CHANGED FORTUNES FOR GOVERNMENT’S FAVOURD CONTRACTOR

BY GREGORY GONDWE

Relations between the Malawi government and a multinational construction company, once seen as its sweetheart have soured, with the government disputing billions of kwacha the firm is demanding for road works.

Portuguese-based Mota-Engil is claiming arrears of K50 billion for works either “completed or substantially complete” and a similar amount in finance charges.

It says some of the arrears date back 13 years.

Nuno Antunes, Mota-Engil Managing Director wrote the Government of Malawi on July 20, 2020, immediately after the Democratic Progressive Party was voted out of power, demanding that Government through its Roads Authority, pays what it owes the company.

“To date the Roads Authority owes Mota-Engil more than Fifty Billion Kwacha in arrears for works that have either been completed or are substantially complete,” writes Antunes. “Some of these debits date back as far back as 2008.”

The letter further stated that from the amounts owed, at the prevailing interest rate, a total amount of not less than K500 million is being added monthly to cover financial charges and that indicatively the accrued financing charges were estimated to be K40 billion due to delayed payments on all completed contracts.

“This means to date a total estimated value of Ninety-Six billion is what is due from all completed contracts,” Antunes says in the letter before providing a table with 22 road projects.

However, a recent physical verification of some of the company’s roadworks, conducted by the National Audit Office, says Mota-Engil pocketed the money for three projects that had either stalled or where there was no indication of progress.

Roads Authority chief executive officer Emmanuel Matapa disputed the company’s figures, saying that they would be “drastically reduced” once reconciliations are completed.

“We are an implementing agent; payment is done by our sister company the Roads Fund. The notes we’ve shared show that the arrears have been reduced. I don’t think the figures are correct,” Matapa said.

Mota-Engil has historically been accused of receiving favours and special treatment from those in power, particularly under former president Bingu wa Mutharika.

The company reportedly built a villa for Mutharika in Portugal and a mausoleum for his wife Ethel at Ndata farm in Thyolo where they were both buried.

In 2018 a leaked official report showed that Mota-Engil had almost 10 times the value of government road-building contracts as its nearest rival.

A report by the Roads Authority indicates that the company currently has government road contracts with a combined value of 142-billion kwacha.

Immediately after the Democratic Progressive Party was voted out of office last year, on July 20, Mota-Engil managing director Nuno Antunes wrote to the government demanding that it pay its accumulated debts to the company.

In a letter which the PIJ Malawi has seen, Antunes said the Roads Authority owed it more than K50-billion and that at least K500 million was being added to the debt each month to cover finance charges.

Accrued charges were estimated to be K40 billion from delayed payments on all contracts.

“This means to date a total estimated value of 96 billion is … due from all completed contracts,” Antunes says, before providing a table of 22 road projects undertaken by the company.

In January this year, the government responded by calling for an audit by the National Audit Office.

In a leaked draft report from the National Audit Office to Secretary to the Treasury, dated 27 January, 2021, which is also in the PIJ’s possession, the auditors argue that some of the claims are for projects that were donor-funded and others lack proper certification.

The report shows that at least K52.9 billion in arrears had accumulated by November last year, of which a total of K48.9 billion was approved. In addition to this amount, the contractor claimed EUR20,713, 205.95 and USD1,268, 381.54 on interest and donor-funded projects.

However, the statement further reads ‘an examination of the statement provided by the contractor against Road Fund Administration project schedules and records revealed that the contractor’s claimed arrears included MK3,993,250,610.61 related to projects which are not supposed to be paid by Government through Ministry of Finance because there are either donor-funded or have disputes or certificates not received by RFA’.

“This therefor follows that on Government projects to be paid through Ministry of Finance the total amount of arrears to be claimed by the contractor should be MK 48.9 billion and EUR 13.6 million,” reads the report signed by Thomas Makiwa, Acting Auditor General.

The verification exercise involved a review of contract agreements, interim payment certificates, payment vouchers and other supporting documents. Interviews were also conducted with officials to obtain clarification and understanding on the calculation of arrears and interest.

Recalculations were also done on amounts pertaining to measured works.

Mota-Engil also claimed £20,7 million and just over $268 000 on donor-funded projects, of which £13.6 million was approved.

The draft report said that a review of contract agreements and other documents revealed that out of K52,9-billion claimed by the contractor on projects funded by government through the Ministry of Finance, the Roads Fund accepted K24,3 billion as valid.

The fund disputed claims to a total of K27,6 billion – or 52 percent.

A highly placed source at the audit office said that Mota-Engil had not provided a number of key documents needed by the Roads Authority to authenticate the accumulated arrears being claimed.

Said the source: “What we have now is draft documentation but the discrepancies uncovered are huge and far-reaching. We are waiting for the contractor to respond to the matters raised.”

The draft certificate also shows that the company’s interim payment certificates were being disputed because they represented K18.8 billion in interest on late payment charged by the contractor a in foreign currency or using different interest rate from what was in the contract agreement.

Another K1.56 billion were disputed because, according according to Road Fund Authority, the works were not satisfactorily performed and completed. A six percent price escalation, totalling K1.64 billion, was also rejected.

The auditors raised questions about a K5.1-billion contract for the Rumphi-Nyika-Chitipa road in northern Malawi, where Mota was claiming K2.3 billion for work performed.

They found that the company had received at least K2 billion, representing 46 percent of contract price, but that the project had stalled.

The company lodged another claim of K27.5 billion for the 75km Njakwa-Livingstonia-Chitimba road, also in the northern region.

However, the audit found that it had received half – about K24 billion – of a total contract amount of K39.8 billion.

However, it said that construction work commenced in November 2016 and should have been completed by July last year.

The engineering firm was also faulted for pocketing K1.6 billion from K2.1 billion it claimed for Nkhotakota-Dwangwa road project, while no works were under way and the contract period, from April 2019 to October 2020, had expired.

The Road Fund said it had also found that as at June last year, payment certificates totalling K6.3 billion had not been received from Mota-Engil.  

The highest claim for a project which had its arrears reduced was the Goliati-Chiperoni road, for which with K287 million was claimed and K151 million accepted and certified.

Some government officials questioned Auditor-General Thomas Makiwa’s certification of certain claims as valid.

Said one official: ” The determination by the AG and the findings in the report seem not to be speaking to each other. The draft certificate for Mota Engil raised a number of grey areas.”

Another government official at Treasury said that government only pays verified amounts.

Another indication that the relationship between Mota-Engil and the company is worsening is the government procurement office’s withdrawal of a K48 billion contract for the design, upgrading and rehabilitation of a railway section between Marka and Bangula in the Nsanje district that had been awarded to the firm.

Mota-Engil was awarded a “no objection” for the railway contract in November last year, erroneously signed by an officer of the Public Procurement and Disposal Authority, Nancy Wana, on January 22 this year, instead of the Auditor-General, as is legally required.

However, in a letter to the secretary of the Ministry of Transport and Public Works, the acting DG, Timothy Kalembo, overturned the decision, saying this had been “necessitated by factors in relation to reviewing of your submission”.

This was the first setback of its kind for the Portuguese construction conglomerate.

Mota-Engil came to Malawi in 1990 to build part of the Lakeshore Road in the northern part of the country. But when Bingu wa Mutharika came to power in 2004, it moved to centre stage.

Besides road construction, the company has been involved in rail construction; hydro electricity plant rehabilitation; a Lake Malawi water transport system, a project for the Lilongwe Water Board; construction of a dry port at Liwonde; and land acquisition for a hotel.

It has made donations to several entities connected to power, including former First Lady Gertrude Mutharika’s organisation, the Beautify Malawi Trust, to which it once donated US$125,000.

In July 2013 Mota-Engil built Mutharika’s pet project, the Nsanje Inland Port, part of the ambitious $6-billion Shire-Zambezi waterway to link Malawi to the Indian Ocean.

The company offered to build it using US$20 million of its own resources, which the government would repay.

There have been claims in the Malawi parliament that the relationship between the company and the last president, Bingu’s brother Peter wa Mutharika, was equally strong.

In an interview, Mota Engil spokesperson Thomas Chafunya declined to comment on all the issues raised. Nuno Antunes, Mota-Engil Managing Director did not respond to an email.