Govt awarded contracts to Mulli linked ‘briefcase’ firms

  • DPP Govt. offered Mulli Brothers a blank cheque
By Clement Chinoko

Government granted lucrative fertiliser contracts to ‘briefcase’ companies connected to Mulli Brothers Limited (MLB) and approved their access to Reserve Bank of Malawi (RBM) financing facility through which they earned multi-billion Kwacha credit covers which they have defaulted, PIJ has established. 

The questionable deals have slid government towards a potential loss of millions as the firms did not tender any sureties to aid in the financial recoveries in case of defaults.

The companies are Webb Commercials, FF Trading and Rock ba Rock Investments. They were listed among suppliers of the 2019/20 Farm Input Subsidy Programme, a former ruling Democratic Progressive Party (DPP) food security flagship programme under the Ministry of Agriculture.     

The three and Mulli Brothers Limited which in total got K5.3 billion  are currently being sued by the RBM for failure to repay around K3 billion by December 2020, as per the agreement.  Court records show that the four companies were accessing the funds through Dual Tranche Strategic Structured Commodity and Trade Finance Facility.

The agreement was that RBM was sourcing forex and paying foreign-based fertiliser manufacturers on behalf of the local firms in the hope that they will refund later. 

PIJ through its investigations traced the companies’ ownerships and lines of operation and discovered that they do not have independent physical addresses and tangible assets.

Records at the Registrar General Office show that FF Trading belongs to a DPP former parliamentarian and MLB co-owner Felton Mulli, Dalitso Mulli and Facton Kampake, listed on LinkedIn, a social media platform for professionals as an accountant for Mulli Brothers Limited. 

FF Trading was registered in February, 2008 with a K500 000 capital. RBM credited it K600 million and it has repaid K374 million. 

PIJ further established that Web Commercials directors include Mulli Brothers managing director Leston Mulli’s right hand man Joseph Khupe, Chance Gondwe and Caroline Mkona. The company was awarded a K1.2 billion credit cover. It has paid back K900 million.

Rock ba Rock director is listed as Leonard Kandoje got K1.4 billion credit cover and it has repaid K479.7 million. 

Registration records for Web Commercials and Rock ba Rock could not be traced at the Registrar General’s office but a list of Ministry of Agriculture successful fertiliser supplying bidders confirmed their directorships. 

Interestingly, both Rock ba Rock and Web Commercials contact person, according to the documents secured from the Ministry of Agriculture, is Gilton Chakhaza, Mulli Brothers Limited finance director. 

Court records indicate that Rock ba Rock is based in Zomba, Web Commercials in Limbe, Blantyre and FF in Migowi, Phalombe. A search though did not establish their physical locations.

PIJ asked Web Commercials director Khupe where they operate from and he responded: “If you want an interview just send a questionnaire.”

When told him that PIJ wanted to drop the questionnaire at the office and that he should give a location, he said:” just tell me when it is ready, I will collect it.”  

PIJ further inquiry, found that Web Commercials uses structures of Mulli Brothers Limited in Chigumula, Blantyre. 

When PIJ went to MBL premises disguising as a client wanting to do business with Web Commercials, PIJ discovered the two companies operate as one. 

In 2012, RBM entered into the K200 billion Dual Tranche Strategic Structured Commodity and Trade Finance Facility agreement with the Eastern and Southern Africa Trade and Development Bank (PTA Bank) in which it would be borrowing funds to cover up for importation of petroleum products and  fertiliser. In turn the importers would be paying RBM later.

In the deal, government would be a guarantor as it committed to repay any shortfalls in case of defaults.

“The Ministry of Finance represented herein by the secretary of the Treasury, herein undertakes that it shall make available to the borrower (RBM) any shortfalls of amounts of United States Dollars or equivalent in convertible currency due and repayable/payable to PTA bank on due dates,” reads a letter of undertaking by former secretary to the treasury Randson Mwadiwa to the PTA Bank. It is dated November 5, 2012.

Ministry of Finance refused to respond to PIJ questions pertaining to measures government put in place to control abuse of the facility.

‘Firms identification beyond RBM’

The RBM, on its part, indicated that the role of scrutinising the facility’s beneficiaries did not fall within its jurisdiction.

In a response to a questionnaire, the central bank’s director of communication Onelie Nkuna said: “Government working with the Smallholder Farmers Fertilizer Revolving Fund of Malawi (SFFRFM) would identify suppliers under the FISP programme upon which the Bank would provide Letters of Credit for importation of fertiliser under the TDB Facility.”

Nkuna further explained that through this arrangement, “the bank opened a number of Letter of Credits (LCs) for various companies. However, Mulli Brothers, FF Trading, Rock-Ba-Rock, Web Commercials and JF Trading did not settle their accounts, as was required. In trying to get the beneficiaries of the LCs to pay, the Bank commenced legal action against them in court.”

Nkuna said she would not comment further as the issue is in court: “The Bank does not wish to make any additional comments to allow the due process to take place.”

MLB managing director Leston Mulli in a telephone interview could neither confirm nor deny that his company is connected to FF Trading, Rock Ba Rock and Web Commercials.

“Did you investigate and found out that I am a shareholder of those companies?” he asked. “Ownership is being a shareholder, so did you establish that I own all those companies?”

But PIJ put it to him that some directors of the companies are either his relations or associates, Mulli responded: “I cannot comment further because the issue is in court. Let us wait and see what happens in the courts.”

Economic analyst Milwad Tobias said the Trade Finance Facility is crucial to the country but suspected that it was messed up by political interference as some people close to administration cut corners to benefit.

“If you look at the government systems, they are solid enough to deliver.  However, when politics interferes, even if the facility’s beneficiaries surrendered surety, we would have seen the same scenario where some people benefited questionably and defaulted repayment.

“We can’t really comment much on the Mulli issue because it is in courts. But when you ask, do we have the proper systems and instruments in government? The answer is yes. What we are lacking are ethics,” he said.

Mulli Enjoying blank Government cheque

Leston has been a known DPP sympathiser and close ally of former president the late Bingu wa Mutharika and later transferred this cronyism to Bingu’s younger brother Peter who became President in 2014. Mulli kept on using this relationship to benefit from Government purse as he pleased.

In 2015, Mulli Brothers got a loan from the government owned Malawi Savings Bank before the bank was sold to FDH Bank. Government set up a debt collection company to collect toxic loans following the sale of the bank.

However, before the 2020 presidential elections, the DPP government bypassed the debt collection company and entered into an agreement with Mulli Brothers allowing the company to repay K5 million every month.

Attorney General Dr Chikosa Silungwe facilitated reviewing the consent order between DPP administration and Mulli Brothers Limited (MBL) Holdings, providing settlement of K5 billion debt over a 50-year period.

Silungwe said the court order that facilitated the arrangement, which he described as “ridiculous”, was under review.

Said Silungwe: “It’s an unreasonable agreement. It means that it will take Mulli Brothers 50 years to pay back the money. It is a ridiculous order.”

Former chief secretary to the government Mr Lloyd Muhara and then secretary to the Treasury Cliff Chiunda signed on behalf of the Malawi Government while MBL Holdings Limited was represented by its lawyers.

MSB Debt Collection Company board chairperson Chadwick Mphande also said his company took up the matter following the change of government.

 “We assigned our lawyer Mr. Alinane Kauka to take action when we realised Mulli would not pay back the money. We threatened to put his company into liquidation.”

Mphande explained that Mulli then went and spoke with the then Chief Secretary Muhara and agreed that Mulli should pay the debt in instalments.

When new Government came to power Mphande briefed the Minister of Finance Mlusu and showed him the agreement and that as a debt company we would not accept that.

“We were willing to recommend perhaps five-year period of repayment, but not longer than 10 years,” he said adding that since its formation, the loan recovery company has struggled to recover what have come to be known as MSB “toxic assets”.

Minister of Finance Felix Mlusu revealed before Parliament that Mulli Brothers had so far repaid K75 million. He added that Government cancelled the agreement and will find alternative means of recovering the remaining amount.

Twelve other people also owed government money but only one has so far repaid. Mulli campaigned for Mutharika during the 2020 presidential elections.

Mulli’s back and forth Access to Public Resources

Mulli Brothers Limited had a limitless access to public resources during Bingu wa Mutharika’s rule. When Joyce Banda took over after Bingu’s death he lost his grip until Peter Mutharika won back the presidency for the DPP.

MBL bounced back as one of the dominant players in the Farm Input Subsidy Programme (Fisp)—two years after Banda’s People’s Party (PP) administration directed all departments and ministries to stop doing business with the company.

Peter Mutharika reversed the directive barely three months after assuming power through a memo dated August 22 2014 and addressed to all government institutions in which it stated that the ban against Mulli was no longer in force as it had been the subject of costly litigation on government’s part.

MBL virtually controlled supply of the subsidised farm inputs during late Bingu’s administration. With Peter it returned as one of the major suppliers alongside the parastatal, Agricultural Development and Marketing Corporation (Admarc) and Transglobe Produce Exports Limited as well as Export Trading Company Limited.