Malawi oil contracts under probe

Malawi’s Anti-Corruption Bureau has launched an investigation into whether money irregularly changed hands during the rushed signing of production-sharing agreements on three of Malawi’s petroleum blocks just eight days before the 2014 elections in the country. The probe was requested by a range of Malawian civil society organisations and international NGO Oxfam.

The awarding of six petroleum exploration licences between 2012 and 2014, under the former presidencies of Bingu wa Mutharika and Joyce Banda, was fraught with controversy.

Less than two weeks before the hotly contested poll in May 2014, Banda’s government entered production-sharing agreements with RAK Gas MB 45 – a subsidiary of the United Arab Emirates’ state-owned RAK Gas registered in the secrecy jurisdiction of the Cayman Islands. 

The deal was reached before any proven oil discoveries.

According to the records of the Reserve Bank of Malawi, RAK Gas made an unexplained payment of $235,700 (89-million Malawi kwacha) to the Reserve Bank’s account for the government’s mines department before the exploration licences were handed out.

The unusual wire transfer was picked up and queried by independent consultants LBN Strategies of Cologne, Germany, and Lilongwe-based Resources M&E while examining the Reserve Bank’s accounts as part of a scoping exercise for government.

Last year RAK Gas’s Malawi country manager, Chimwemwe Chikusa, told the Centre for Investigative Journalism Malawi that the payment was for licence fees and the annual ground rent on the oil concession.

Malawi’s non-government pressure group for the extractive industries, the Natural Resources Justice Network, was unconvinced. “What was this money for and how has it been used?” it asked in a press release.

Sources in the Anti-Corruption Bureau, as well as senior members of Banda’s People’s Party, who asked not to be named, also queried a pre-election payment of $5-million by RAK Gas to Banda’s Mudzi Transformation Trust, which built or renovated houses for the poor in Malawi.

Chikusa and Banda’s spokesperson, Andekuche Chantunya, both told the CIJM that the donations were part of the company’s corporate social responsibility programme.

The Malawi government divided Lake Malawi into six segments for oil and gas exploration. The licences for blocks 4 and 5 were held by RAK Gas MB45, a Cayman Island subsidiary of the state oil company of the Ras Al Khaima Emirate in the UAR.

Malawi’s graft-busting body, the ACB, confirmed that it is probing RAK Gas but declined to provide more details.

“We are conducting investigations in relation to payments made by RAK Gas. The bureau will not be drawn to comment more on the issue, as doing so may prejudice the investigation,” said ACB spokesperson Egrita Ndala in an e-mailed response.

A leaked legal opinion from the Attorney General, Kalekeni Kaphale, in 2015, suggested that some of the licences should be revoked. 

This was because three of the concessionaires, RAK Gas, Pacific Oil and Hamra oil, were connected by “a thin corporate veil” apparently intended to circumvent the rule that one company could not hold two contiguous blocks.

In an analysis of the contracts published in February this year, entitled “Malawi’s Troubled Oil Sector: Licences, Contracts and their Implications”, Oxfam objected that “if oil exploration is successful, the agreements could be in place for 30 years covering exploration, extraction, and closure. These agreements give Malawi a raw deal and an incoherent fiscal package”.

Oxfam and its local civil society partners asked President Peter Mutharika not to endorse oil exploration in Lake Malawi, saying there were many grey areas that needed to be cleared up.

“Given the purported irregularities around the initial signing of the contracts, the ongoing ACB investigation, the absence of transparency in the renegotiations being led by the Minister of Agriculture, Irrigation and Water Development, the lack of a clear petroleum policy, an updated Petroleum Act, a completed model contract and comprehensive financial modelling, we are calling on the President not to approve the exploration,” they said.

However, Mutharika has remained defiant. Malawi’s Petroleum (Exploration and Production) Act, passed in 1983, vests all oversight powers in respect of petroleum products in Malawi in the President, although it also empowers the responsible minister to conclude agreements.

In a subsequent comment to Mining in Malawi, Mutharika implied that exploration will go ahead.

“Using the available technology, we will get results similar to those obtained through offshore drilling,” he told the journal.

The amaBhungane Centre for Investigative Journalism provided this story. Like it? Be an amaB supporter and help us do more. Know more? Send us
a tip-off.

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Collins Mtika
Collins Mtika works from Mzuzu, Malawi. COLLINS MTIKA is a Malawian investigative journalist. He is the Malawi Correspondent for RSA based pan African weekly newspaper called the African Independent. Collins Mtika has over 110 followers on Twitter.

Municipality won’t remove former mayor, despite home affairs demands

The department is fighting with a small Free State town, which it accuses of continuing to employ an illegal immigrant

Western Cape Premier Alan Winde tests positive for coronavirus

Alan Winde admits he is in a vulnerable group when it comes to contracting the virus, considering he is 55 years old, and a diabetic

Eskom refers employees suspected of contracts graft for criminal investigations

The struggling power utility has updated Parliament on investigations into contracts where more than R4-billion was lost in overpayments

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday