Malawi’s new government has succeeded in slashing a controversial $145-million defence deal signed between former president Joyce Banda and a South African-based arms company, the Paramount Group, saying the contract was “too expensive” and not subjected to “proper analysis”.

After talks with Paramount, Malawi’s finance minister, Goodall Goniwe, said last week that a 2013 credit agreement covering the supply of seven interceptor boats to patrol Lake Malawi was scrapped and replaced by a supply agreement worth $17-million.

The new agreement covered only goods under manufacture at the time of cancellation and “their accompanying services”, Gondwe said.

AmaBhungane was not able to confirm how many of the 8.5m patrol boats had been supplied: neither the defence department nor Paramount would disclose this.

Banda defended the 2013 deal, saying the boats were needed because of a long-running border dispute with neighbouring Tanzania, which was rekindled in 2012 by a Malaw-ian plan to explore the lake for oil. (See below: “Lake’s oil and gas troubles run deep”)

But the deal was criticised as a misdirection of scarce resources in one of the poorest countries in the world.

Questions were also asked about the relationship between Banda and Paramount, said to be Africa’s largest private defence contractor.

“Bypassed” finance ministry

The London-based Daily Telegraph reported that the family foundation of Paramount’s owner, Ivor Ichikowitz, paid for British public relations firm Bell Pottinger to advise Banda on how to polish her image.

The foundation denied any connection between the contract and its charitable activities.

Asked what the government had learnt from the deal, Gondwe said: “The contract highlights the importance of doing proper analyses of contracts before agreeing to them.

“Maybe at the time of making this agreement it was necessary, but when it became apparent that the contract was too expensive it was renegotiated,” he said.

In other media reports, Gondwe charged the contract was illegal and “bypassed” the finance ministry. Another source told the Mail & Guardian it was not passed by government’s procurement committee.

Gondwe was also reported as claiming that the deal damaged Malawi’s credit line to the International Monetary Fund.

Paramount’s director of global marketing, Nico de Klerk, said the group could not comment on the contract’s details because of confidentiality agreements.

He referred to a government-Paramount statement in September 2014, which described as untrue reports that the original deal was illegal and had been terminated.

“We cannot give any information”

At the government’s request, the company “was engaged in constructive dialogue to replace the old contract in order to meet the government’s needs”, the statement said.

It said the original deal “was concluded according to Malawian government processes and signed by the former minister of finance and former minister of defence”, and Malawi’s attorney general had confirmed its legality.

Malawi defence force spokesperson Paul Chiphwanya stonewalled questions about the number of boats supplied and whether and how they were being used.

“We cannot give any information because it’s [a matter of] national security,” he said. “We can’t disclose what we have in the army.”

According to its website, the Paramount subsidiary that supplied the boats, Nautic Africa, has an office at Monkey Bay, in Mangochi, on the southern shores of Lake Malawi.

Its address is given as “Malawi Defence Force – Marine Unit”.

De Klerk said that, as part of the sale of the interceptor boats, Nautic was contracted to provide training for the vessels’ operation and their service and maintenance.

But this had been concluded and the company no longer operated in Malawi.

“We have other priorities”

University of Malawi economist Ben Kalua said Malawi was not at war when the contract was signed and that it remained on peaceful terms with its neighbours.

“We are not an economy that needs such contracts,” he said. “We have other priorities: we are in an economic mess and couldn’t repay this loan at the expense of the education and health systems.”

Banda’s spokesperson, Andekuche Chanthunya, insisted Malawi was in danger when the deal was made and needed to bolster its security.

Banda’s former ruling party, the People’s Party, doesn’t regret signing the boats contract, he said.

“We needed the patrol boats on our lake, to keep the country safe. It is routine to have borders checked, even across water. If we just leave the issue we will find our lake gone.”

Lake’s oil and gas troubles run deep

Prospecting for oil and gas on Lake Malawi is to start early this year, according to the Malawi government – despite Tanzania’s objections and Unesco worries about its possible environmental impact.

The principal secretary in Malawi’s ministry of national resources, energy and mines, Ben Botolo, announced at the end of 2015 that exploration would begin in January or February.

Four companies are reported to have been granted exploration licences: South African-based, JSE-listed SacOil Holdings;

Rak Gas, owned by the government of United Arab Emirates emirate Ras al-Khaimah; Cayman Islands-registered Hamra; and Pacific Oil, part of Vega Petroleum, which has oil concessions in Egypt.

When in 2012 Malawi declared its plan to prospect, Tanzania called for exploration to be delayed until the border dispute was settled and then-president Joyce Banda ordered interceptor boats to patrol the disputed waters.

The current frontier skirts Lake Malawi’s northeastern shoreline. Basing its argument on international precedent, Tanzania claims it should run in a north-south line through the middle of the lake.

Fuelling the latter’s sense of grievance is the fact that the Malawi-Mozambican frontier to the south does bisect the lake.

Malawi and Tanzania cite the Heligoland-Zanzibar Treaty of 1890 between Britain and Germany to justify their positions. In keeping with its policy of not meddling with colonially drawn borders, the Organisation of African Unity, and later the African Union, did not become involved.

The dispute first surfaced in 1967 when Tanzania lodged an official protest with the Malawi government, without result. In 2013 there were isolated clashes, amid Tanzanian accusations that its fishermen had been harassed.

Malawians and Tanzanians have waited for the Africa Forum of former African heads of state and government to mediate in the dispute. But the September 2013 deadline came and went, without result.

Some of the prospecting blocks overlap the Lake Malawi National Park, a world heritage site, prompting a monitoring visit by Unesco early last year and a request by the World Heritage Committee for the cancellation of the exploration licences in the park. The committee said an oil spill would be a severe risk to the integrity of the lake’s ecosystem.

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