Malawi Housing Corporation (MHC) has just wasted land it could have meaningfully utilised to the benefit of the nation as it fails to get proceeds from a 2012 joint venture with a Chinese company called Henan Guoji Development Co. Limited.
MHC and Guoji formed a joint venture for construction of houses and other facilities with a shareholding structure of 80 percent for the Chinese company and 20 percent for MHC. The venture is under the name MHC Henan Guoji Development Company Limited.
The two sides agreed that 60 percent of the management team would be appointed by Henan Guoji and 40 percent by MHC. They also agreed that MHC would contribute land which would be its equity contribution and the ownership of the land transferred to the name of the MHC Henan Guoji – Development Company Limited (the joint venture).
The two companies further agreed that MHC should facilitate the processing of Work Visas and Residence Permit for Chinese personnel in the joint venture with all expenses for the exercise being
borne by Henan Guoji.
Henan Guoji’s contribution includes construction equipment and building materials; financing all activities of the joint venture; funding for all the legal documentation to establish the joint venture company; providing the overall plan and design scheme of the project in consultation with MHC and professionals in operations among others.
Despite the two parties agreeing to share profits in the ratio of 80 percent to 20 percent in favour of Henan Guoji, MHC is not benefitting from the deal according to inside sources at the statutory corporation.
Some houses are not occupied to this date. The houses are said to be overpriced for the Malawi market.
“This is fourth year and houses have not been occupied. What kind of investment takes that long?” observed an inside source at MHC.
And on May 9 2016, MHC Acting Chief Executive Officer Eunice Napolo wrote the other party demanding K240 million from proceeds, four years down the line.
The letter, with reference number BC/438, goes with the heading: MHC-Henan Guoji Development Company Limited- Review of The Sharing of Proceeds from the Joint Venture.
It is addressed to Ms Tracy Kang.
“The subject above and the meeting of 18th April 2016 at MHC Boardroom, Lilongwe refers. As per the resolution of the meeting find attached valuation report for the land that has been used so far and also for the houses.
“According to the valuation, the land that has been used is valued at MK240,000,000.00 (Two hundred and forty million Kwacha.”
MHC proposes to get four houses (two bedrooms each) and three houses (three bedrooms) as being the equivalent to the value of the land it contributed.
When contacted on the matter, Napolo said the issue was confidential.
“Where did you get that information? The issue at hand is confidential as there
are two parties involved; therefore MHC at this point is not in a position to divulge any information concerning the joint venture,” she said.
She added: “In terms of profits, MHC contribution to the joint venture has yielded positive results to date knowing that land most often appreciates in value over time.”
According to the agreement document which we have seen, the board of directors consists of seven people, four of which are appointed by Henan Guoji and three by Malawi Housing Corporation.
The two parties also agreed that MHC should contribute office space and transportation during the preliminary stages of the project and find accommodation for Chinese personnel but expenses for the accommodation to be met by Henan Guoji.
They also agreed that MHC should approach the Government and lobby for construction of no fewer than 1000 units for the first year and land reserve accommodating no fewer than 200 hectors anywhere in Malawi.
Duties of the joint venture included planning and surveying or demarcating into plots the land earmarked for this project; ensuring that the plans include creation of complete communities with facilities such as hospitals, schools and shopping malls; designing houses and other buildings constructed by the joint venture; marketing and selling the houses and other products of the joint venture; constructing demonstration houses; establishing factories to manufacture building materials such as tiles and others.
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