Zambia Cooperative Federation (ZCF) Limited has hit the embattled Agricultural Development and Marketing Corporation (Admarc) with a fresh K371 million (about $500 000) penalty on alleged breach of contract.
The claim includes interest charges as well as collection costs.The claimis based on a supply contract the two institutions entered in 2016.
The two parties—Admarc and ZCF—have since commenced arbitration proceedings where ZCF witnesses justified their claim for the interest on the principal amount whereas Admarc explained why it should not pay the same.
Lawyers representing ZCF, Bright Theu and Lusungu Gondwe, yesterday confirmed the commencement of the proceedings, but both declined to divulge further details of the matter, describing it as “private”.
Said Theu: “An arbitration is a private proceeding between the parties and an arbitrator so I am a bit constrained to divulge details as of now until perhaps a decision is made.”
Admarc entered into a maize sale and purchase contract with ZCF in June 2016 for the latter to supply 100 000 metric tonnes (MT) of white maize, but the contract was terminated in April 2017 after only 4 512 MT was supplied.
Delayed payment by the State produce trader prompted ZCF to start legal proceedings and finally payment was made in October 2017 after ZCF lawyers obtained a court order to freeze Admarc bank accounts.
Noting that only the principal was paid, ZCF claimed bank penalty charges, interest and collection costs a development that saw the matter referred to arbitration in line with Clause 13 of the two parties’ contract.
Court documents The Nation has seen show that Treasury authorised the financially-stressed parastatal to pay ZCF on October 17, the same day the State-owned grain marketer had its accounts frozen.
In December 2017, Treasury also gave Admarc K45.2 billion bailout after it had repaid other debts it owed three of the country’s commercial banks.
In April this year, Admarc acting chief executive officer Margaret Roka-Mauwa lobbied the Budget and Finance Committee of Parliament to enable the institution obtain loans through loan authorisation bills in the National Assembly.
She said in the absence of loan authorisation bills, the parastatal would continue to be choked with huge debts.
Minister of Finance, Economic Planning and Development Goodall Gondwe told Parliament that government guaranteed Admarc’s loans in the 2015/16 financial year due to the perceived maize shortage in the country at the time, but the maize was not sold due to donations of grain and other food stuffs and also because the maize sold in Admarc depots was more expensive compared to vendors’ prices.
Of the K45.2 billion bailout, K29.5 billion was repaid to CDH Investment Bank, K9.7 billion to Ecobank Malawi, K4.5 billion to FDH Bank and K4.7 billion to Alliance Capital.
Admarc repaid the banks about K3.4 billion of its own resources and was expected to pay back to the government after selling the 90 000MT in its stock.
However, opposition political parties and economic analysts described the bailout as illegal and a threat to the country’s national budget.
Commenting on the development in an interview yesterday, Economics Association of Malawi (Ecama) executive director Maleka Thula said should Admarc pay the penalties and interests to ZCF, the move would mean that government is using the funds to sort out avoidable costs instead of using them productively.
The parties will reconvene on May 28 2018 for oral submissions of legal arguments before the arbitrator makes his determination by June 13 on, among others, whether Admarc is liable to pay the interest or not.
The Zambia maize procurement contract is what led to the arrest of former Cabinet minister George Chaponda and businessperson Rashid Tayub. After almost a year of trial, the court last Friday found the two with no case to answer.