Govt sold subsidize fertiliser

Government sold about 37,000 metric tones, worth about K2.2 billion, of the surplus fertilizer subsidy to Standard Bank of Malawi with the option to buy back the fertilizer during the next growing season. Malawi News has leant.
Principal Secretaries (PS), Patrick Kabambe, for Agriculture Ministry and Radson Mwadiwa for Finance Ministry confirmed the transaction saying government entered in a special arrangement with the bank where the bank bought all the surplus fertilizer government had with on understanding that government would buy back the stocks next growing season.
However the two PS would not agree with each other on who was footing the demurrage costs as Kabambe said government is meeting some of the costs while Mwadiwa saying Standard Bank was responsible for the demurrage costs as at the meantime the fertilizer was belongs to the bank.
“There are some costs which government is paying. Storing is not cheap,” said Kabambe. The demurrage costs including security, storage and other storage risks.
Mwadiwa said there were some benefits that government is going to get out of the fertilizer deal as the agreement they had with the bank meant that government would buy the fertilizer at the same price it sold to the bank.
“There was a premium of US$16 per metric tonne which we are going to add when buying back the fertilizer fortunately DfID paid the premium,” he said. DfID is a United Kingdom department responsible for international development.
He said government sold the fertilizer as US$450 per metric tonne and is expected to buy back the same stock at US$ 465.
“Right now, fertilizer is selling between US$ 530 to US$540 per metric tonne outside, if we are to buy back the fertilizer from Stanbic that mean we will serve US$85 per metric tonne,” he said.
Mwadiwa said the another benefits it that government would serve in terms of transport as the fertilizer is already in the country as well as that it would act as a head-start in the next subsidy programme.
Government, like last year, has also planned to purchase 150,000 metric tonnes for the subsidize programme and with the 37,000 metric tonnes already in the country government is going to buy only 113,000 metric tonnes.
“The money which was realized from the transaction was ploughed back into the budget, so nothing was lost,” he said.
Mwadiwa explained that the surplus come about when government decided to involve private companies to distribute the fertilizer after it had already authorized Admarc and Smallholder Farmers Fertilizer Revolving Fund of Malawi (SFFRFM) to buy the whole 150,000 metric tonnes.
He said government authorized private companies to buy 20,000 metric tonnes resulting in the country having 170,000 metric tonnes of fertilizer against the approved K150, 000.
“Because of this it meant that Admarc and SFFRFM did not sell all its fertilizer, this is the fertilizer that was sold to Standard Bank,” he said.
Standard Bank spokesperson Rick Chikwekwe declined to comment saying that it was the bank’s policy not to discuss client’s information.
“It is a sensitive issues and government is our client so we have a confidential policy we can not discuss anything,” he said.
Malawi News source, however, revealed that Standard Bank agreed to buy the fertilizer on the understanding that government would bear all the demurrage costs including insurance.
He also wondered how would government decided to sell the fertilizer and plough back the money into the budget without parliament’s approval.
“Under what vote did the money that was collected from the sale ploughed back into the budget? K2.2 billion is not small money that could be put in the budget without the knowledge of parliament,” he observed.