in Malawi or any other country. Salima Sugar produces brown sugar and does not produce white sugar. The brown sugar produced is sold through distributors. HRDC should verify with their source and bring evidence,” challenged Thupi.

On tax evasion, the Company Secretary disclosed that SSCL, like any other investor, has a tax holiday on imports for machinery for sugar production and irrigation machinery.

But Thupi emphasized that the company has been compliant on all taxes, which including pay as you earn, withholding tax and other taxes not covered in the tax holiday.

“MRA normally checks our tax compliance in accordance with our taxation laws. On buying of sugarcane from farmers, SSCL buys sugarcane from medium and small scale farmers since its inception through their various associations mainly from within Salima and Nkhotakota. In 2020, due to late production as a result of Covid-19, we bought less cane (12, 000) metric tonnes from the out-growers and it was based on what we agreed with the government and the farmers. In 2019, we bought 35, 000 metric tonnes from out-growers. Our buying price is competitive and the best on the market,” said Thupi.

SSCL employs over 4, 000 labourers annually and has 200 permanent employees, according to Thupi.

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