Malawis newly elected President Peter Mutharika inspects a military parade at the Malawian Parliament Building in the Capitol Lilongwe before officially opening the 45th Session of Malawi Parliament on June 17, 2014. AFP PHOTO/AMOS GUMULIRA (Photo credit should read AMOS GUMULIRA/AFP/Getty Images)
GABORONE, Botswana — The Malawian government has offered to renegotiate a $145 million weapon procurement deal with South Africa's Paramount Group after canceling an initial 2012 agreement on allegations that the deal violated national laws and was based on highly inflated commodity prices.
Under terms of the deal, which was signed by the government of former President Joyce Banda, in 2012, the Paramount Group was to supply Malawi with equipment that includes seven interceptor boats and training for the Malawi Defense Force (MDF).
The boats have since been delivered and deployed to maritime border patrol duties on Lake Malawi.
The deal also covered the supply of modern combat and camping gear for MDF units deployed on active combat with the Southern Africa Development Community Rapid Intervention Brigade, (SADC-RIB), fighting rebel groups and militias in the eastern Democratic Republic of Congo.
The deal also gave the South African company lucrative contracts in the fuel trade and agro-trade businesses. However, the deal was canceled in August 2013 by the newly elected government of Malawi President Peter Mutharika, which said the deal was substantially over-valued while its repayment terms were unsustainable for the struggling economy.
This week, the government said it concluded its probe of the deal and decided to renegotiate terms instead of totally canceling it. as initially planned. Malawian Attorney-General (AG) Kelekeni Kaphale told local daily newspaper the Nyasa Times that the agreement was reached after a consultative meeting held with representatives of the Paramount Group.
Kaphale The AG said that during the three-year long probe into the deal, the government discovered that ex-President Banda had violated the constitution by barter-trading the Dassault Falcon 900EX jet, valued at $15 million, to a Paramount Group subsidiary as part of the settlement for the arms deal. The jet was sold in 2012.
"We will not cancel, but we will just renegotiate some of the contracts," Kaphale told Nyasa Times. In terms of the initial deal, the government of Malawi would acquire the weapons on a $160 million credit, which included interest, which would be repaid at a rate of $5 million quarterly for eight years.
The Malawian government has pledged to meet its contractual obligations but says it will not accept any further arms deliveries.
Its probe of the deal discovered that the market value of the patrol boats was equipment could have been acquired for $31 million. It has instead offered to pay $16 million for the patrol boats and other equipment which has been delivered.
Malawi says the payment will clear its debt to Paramount Group since it is a top-up on the $15 million paid in 2012 by barter-trading the ex-presidential jet. Efforts to get a comment from the Paramount Group were unsuccessful.