/ 11 September 2014

Malawi government up in arms after Banda’s $144-m deal

Malawi Government Up In Arms After Banda's $144 M Deal
The historical record shows that Malawi’s difficulties under Hastings Banda were evident at the very moment of the country’s founding

South African arms dealer Ivor Ichikowitz’s formerly friendly relationship with the Malawian government has run into stiff headwinds since the election of a new administration under President Peter ­Mutharika.

Last week two government ministers told amaBhungane that a $145-million defence contract signed by former president Joyce Banda and Ichikowitz’s Paramount Group had been partly cancelled and placed under investigation.

But Ichikowitz appears to be fighting back.

This week, after amaBhungane put questions to the company, a joint statement between it and the Malawi government was released, denying that the contract was illegal or had been terminated.

Daniel Jenya, a personal assistant to Finance Minister Goodall Gondwe, said the company had asked the government to endorse what had originally been a Paramount communiqué.

Mutharika’s Democratic Pro­gressive Party toppled Banda’s People’s Party in disputed elections in May this year.

In a phone interview last week, Gondwe said that the government had cancelled Paramount’s $145-million flagship arms deal with the Malawi Defence Force, calling it “illegal, expensive and unsustainable”.

The office of the director of public procurement, which must approve all procurement activities in Malawi, said that it knew of no contracts between the government and the group.

In an interview Malawi Information Minister Kondwani Nankhumwa appeared to imply that Banda had handed out the deal to supply patrol boats and other military equipment. “Government procedures and legislations do not allow the president to dispose of national assets or award contracts. It was wrong and illegal,” he said.

Nankhumwa, as the government spokesperson, added that the government was reviewing all Paramount’s contracts, including lucrative deals in fuel and agriculture it received last year.

The joint statement takes a notably different tack. Denying that the defence contract had been terminated, it said Paramount was “engaged in ongoing constructive dialogue to replace the old contract, in order to meet the government’s requirements”.

It said the contract “was concluded according to Malawian governmental processes and was signed by both the former minister of finance and the former minister of defence”.

“At the time of signing, a legal opinion was secured from the Malawian attorney general confirming both the legality of the agreement and its validity under Malawian law.”

Paramount also downplayed the government investigation, saying it was normal for an incoming administration to review the policies and programmes of its predecessor, including procurement contracts.

“No alleged irregularities have been brought to our attention, nor do we anticipate that there will be any. We support the review … and have written to the president of Malawi offering our full co-operation,” said the group’s director for global marketing, Nico de Klerk.

Gondwe could not be contacted this week for an explanation of the government’s apparent volte-face.

Patrol boats supplied
Last year Paramount supplied seven armed interceptor boats for use in patrolling Lake Malawi amid heightened border tensions with Malawi’s northern neighbour, Tanzania.

It was also commissioned to provide training for soldiers and maintain the boats for five years.

In the same year, the group, through another South African company, Canvas and Tent, allegedly supplied equipment to Malawian peacekeeping troops in the Democratic Republic of Congo.

In his statement last week, De Klerk said Banda’s government had approached the company, but declined to give details.

“It is not appropriate … to comment on the procurement details and procedures followed by a sovereign and democratically elected government,” he said.

Banda reportedly agreed in a supplier credit agreement that Malawi would pay Paramount $5-million quarterly for eight years, meaning the government would eventually have shelled out $160-million.

Contractual obligations
In last week’s interview, Gondwe agreed that the new government remained legally bound to meet its contractual obligations, but it would accept no further arms deliveries and would pay Paramount just $16-million – $31-million for equipment that had been delivered, less the price of a presidential jet Banda sold to the company.

“Paramount has acknowledged our concerns regarding the deal. Malawi will now pay only $16-million because we bartered the jet,” Gondwe said.

Banda allegedly “bartered” the French-made Dassault Falcon 900EX jet, which her predecessor, the late Bingu wa Mutharika, had bought with $22-million of donor money. The jet was sold in 2012 to Bohnox Enterprises Limited, a Paramount subsidiary, for $15-million to settle part of the arms debt.

The sale of the jet allegedly flouted section 172 of the Constitution, which makes it illegal to spend government money not deposited in the consolidated fund of Malawi’s Reserve Bank.

Chairperson of the Paramount Group, Ivor Ichikowitz. The Malawian opposition claimed the company was behind Banda’s election campaign this year. Photo: Craig Nieuwenhuizen/Gallo Images/Foto24

The British Telegraph newspaper revealed last year that the Ichikowitz Family Foundation paid for a campaign by the London-based PR company Bell Pottinger to rebuild Banda’s standing among foreign donors following a corruption scandal.

Ichikowitz’s brother, Paramount executive director Eric Ichikowitz, confirmed to the Telegraph that he had paid Bell Pottinger.

“The family foundation believes that President Banda is a force for good in Malawi and that she is striving to improve the lives of all Malawians,” he said.

“It is keen for her efforts to be duly recognised by the international community and fairly represented in the international media.”

No connection
He added that “there is absolutely no connection between contracts undertaken by Paramount Group and its companies and any charitable work undertaken by the Ichikowitz Family Foundation.”

In the run-up to the elections, Malawi’s opposition parties claimed that Ichikowitz money had served to bolster Banda’s well-resourced campaign.

De Klerk said Paramount’s support for Malawi “is a matter of public record. It became one of the issues of political debate in Malawi, among Malawian parties, and not with the group itself”.

Paramount also sponsored the United Kingdom-Malawi Trade and Investment forum in London last year. Ivor Ichikowitz was part of the Malawi delegation and a panellist during a session on infrastructure investment.

Through another subsidiary called Trans Africa Capital, the company signed fuel and agricultural contracts with the government, including a lucrative deal to supply fertiliser under the government’s farm input subsidy programme.

Mutharika’s government has overturned Banda’s decision to award South Africa’s Legacy Hotels a contract to run the government-owned, multibillion-kwacha Umodzi Park complex in Lilongwe, comprising the Bingu wa Mutharika Conference Centre, the Presidential Hotel and the Presidential Village.

Aid money for arms
Malawi State House sources also said that Mutharika had denied Ichikowitz an audience on the sidelines of the US-Africa Leaders Summit in Washington in May. Ichikowitz’s main purpose was reportedly to make an impassioned plea to the US government to allow African leaders to use aid money to strengthen security institutions to deal with threats to Africa’s security (See “The road to peace is paved with military interventions”).

“In the normal course of business it is our policy to engage with the head of state in countries in which we have on-going relationships,” said De Klerk. “No formal request was made for any meeting in the US, and as such no request was denied.”

Banda’s spokesperson, Andekuche Chanthunya, said at the time: “As far as we know there is no official investigation. But Mrs Banda is ready to co-operate with the government should there be one.”

Chanthunya said there was no possibility that the defence and other contracts won by Paramount were illegal. The government was merely revising the contracts, and was not scrapping them.

He also dismissed any suggestion that the company was awarded the deals because of its relationship with Banda.

Banda has previously defended the defence contract, arguing that Malawi is vulnerable to many security threats, ranging from transnational organised crime to terrorism.

“Buying of equipment for the army to us is a must and a priority … our army is vulnerable and not well equipped to face anything and protect Malawians,” she told the Telegraph.

The road to peace is paved with military interventions

“African arms-maker to Obama: Give war a chance!” The Daily Beast’s sarcastic headline referred to Ivor Ichikowitz’s presence at the United States-Africa Leaders Summit in May this year to plead for Africa to be sold more advanced weapons. 

The US should provide aid to help African leaders to combat the continent’s insurgents and fanatics, the news website reported the Paramount boss as saying.

 “Human rights groups are not exactly thrilled about the proposal, which just so happens to dovetail rather nicely with Ichikowitz’s business interests,” it added.

 The chairperson of Africa’s largest defence contractor presents a paradox: an unapologetic, media-savvy arms dealer who says his aim is to bring peace and security to a continent already awash in arms.

 He told the Sunday Times he had never broken arms control laws or sold weapons to dictators. “I never went to the army; I was never interested in military issues,” he told the ­digital publisher George Media Network. 

Founded by Ichikowitz in 1994, Paramount manufactures a wide range of armoured vehicles and deals in ­surplus South African military equipment, including fighter aircraft. 

His fortune is based in particular on the sale of surplus South African armoured vehicles to the rest of Africa and the Middle East. 

The business has grown exponentially: last year it was widely reported that he was poised to buy the ailing tech arms manufacturer Advanced Technologies and Engineering, making him Africa’s “most influential supplier of combat and peacekeeping hardware”. 

Founded in 1994, Paramount has footprints in many African states, including Gabon, Mali, Zambia and Guinea-Conakry. In March this year, it opened an office in Ghana as an apparent springboard for expansion into West African countries such as Côte d’Ivoire and Togo. 

Ichikowitz maintains a philanthropic organisation called the Ichikowitz Family Foundation, launched in 2010 and described as “concerned with improving education, the environment and human rights in Southern Africa”. 

Britain’s Telegraph newspaper revealed that the foundation paid for former Malawi president Joyce Banda’s PR campaign to win back foreign donors following a corruption scandal.

 Central to Ichikowitz’s business method is forging links with political power brokers. In 2009, he laid out his personal jet to ferry Nelson Mandela to a Jacob Zuma election rally. 

The luxuriously converted Boeing 727 was also used to convey Zuma to Lebanon and Kazakhstan for alleged ANC fundraising and business meetings, and to the UN General Assembly in New York. 

 Ichikowitz said that he went on the Kazakhstan flight to test upgrades to the jet and did not attend the meetings. In October 2012, Deputy President Kgalema Motlanthe used the Boeing to travel to Italy with his companion Gugu Mtshali. 

Well connected
Ichikowitz’s business partners have included Moeletsi Mbeki, the brother of former president Thabo Mbeki, and former ANC treasurer Mathews Phosa.

The latter accompanied him on a trip to meet the president of Nigeria’s People’s Democratic Party, Alhaji Bamanga Tukur, with an eye to strengthening trade relations. 

He was the business associate of the empowerment tycoon Robert Gumede, pledging R6-million at a Zuma fundraiser Gumede organised in October 2008.

He told the Sunday Times there was nothing untoward about being “a vocal supporter” and funder of the ANC. 

A defence department-commissioned inquiry in 2005 accused Ichikowitz’s companies, the Virlean Initiative and Mechanology Design Bureau, of the unauthorised stripping of parts from army vehicles and of selling arms to countries, including Angola, in breach of arms control regulations. 

 The report, by First Consulting, recommended that Paramount be investigated. No action was taken, and a parallel Armscor investigation apparently cleared all parties.

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.