By CIJM Reporters
Planting trees outside secondary schools, funding programmes to end child marriage, giving drums, trumpets and harmonicas to students.
At first glance, the Beautify Malawi Trust, known as Beam, is creating opportunities for Malawi’s young people and making the Southern African country a better place to live.
But the charity, which is controlled by Gertrude Mutharika, the wife of the country’s President, Peter Mutharika, is offering another service.
Foreign oil companies have allegedly given the charity at least $300,000 since Mutharika became president in 2014.
In exchange, his administration is shielding them from a government investigation into alleged $1.2mn of kickbacks that the companies are suspected of paying to Malawi’s former President Joyce Banda, the Centre for Investigative Journalism Malawi (CIJM) can reveal.
According to leaked documents and dozens of interviews with senior officials, Mutharika is using her influence to derail an investigation by the government-run Anti-Corruption Bureau into the awarding of six oil and gas exploration licences on Lake Malawi.
Banda awarded the licences to several foreign oil and gas companies: South Africa-based Sac Oil (later changed name to Efora Energy, “Energy for Africa”, British firm Surestream Petroleum, RAK Gas of the United Arab Emirates, and Seychelles-based Pacific Oil. Egyptian company Hamra Oil later bought Surestream’s concession.
JSE-listed Efora Energy, formerly trading under SacOil Holdings, announced in November 2017 that it had suspended oil exploration on Lake Malawi saying the prospectivity did not meet project investment criteria. SacOil initially acquired the licence in December 2012.
The sources in Malawi’s seat of government, State House, also said that Malawi’s graft-busting body, the Anti-Corruption Bureau (ACB), has come under pressure to drop investigations of the companies because they have made donations to Gertrude Mutharika’s Beautify Malawi Trust (Beam).
“A State House official called an investigator who was handling the case to back off the probe. And we did,” said an ACB senior official, who asked not to be named for fear of reprisals.
But ACB Senior Publicist Egrita Ndala said in telephone interview that a case might be dropped due to many reasons.
When pressed to comment whether pressure from the Presidency or State House could be some of the reasons, Ndala demanded a questionnaire. She has not responded up to now.
The ACB officials’ apprehension is understandable. In 2015, bureau’s director of corporate services, Issa Njauju, was murdered and had his car torched. His body was then dumped next to the presidential villas in Lilongwe’s area 44.
Investigations into his death have stalled, and no one has yet been held accountable.
In May 2017, the ACB launched investigations into whether money corruptly changed hands during the rushed signing of production-sharing agreements in regard to three petroleum exploration blocks on Lake Malawi (Two of these cover the Lake, one of them (Pacific Oil, Block 6 is on land) just eight days before May 20 2014 elections that toppled former president Joyce Banda.
But in August 2017 the ACB suddenly changed its tune, saying it had no money to start investigating the companies – despite receiving an increased allocation in the 2017/18 budget.
The State House sources said the ACB’s refusal to tackle the alleged corruption was linked to donations made by the oil concessionaires to Beam.
Reacting to the allegations, Bright Molande director of communications at State House, merely remarked that pressure from State House “may not necessarily mean the Presidency; we have to be careful”.
In August last year, a letter leaked from Gertrude Mutharika’s charity indicated that the president’s wife had asked for financial assistance from one of the concessionaires, Hamra Oil Holdings, and received MK20-million (28,000 dollars).
In the letter seen by CIJM, the First Lady said that the funds should be channeled through presidential chief economic and special adviser Collins Magalasi; the vice chairperson of Beam’s board, Chimango Chirwa; the chairperson of its finance and fundraising sub-committee, Mayamiko Mwinjilo; or board member Nazma Ismail.
Hamra Oil ex-chief executive Ben Chiza Mkandawire has claimed that as soon as he learnt that the donations from the company had been deposited in personal accounts, he stopped any further donations.
President Peter Mutharika’s press aide, Mgeme Kalirani, said the First Lady and her foundation have never received funding or interacted with any oil company in Malawi or elsewhere.
“These are wild and malicious allegations composed and peddled by ill-minded individuals against the noble character of the First Lady, Madam Dr Gertrude Mutharika,” Kalirani said.
He added that paying attention to the claims of the “ill-minded individuals” at State house was a waste of time.
The ACB is not independent of the Malawi government: its budget comes from the state and it indirectly controls the bureau’s prosecutions. By law it may not prosecute without a nod from Director of Public Prosecutions, who is appointed by President Peter Mutharika.
The oil saga began in 2009 , when the government divided Lake Malawi into six segments for oil and gas exploration. It subsequently awarded block 1 to Sac Oil of South Africa, blocks 2 and 3 to the British firm Surestream Petroleum Blocks 4 and 5 went to RAK Gas, the parastatal oil company of Gulf state Ras al Khaimah, and block 6 to Pacific Oil.
Hamra Oil later took over Surestream’s concession.
In their licence applications, the six companies pledged to pay a combined total of $1.2 billion ($200,000 each) per year to former president Banda’s Mudzi Transformation Trust, according to documents seen by the CIJM at the department of mining (Petroleum Secretariat).
And in the lease agreements warehoused at the department of oil and mining, which the CIJM has seen, the oil companies also pledged $200,000 each for corporate social responsibility spending, heavily weighted towards such beneficiaries as Banda’s Safe Motherhood Project and Mudzi trust, which built and renovated houses for the poor.
According to high-level sources, all the companies met their obligations in 2014, paying the Mudzi trust the agreed amount of $200 000 each.
With Banda now out of power and living in exile, sources alleged that after 2015 the cash trove has been diverted to Beam.
CIJM has also learnt that Banda is trying to help President Mutharika build support for his 2019 presidential campaign in exchange for dropping charges against her.
A source in the ministry of mines alleged that when Banda fled into exile, the oil companies were ordered to redirect their annual pledges to Beam.
“They all obliged since this was one of their pledges when applying for the oil concessions,” said the source.
Reserve Bank of Malawi spokesperson Mbane Ngwira said the amounts allegedly paid were not enough to move markets, and so were off the bank’s radar.
“Operationally RBM does not clear foreign currency receipts; these go through the commercial banks. So, it would be difficult for us to track them unless we know the banks that these funds are coming through,” Mbane said in a written response.
The licence process attracted controversy almost immediately.
In their licence applications, the six companies pledged to pay a combined total of $1.2 million ($200,000 each) per year to former president Banda’s Mudzi Transformation Trust, according to documents seen by CIJM at the department of mining (Petroleum Secretariat).
And in the lease agreements warehoused at the department of oil and mining, which CIJM has seen, the oil companies also pledged $200,000 each for corporate social responsibility spending, heavily weighted towards such beneficiaries as Banda’s Safe Motherhood Project and Mudzi trust, which built and renovated houses for the poor.
A leaked legal opinion from the office of the former Attorney General, Kalekeni Kaphale in 2015 suggested that some licences should be revoked because RakGas, Pacific Oil and Hamra Oil were connected by a thin “corporate veil” apparently intended to circumvent the rule that one company could not apply for two exploration blocks.
Far more serious, however, were records of the Reserve Bank of Malawi, showing that days before the exploration licences were paid out, RAK Gas made an unexplained payment of $235 700 (MK89-million) to the Reserve Bank’s account for the mines department.
The unusual wire transfer was picked up and queried by independent consultants LBN Strategies of Cologne, Germany, and Lilongwe-based Resources M&E while examining the Reserve Bank’s accounts as part of a scoping exercise for government.
However, Finance Minister Goodall Gondwe that government had also heard of the said payment but expressed ignorance on the other payments by the companies to either the Trusts or the First Lady.
“The Trust disbanded so it’s difficult to get hold of documents,” Gondwe said in a phone call this week.
A range of Malawian civil society organisations and international NGO Oxfam demanded an investigation into the licensing process.
Last year a former Hamra Oil official queried the management of Beam after he learnt that the money his company gave to the charity may have been abused.
Explaining the failure to pursue the investigation, ACB spokesperson Egrita Ndala said: “The investigations have stalled due to insufficient resources and legal processes that are required to follow some links both within the country and in other jurisdictions outside the country.”
She said that ACB needs financial resources to operate effectively, but also trained personnel, vehicles “and other relevant equipment”.
She also revealed that $1.5-million of the ACB’s 2017/8 budget of $4-million – close to 40% – went on “personal emoluments, while $2-million is for corruption prevention, public education, investigations and prosecutions”.
In 2015 the Extractive Industries Transparency Initiative (EITI) Board unanimously approved Malawi’s application to join the EITI.
However, the country’s first EITI report, launched in Lilongwe this year, revealed that 34% of the revenue from the extractive industries paid to the government could not be accounted for the fiscal year 2014/15.
“This story was produced by the Centre for Investigative Journalism Malawi (http://investigative-malawi.