The rich better have Malawi's money
Debt-saddled states are going after firms that have failed to pay what they owe on extractive and even fraudulent deals.
Jack McBrams in Lilongwe
The military junta in Mali made global headlines this week for detaining the chief executive of Resolute Mining over alleged back taxes amounting to $160-million. With its share price tanking, the Australian multinational agreed to pay.
But Mali is not the only African country going hard after global giants. In other lawsuits, Malawi is seeking more than $314-billion from Columbia Gem House, TotalEnergies and Star Agritech.
The government’s move against United States gemstone miner Columbia Gem House is unprecedented. Authorities want to recover unpaid taxes that they estimate to be nearly $310-billion (including interest).
Columbia Gem House does business in Malawi through a subsidiary called Nyala Mines. In a letter dated 26 July, the attorney general accused Nyala Mines of under-reporting its income from the sale of Malawian rubies and sapphires as far back as 2008. The letter said Nyala paid a mere $600 in taxes despite generating an estimated $24-billion in revenue from the Chimwadzulu mine located in the central region of Ntcheu.
French energy giant TotalEnergies is on the hook for $4-billion in a dispute over its use of government-owned storage facilities for fuel imports. On every litre of fuel imported into Malawi, TotalEnergies was allegedly required to pay 50% of the gross profit to the government, but stopped the payments in 2006.
The government claims that the halt in payments caused it substantial financial losses and will now sue the French company in an international court. The attorney general said preparations for the case “have reached an advanced stage”.
Meanwhile, a 21-day payment ultimatum to Turkish company Star Agritech International Turkish expired this week. “They haven’t yet responded. The next step is legal action,” attorney general Thabo Chakaka told The Continent on Wednesday evening.
Malawian authorities want $15-million from the tobacco trading company, over allegedly fraudulent transactions that involve the state-owned tobacco-buying enterprise, Malawi Leaf Company Limited. The dispute dates back to 2013 when Malawi Leaf offered a company registered in Hong Kong, Star Tobacco International – the predecessor of Star Agritech – a block sale of more than three-million kilograms of tobacco at pre-agreed rates. A partial shipment of 52 containers of tobacco was made but the buyer allegedly failed to pay.
Malawi Leaf halted further shipments and eventually took legal action in Hong Kong, where a court ruled in its favour. However, the judgment could not be enforced because it turned out that Star Tobacco International was an asset-less shell company and none of its directors resided in Hong Kong.
The Malawian government says the deal was designed to defraud it and it will pursue civil claims and potential criminal proceedings against Star Agritech.
Frank Namangale, the spokesperson for Malawi’s justice ministry, told The Continent that the government is only “claiming what rightfully belongs to the Malawian people” and the funds which “represent a significant portion of the nation’s wealth” and were “unjustly withheld”.
He added: “The delay in taking legal action was due to the complex nature of these cases and the need for thorough investigation and preparation to build a robust case.”
The Continent contacted all three companies but none sent substantive comments. Columbia Gem House chief executive Eric Braunwart promised to respond but did not, despite several reminders. A spokesperson for TotalEnergies in Malawi said they can’t comment because of the ongoing legal process and Star Agritech didn’t respond.