Malawi cash scandal reaches SA

The Malawian authorities are investigating the Malawi Defence Force’s (MDF) payment of a whopping 1.9-billion kwacha (R60-million) to a South African company that allegedly provided nothing in return – and shifted half the money to its bank account in South Africa.

This follows the arrest of the former defence force commander, General Henry Odillo, and his deputy, Lieutenant Colonel Clement Kafuwa, in Lilongwe last month, allegedly for authorising the payment.

The arrests are part of an intensifying crackdown by President Peter Mutharika’s government in connection with the Cashgate scandal, apparently in a bid to win back the confidence of donors, who have suspended aid to Malawi.

At least $30-million was looted from state coffers during Cashgate, mainly in 2013.

Odillo is alleged to have signed cheques in favour of the South African-registered Thuso Group for the supply of 5000 rounds of blank 88mm ammunition in 2013. 

Ammo paid for, but not delivered
But it was allegedly never delivered, and more than double the market price was paid for it, according to British-based auditors Baker Tilley.

A forensic investigation also found that Odillo asked the former auditor general, David Kandoje, for the “externalisation” of R30-million to Thuso’s Standard Bank account in South Africa.

The deputy director of Malawi’s Anti-Corruption Bureau (ACB), Reyneck Matemba, told amaBhungane last week that Odillo and Kafuwa, who are out on bail, face charges of abuse of office, negligence by public officers in preserving money or other property, and money laundering.

“We arrested him [Odillo] because he was the one who signed all the cheques to the Thuso Group to supply the MDF with military equipment that was not delivered. Both Odillo and Kafuwa have yet to plead because investigations are still under way,” Matemba said.  

A Standard Bank South Africa official, Kate Johns, said the bank was aware of the R30-million deposit into one of its accounts, but would not add anything more. 

“We have had similar queries regarding the said amount of money before. I’m sorry we can’t comment on that,” Johns said.

“Malawi government getting it wrong”
In a phone interview this week, the Thuso director, Alexander Banda, said he was aware that the Malawian authorities were probing his company in connection with the payment, but he would not comment until the issue had been thoroughly investigated.

“What I can tell you is that the amount in question is not in connection with Cashgate. I can’t tell you exactly where it came from, but the Malawi government is getting it wrong on this issue.

“I would ask you to wait until the ACB conclude their investigations and thereafter we can meet and I will tell you details,” he said.

Thuso, based in Sandton, is a diverse group offering construction, exhibition, logistical and event services. On its website, it does not describe itself as a defence contractor.

The Baker Tilley report names a former MDF lieutenant colonel, Nelson Kauwa, as a co-director of Thuso.

According to the auditors’ second audit report on Cashgate, Thuso initially received MK920-million (R28-million) for the blank ammunition.

“No evidence to show the 5 000 rounds were delivered could be provided by the MDF and a price comparison exercise found the unit prices to be inflated by at least 2.33 times the average market price of the goods,” the report says.

Senior MDF officials signed off cheques
It adds that, during auditing fieldwork at the defence force, “paperwork showed a further payment of ZAR30-million (equivalent to MK1 001 028 000) was made on August 28 2013 to Thuso’s Standard Bank account in South Africa and, similarly, no evidence of the supply or delivery of the goods for this payment could be provided by the MDF. 

The two cheques totalling MK920-million were both signed by General Henry Odillo, Richard Chidzungu and Harry Chawinga, while the request for the externalisation of the R30-million, sent on August 21 2013, was signed by Odillo and Chawinga,” the report says.

AmaBhungane has not been able to establish the full identity of Chidzungu and Chawinga.

The files provided by the MDF, the report says, contained no legal correspondence that indicated that advice had been sought to assist in reclaiming the amounts paid to Thuso, or that any action had been taken to prohibit the group acting as a supplier to the Malawi government in the future.

It also said, after the disbursement of the MK920-million, MK480-million was paid to a company called IPS, owned by one of the principal Cashgate suspects, Oswald Lutepo.

“Similarly, no evidence of goods, services or works being supplied in return for this payment could be provided and the majority of the funds were withdrawn in cash once deposited into IPS,” the report says.

Lutepo, a former senior official of former president Joyce Banda’s People’s Party, has been charged with theft and money laundering.

Several charged and arrested
Last week, the ACB also arrested Ganizani Sionga Kuchombo in relation to the defence force payments to the Thuso Group.

ACB spokesperson Egrita Ndala said Kuchombo, a vice-consul at the Malawian consulate in Johannesburg, was arrested after the bureau established that part of the money paid to the Thuso Group was transferred to his bank accounts in Malawi and South Africa.

Kuchombo was charged last Friday with one count of money laundering and is currently out on bail. AmaBhungane tried to contact him at the consulate this week, but was told he was not in the office.

Thuso’s Banda said he was surprised that the agency had linked Kuchombo’s arrest to his company.

The Cashgate scandal, involving the fraudulent payment of billions of kwacha in government funds to private contractors for goods and services that were never delivered, came to light in September 2013. 

It followed an assassination attempt on Malawi’s then budget director, Paul Mphwiyo, who said he believed he had been targeted because he planned to reveal the names of government officials who had put him under pressure to authorise irregular payments.

Joyce Banda’s justice minister, Ralph Kasambara, has been charged with the attempted murder of Mphwiyo. But Mphwiyo and his wife, Thandi, were later charged with theft and money laundering linked to Cashgate.

Donors suspend aid after Cashgate scandal
A month after the scandal broke, most of Malawi’s donors announced that they were suspending aid until the investigation into the scandal was completed. 

Donors, including the European Union, contribute 40% of the national budget of Malawi, one of the world’s poorest countries.

More than 70 people, including civil servants, politicians and business owners, have now been arrested and charged in connection with the scandal. 

More than 30 private bank accounts have been frozen and properties suspected of being acquired with stolen money seized.

Five people are serving jail sentences in connection with Cashgate, including the former principal secretary in the ministry of tourism, Treza Namathanga Senzani, and Victor Sithole, former accounts assistant in the ministry of energy, mining and natural resources.

Senzani who is serving a three-year jail term, pleaded guilty to charges of stealing MK65265750 and money laundering, and Sithole, convicted of stealing more than MK28717000, is serving nine years in jail.

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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.

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