The piece “Cashgate scare: Corruption preys on investor perception” featured below was initially published in Malawi’s Mining & Trade Review Issue Number 29 2015 that is circulating this September 2015.

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

The publication announced its rebranding this month, moving from the Mining Review to the Mining & Trade Review

The decision to rebrand has come about in response to some of our readers from other economic sectors in addition to mining who want to be incorporated as stakeholders.

Cashgate scare

…Corruption preys on investor perception

By Marcel Chimwala

There is need for Malawi to put in place serious measures to guard against the corruption syndrome christened cashgate that has rocked the government system over the past years if it is to successfully attract investors in mining and other economic sectors.

Investors Mining & Trade Review interviewed in the aftermath of the recently held Malawi Investment Forum in Lilongwe say revelations of massive corruption in government that have led to the loss billions of kwachas from government coffers since the first days of the democratic era have eroded a heap of their trust in the Malawi government system.

Paladin Africa General Manager Greg Walker says in his write-up presented on behalf of mining investors at a mining conference that was part of the same investment forum, that in the internationally recognised Fraser Institute Annual Survey of Mining Companies which rates 122 jurisdictions around the world based on geological attractiveness and government policy encouragement for exploration and investment, Malawi was considered in 2014 but not included due to insufficient response.

He also says Malawi first appeared on Transparency International’s (TI) Corruption Perceptions Index in 1998 – and ranked 45th of 99 countries surveyed. In 2010, Malawi ranked 85th. Today Malawi has slipped to 110th – “a trend that can and must be reversed.”

Cashgate also led to the suspension of aid to Malawi by the country’s donors who lost trust in government financial administration during the previous administration of President Joyce Banda.

However, reports of corruption in Malawi Government circles started to emerge since the first days of the multiparty era when the country was under the Bakili Muluzi led administration when donors also suspended aid due to financial mismanagement.

Traditional donors led by the International Monetary Fund also suspended aid during the reign of the third multi-party President Bingu Wa Mutharika citing issues of economic and political governance.

An audit report by UK consulting firm Baker Tilly has indicated that K577-billion was lost to corruption between 2009 and 2014. [Mining in Malawi: the figure MWK577 billion was identified in the Final Analytics Report on the Reconstruction of the Malawian Government Cashbook for Purposes of Further Investigation, produced by PricewaterhouseCoopers; this can be downloaded from Nyasa Times here; Baker Tilly conducted a forensic audit of transactions and controls between 1 April and 30 September 2013]

President Arthur Peter Mutharika has, meanwhile, pledged to fight corruption in order for the country to win the confidence of investors and donors.

Taking heed of Mutharika’s call, Chief Justice Andrew Nyirenda also pledges for timely and fair handling of cashgate cases saying appropriate handling of cashgate cases will demonstrate to the general public that the country is serious in fighting corruption.

I want to assure the public that we will do what we can on our part to ensure that these cases see their way through the courts,

says Nyirenda.

The government is  in the process of developing a new system to replace the Integrated Financial Management Information Systems (IFMIS), which is said to have had loopholes that led to the siphoning of funds, with a new leak-proof system and has ever since advertised for international bids from expatriate firms to install the new system.

In order to ensure that there is transparency and accountability in the extractive sector, the President is leading the Malawi Government into joining the Extractive Industry Transparency Initiative (EITI) and the government has formally submitted an application to join the initiative.