The project through which Lilongwe Water Board (LWB) seeks to tap water from Lake Malawi in Salima District has taken another twist, with Minister of Finance, Goodall Gondwe, disclosing that its price could now be around $300 million [approximately K220 billion].
The project, initially pegged at $500 million [approximately K365 billion], was awarded to Khato Civils, an engineering company owned by South Africa-based Malawian Simbi Phiri.
Recently, Phiri was quoted in the local media as saying that the government was delaying to sign the contract apparently because it was first seeking approval from the World Bank and the International Monetary Fund (IMF).
On Tuesday, Gondwe reiterated that the government, as the guarantor of the loan for the project, is yet to get approval from the two global financial institutions.
He was responding to concerns raised by Dowa East Member of Parliament (MP), Richard Chimwendo-Banda, who sought answers on why no details about the project are appearing in the Ministry of Agriculture, Irrigation and Water Development 2018/19 budget allocation.
Chimwendo-Banda said: “We want to understand what is happening in the project. Does this project really exist? Whether it is financed by donors, [details about] the project do not appear anywhere in the budget. We have talked about this for a long time now.”
In response, Gondwe claimed that something is happening on the ground, adding that Cabinet has approved the issuance of a sovereign guarantee he would be formally informing Parliament about in due course.
“There will likely be a significant reduction from the initial amount. The $500 million included the possibilities that the project would be taxed at $100 million. It also included another $100 million for replacing old pipes in Lilongwe.
“But government has decided to waive the tax while the World Bank has provided the funds for replacing the pipes that are quite rotten. So the total cost of the project would be less than what we thought before,” Gondwe said.
He further said the progress of the project would still depend on getting approval from the IMF and the World Bank.
According to Gondwe, any commercial borrowing is supposed to be approved by the World Bank or the IMF in the case of Highly Indebted Poor Countries,.
On the other hand, the minister admitted that there is some resistance from development partners and that it would not be easy to convince the two global financial institutions due to that.
He said: “There is a lot of despondency of donors in Lilongwe against the project, so it will not be easy to get it through. There are a number of ifs and buts.”
According to the agreement between LWB and Khato Civils, the latter is supposed to find appropriate resources to borrow, with the government acting as the guarantor.
Various MPs from the opposition benches in Parliament have been accusing the government of paying little attention to the project, warning that, if it is frustrated, the water crisis in Lilongwe may soon get worse.
However, according to Gondwe, it is just a matter of following procedures because the amount of money involved “is substantial”.
In April last year, during the National Anti-Corruption Conference, European Union Ambassador to Malawi, Marchel Gerrmann, cited the procurement of large-scale purchases, including that of the water project, as an example of cases where procedures were not adhered to.
“What messages are being sent if a $500 million contract takes place under restricted tender within a very short timeframe and more so without feasibility studies and environmental impact assessment?” Gerrmann queried at that time.
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