Money from Malawi 'Cashgate' scandal allegedly funded electoral campaigns
Audit by British firm Baker Tilly uncovers evidence that MPs benefited from misappropriated funds, reports in South Africa claim
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David Smith, Africa correspondent
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Fri 13 Feb 2015 11.59 EST Last modified on Wed 31 May 2017 06.17 EDT
Residents of Ndirande township in Blantyre, Malawi, vote in last May's election. Reports claim some electoral candidates benefited from money taken from government coffers. Photograph: Gianluigi Guercia/AFP/Getty Images
Malawi's "Cashgate corruption scandal" may have cost the public 24bn kwacha (£35m) – almost double the official estimate – with some of the money siphoned off for politicians' election campaigns, according to a British-funded audit, it was reported on Friday.
An investigation by the auditor Baker Tilly indicates that payments were made to 202 individuals by government departments, in particular the police and army, according to the South Africa-based Mail & Guardian newspaper. "The proceeds of Cashgate may have been used to support electoral campaigns, though it is not possible to confirm the source of the funding," the auditor found.
The affair continues to cast a long shadow over Malawi, one of the world's poorest countries and currently dealing with the aftermath of its worst floods for half a century. It prompted Britain and other donors to freeze aid while dozens of civil servants, businessmen and politicians were put on trial. Last year the government estimated that Cashgate had cost it about 13bn kwacha.
The Mail & Guardian said it obtained a leaked copy of the auditor's report, which examines 48 companies allegedly involved in the scandal. According to the newspaper, the report suggested that the companies were in league with officials of commercial banks.
"It shows that the scam was based on over-invoicing, double payments and payments for items that were not supplied or for which there was no supporting documentation. A total of 32 cheques worth 1.3bn kwacha were paid to 18 companies without supporting evidence, 3.8bn kwacha flowed from inflated procurement prices, and the sum of 1.9bn kwacha related to payments for which there was no evidence of goods or services being provided.
"Eight businesses were identified as opening new bank accounts or reopening dormant accounts and within three months depositing at least one cheque, with no supporting records or evidence of supply available."
The auditor discovered evidence suggesting that fraudulent cheques were written out in big batches between April and September 2013. Paul Mphwiyo, budget director in the finance ministry, was shot and seriously wounded in September 2013 as he was about to expose a corruption ring. Malawi held elections in May 2014.
Nine individuals who received government money, either directly or through close relatives, without providing goods or services, were registered by the Malawi Electoral Commission as election candidates, the South African newspaper noted. Among them were four linked to then president Joyce Banda's People's Party (PP), who pocketed about 8bn kwacha between them.
The alleged principal beneficiaries included the PP's former recruitment director, Oswald Lutepo, whose companies accounted for 4.4bn kwacha of the total. Lutepo was sacked by Banda after the scandal came to light; he ran as an independent candidate, but lost. Banda, also defeated at the polls, has always maintained her innocence.
The Mail & Guardian added: "The findings are particularly damaging to the accountant general's office, where six officials, whom the report names, are singled out as having signed the 104 Cashgate cheques. Three of them approved 65% of the payments.
"The auditors say they could find no documentary evidence 'which would help determine the legitimacy of these transactions', and ask why civil servants who signed multiple cheques to the same businesses over a short period failed to raise the red flag.
"The report finds that the six officials breached their fiduciary duty under treasury instructions, and calls for legal and disciplinary steps to be taken against them. They were briefly arrested last year and released on bail, but there appears to have been little further development in the case."
Baker Tilly said on Friday that they could not comment.
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