MUCH ADO ABOUT NOTHING: The K1Trilion Saga

BY FRYSON CHODZI

On 10th July 2021, Malawians were greeted with a Malawi News headline and article which talked about money transfers at the Reserve Bank of Malawi (RBM) totaling to K1tn. The story had two peculiar things. It had a sub headline to indicate that this transfer was questionable as it was done on the eve of announcing the results of the 2020 Presidential Elections. The second was an attempt to show that the transactions were government payments that did not follow laid down procedures. In addition to the article, the social media was awash with the list of transfers to the tune of K1,014,676,413,803.80 which correspond to the Malawi News article as the breakdown of K1tn payments.

While the article only questioned whether laid down procedures were followed, it did enough damage to the people the article had intended to destroy. Simply put, there is a wide section of Malawians who unfortunately some are PHD holders who believes that someone especially former RBM Governor Dalitso Kabambe and of course the DPP stole K1tn and now the country in a mess because of that.

Contrary to the assertions of the Malawi News article which insinuated that K1tn of Government money was transferred not following the laid down procedures, the money in question is not Government money but rather to do with private transactions by a commercial bank. In fact, in the history of Malawi to date, there has never been a day when the Malawi government could trade beyond K15billion even on a pay day of its money. Furthermore, reserves for Malawi at any given day has never gone beyond K500billion. How then could someone steal K1tn in a day? There is no such money available in Malawi and I strongly feel that Malawi News could have done better the same with RBM.

Let me take this opportunity to educate Malawi and indeed Malawi News that the documents circulating in the social media and indeed the ones that the article cited are from the RBM Automated Trading System (ATS) of the 26th June 2020.

What is Automated Trading System?

ATS is a base held at RBM where all financial transactions from all banks in Malawi are recorded. The transactions include both public and private commercial banks. Any money transfers for various reasons by any bank are cleared through the ATS. ATS is linked to IFMIS and RBM system when it comes to public monies.

On each day, the ATS produces report of transactions as per each commercial bank, and the document in question relates to FDH banks transactions. National Bank would have its on ATS report, the same with Standard bank so on so forth. Trading of K1tn in a day within the ATS is not an issue. In fact on a better trading day, the ATS combined of all commercial banks, would trade up to K5tn. The K1tn being talked about is not Government money. It’s rather an ATS generated report on the FDH dealings of the day.

Coming to the document in question, you will note that the document had several columns including a column written ‘type’ ‘Debtor’ and ‘Creditor’. These ‘Debtor’ column means who is paying the money and the ‘Creditor’ where the money is going. The column ‘type’ is the coding system used in the ATS to describe the type of transactions.

You will note that in the document, under column ‘type’ there are several figures and different numbers relating to the transactions. I will explain what each figure means in regard to the coding and description of the transfer and its purpose.

‘103’ coding under type

All transactions that have been classified as 103 simply means customer to customer transactions. For instance, on the sample page of the document below, the first transaction coded 103 shows ‘Debtor’ as ECOCMWMW and ‘Creditor’ FDHFMWMWXX and an amount of K42,339,840. What this means is that a customer X from Ecobank Malawi was sending the stated amount to customer Y of FDH bank.

By the way, let me clarify that interbank transactions are done using swift code. According to the document, only Swift codes for banks are used and these include; ECOCMWMW for Ecobank; FDHFMWMWXX for FDH Bank; RBMAMMWMW for Reserve Bank of Malawi; SBICMWMX for Standard Bank; NBMAMMWMW for National Bank of Malawi.

‘298smt212’ coding under type

All the transactions related to this coding are to do with money securities. Malawi hold its financial securities through Treasury Bills (TBs) and Treasury Notes (TN). Approximately half of these securities are held by the RBM while the other are held by different investors, local and international. Generally, RBM holds securities for a short period of 90 days and the transactions stated were being restructured to a medium and long term of up to 5years having being bought by an international investor.

For instance transaction no 18 on the page below, it means that the RBM had restructured its TB security holding amounting to K2billion to a longer term horizon with FDH. In other words, FDH bought TBs from RBM. Another example is transaction no 195 which shows that RBM transferred its short term security amounting to K295billion to AFREXIM Bank through its agent bank FDH so that it becomes a 5 to 6 year medium tenure security.

The restructuring of securities from short to medium and long term has been a policy of RBM and Government meant to reduce interest payment on Government debt. In the case of all the transactions done on 26th June 2020, the restructuring was meant to reduce the Government interest payments to the tune of K90billion over a five year period.

‘202’ coding under type

This is to do with transactions of bank to bank transfers. You might wish to note that there is a lot of inter banks for several reasons. I can go on and on about other codes. What this demonstrate is that the K1tn document is nothing else just the ATS page related to FDH bank on a particular day of the year. What is very surprising is that the entire Malawi News did not go deeper to understand what these transactions means but opted to create an illusion of wrong doing on the part of RBM.

RBM and Government must trade carefully

Whatever is being said and talked about RBM and allegations are damaging the reputation of the bank. The damage that is being done in order to dent the image of the former Managers of the bank will have huge repercussions on not only the bank but Malawi as a whole.

No investor would seriously consider to invest in a country whose central bank is being accused of money laundering. These political witch-hunt is going to backfire very soon. What is ironic is that RBM just for political expedience well aware that this document has nothing to do with the forensic audit opted to play a card of ignorance and hiding behind the court case while they had an opportunity to clarify matters with the public.

Every day, for our political stupidity we are talking of Afrexim bank credit facility as something that has been used for money laundering. Has anyone in Government and RBM considered what it means if Afrexim would withdraw their US$750million facility it has with Malawi for buying strategic commodities including forex?

These are facts Ladies and Gentlemen, and I would challenge anyone at the bank to dispute what has been written herein even the reporter or Malawi News can do so, as they have failed miserably to follow through the information and report the truth to Malawi.

As I have always done before, let me sincere plead with President Rev. Lazurus Chakwera that its time his government focused on development of Malawi and stop witch-hunting. He has already fired Dr. Dalitso Kabambe at RBM and changed management, the least he can do is to pay these people, open a new chapter and move on. The problem of trying to find a problem where there is none, only aide to opening a can of worms which proves detrimental in long run. Those who said ‘Let the sleeping dogs lie’ were not stupid.

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