Africa Malawi President Banda

Malawi official jailed for nine years over ‘Cashgate’ scandal

By Staff Report

Victor Sithole is the second government employee to be sent to prison as Germany funds audit of Malawi finances to discover how much cash has been lost

MDG : Malawi Corruption Government Economy : protest aagain corruption
Protesters demonstrate against the theft of huge sums of government money by civil servants, including junior staff at Capital Hill, the seat of government in Malawi.Photograph: AFP/Getty Images

Malawi has jailed a second government official over the Cashgate scandal in which more than $30m (£19m) was looted from state coffers. Victor Sithole, an accounts assistant, was found guilty of stealing more than $66,000 and last week sentenced to nine years in jail.

Treza Senzani, the principal secretary in the tourism ministry, pleaded guilty to charges of theft of $150,000 and money laundering at an earlier hearing.

More than 70 people have been arrested over the scandal, which was unearthed in September last year.

Germany this month agreed to fund a new audit of government financesto find out exactly how much money has been lost and and who is to blame. Katrin Pfeiffer, head of development cooperation at the German embassy in Malawi, said the $25m audit would cover 2009-2013.

Pfeiffer said there were suggestions that the looting actually took place over a longer period, before 2009, when the president’s brother, Bingu wa Mutharika, was in power. He died suddenly in 2012. Britain is understood to want any investigation to start from 2005 to establish the extent of corruption. The audit will be conducted by PriceWaterhouseCoopers.

The theft led international donors, which bankroll the country’s budget by up to 40%, to pull the plug on aid worth $150m last year until the government in Lilongwe cleans up the situation.

Political commentators have expressed fears that donors will suspend aid indefinitely because it could take years for the courts to complete cases that implicate several senior officials of the People’s party of former president Joyce Banda, as well as top civil servants and business people.

Billy Banda, director of the rights group Malawi Watch, said: “Malawi needs to establish a special tribunal that should speedily try the cases, otherwise it will take years to conclude the cases and donors will justify their withholding of aid.”

The aid freeze has left the government with a budget deficit of £167m. President Peter Mutharika’s attempts to persuade donors, including Britain, to restart aid have so far proved futile. Another leading rights activist, Billy Mayaya, warned that Mutharika has the “biggest political challenge in his hands to see the successful conviction of all suspects. How his government concludes Cashgate will define his political legacy.”

He accused Mutharika of failing to make significant financial management system reforms to restore donors’ confidence. “Donors are still not convinced their money will be safe in Malawi. The country needs to do more to convince donors that their money will be safe and benefit the poor.”

Mayaya added: “Without donor support, the economic outlook looks gloomy. Malawi cannot do without budget support from donors.”

Mutharika, 74, who in May won disputed elections against Banda, the country’s first female president, met the British ambassador to Malawi, Michael Nevin, last month to plead for the resumption of aid. He argued that his administration had made inroads to address concerns, such as cutting spending and reforming the public financial system.

The ambassador could not be swayed, however, telling Mutharika that the UK was “still monitoring financial management reforms” before it could resume budgetary support. Nevin said: “We want to move from dependence to a particular kind of relationship where both countries will be able to depend on each other in different areas such as trade.”

Nevin said that Britain has already pledged to give Malawi £100m for different programmes this year, adding that the money will not be channelled through the central government, “but through other projects outside the budget”. Britain procures drugs for the country and directly transports them to clinics and hospitals nationwide via district assemblies.

Another British official, Mark Lowcock, permanent secretary in the Department for International Development, was blunter during a visit in September. “What we have said is that Cashgate is a big problem and a basic problem for the people of Malawi and the taxpayers whose money was stolen,” the senior diplomat told the Weekend Nation newspaper.

“Until those problems are fixed, it will perhaps not be the most appropriate thing for donors to put more money into a leaking bucket,” he said.

The country’s three-year extended credit facility programme with the International Monetary Fund (IMF), which ends next year, has also been affected by the scandal. Malawi did not receive a $20m credit facility from the IMF in June, as part of the $156m loan package to help refloat the agriculture-based economy.

The Banda government claims that loopholes in the payment system introduced a year after Bingu came into power were to blame for the looting of public funds.

Banda, who has turned to lecturing abroad since she lost power, told an audience in the Netherlands this month that when she was alerted by an EU official about the theft, she knew she had no choice but to start fighting against corruption.

Banda, a long-time favourite of the west, said that by tackling graft she was putting her political career on the line. She has denied any involvement in the scandal, although her People’s party is accused of siphoning off state funds to bankroll its election campaign.

The Guardian

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