- Seven families dominate the K 35.5 billion initiative
- 16 companies to get 44% of FISP money
- Earnings represent 58% of the K 27 billion fertilizer budget
- CFTC says One Director, One Bid
iHubOnline can reveal that some 16 companies owned by seven entrepreneurial families and their associates have formed cartel-like blocks leading to their domination in contracts to supply fertilizer in this year’s K 35.5 billion farm input subsidy program (FISP).
Research by this reporter has unearthed credible and substantive evidence that the 16 companies will cart home an estimated K 15.7 billion, representing 44.2 % of the total FISP budget and 58 % of the K 27 billion fertilizer budget.
About 80 companies submitted tenders out of which 57 private and 2 state owned entities were granted contracts to supply different types of fertilizer in quantities ranging from 500 metric tons to a maximum of 5,000 metric tons, fetching between K150 million and K 1.5 billion respectively.
In the FISP, resource poor smallholder farmers are given 2 fertilizer subsidy coupons worth K 15,000 each, among others.
About 900,000 farmers will be targeted this year.
Documents we have seen and further inquiries confirm that the Mulli, Master, Patel, Gianniks, Jakhura, Hussein and Ghedia family members and their associates control significant stakes in the program, raising fears of breaching competition law by some of the players in the 2019/20 FISP.
Acting Chief Executive Officer of the Competitions and Fair Trading Commission Martha Kaukonde cautioned that where an individual belongs to multiple boards of companies, the principle of one director, one bid applies under principles of competition law.
“If it is clear one person is director of several companies, only one company can compete in the bidding process,” said Kaukonde in a recent interview.
Section 2 subsection 2 (a) of the Competition and Fair Trade Act stipulates: “Any two companies are to be treated as affiliated enterprises if one of them is a company of which the other is a subsidiary or if both of them are subsidiaries of the same company.”
Legally, therefore, companies with separate directors may be said to be in compliance except for those sharing directors.
In simple terms, cartels emerge when companies create an illusion of competitiveness whilst they are actually bound by family or business ties, conniving on bidding strategy, to drive their profits up as their closely related companies ‘compete’ for business in the public procurement space.
Under the country’s competition legislation, cartel behavior, clustered in anti-competitive trade practices in ‘Part 5’ of the Competition and Fair Trading Act, is prohibited.
Who is who?
Official records show that, among several owners, Mulli Brothers is owned by Leston Ted Mulli while FF Trading is owned by Felton Mulli; Bearings World and Sagar Distributors are both owned by Mohamed Hussein and Noormahomed Hussein.
It has also been established that Worldwide Wholesalers is owned by Abdullah Master, Ashraf Master and Safwan Master.
Ironically, documents we have seen show that Ashraf is also registered as the owner of Aja Investments whereas Safwan is named as the owner of Nafees Investments.
KU Distributors Limited is owned by three Patel family members with Kamlesh being Managing Director, Chipiku Stores has four Patel members (Pramond, Pushpa, Jayesh and Ashok) and HarilalKalaria as shareholders; the Agro Industries is owned by Katan Patel and ETG Inputs Limited is owned by Mahesh Patel, among others.
Efforts to prove conclusive links among all the Patels locally were rather vague. While those close to family were not willing to talk, some hinted the Patels could be linked by caste or clan, not blood.
Further research in Mauritius where ETG is also incorporated identifies Mahesh Patel, Katan Patel and Pradip Patel as shareholders. This information, therefore, seem to link Agro Industries to ETG.
Furthermore, records show Jayesh Patel sits on the boards of both Chipiku and Paramount Holdings.
He sits on the Paramount Holdings board alongside Prakash Ghedia, Asif Patel and Hiren Jagatiya.
The Ghedia family members, Mahesh and Mita, are directors for the other Ghedia enterprise, Paramount Commodities.
Rab Processors Limited and Kulima Gold are both owned by AGA Jakhura, Sai Kiran Josyabhatla, Ahmed Sunka and AfzelThassim while Agora, Farmers World and Malawi Fertilizer Company are linked to Maria KritzasGiannakis, Dimitri Giannakis and Christos Giannakis.
Research by the reporter has established that Paramount Holdings Limited and its subsidiary, Paramount Commodities Limited, are also linked to another tender winner, Chipiku Stores.
Inquiries made to the families in question went unanswered while others promised to respond but never did.
Based on figures before the signing of the contracts, we computed the expected earnings – at least as at the final planning meeting confirming the recommendations of the awards.
By our calculations, the Master Brothers could rake in a total of K 1.8 billion – K 1.5 billion for the contract given to Worldwide Wholesalers whilst Aja and Nafees get K 150 million each.
Mulli Brothers have a K 1.5 billion contract while the company owned by another Mulli, Felton, gets K 500 million, bringing the total sum to 2 billion.
We also gather that the Patels could earn a collective K 2.4 billion since Chipiku Stores will get about K 600 million, ETG about K 300 million while KU Distributors Limited will get K 1.5 billion.
The companies owned by the Ghedias will get K 2 billion – K 1.5 billion and K 500 million for Paramount Holdings and Paramount Commodities contracts respectively. If the directorship of one of the Patels in the company is considered, then the cumulative earnings for all the companies would amount to K 4.4 billion.
Jakhura and colleagues are the second biggest earners at K 3 billion – with Kulima Gold and Rab Processors earning about K 1.5 billion each.
Farmers World and Agora get K 1.5 million each while the Malawi Fertilizer Company will get K 1.2 billion, bringing the total to K 4.2 billion.
The Hussein brothers of Bearings World and Sagar Distributors will likely fetch K 300 million jointly as they were both contracted to supply 500 metric tons of fertilizer.
Authorities at SFFRFM could not verify the figures we sourced independently saying the contracting parties were yet to sign all the paperwork related to their contracts and, therefore, the information is, for the time being, protected by confidentiality.
The Autonomy Question
Our research has shown that other than sharing strategic leadership, some of the companies operate from the same bases or use the same infrastructure.
For example, one manager at Malawi Fertilizer Company in Liwonde had an email address bearing the handle @farmersworld.net, a brand component of a sister company.
The Master family has three companies contracted to supply subsidy fertilizer while the Hussein family has two companies participating in this year’s FISP.
Jakhura and others maintain directorship in two companies while Chipiku’s Jayesh Patel also sits on the board of Paramount Holdings Limited, thereby creating a probable link between the two companies.
Evidence from Mauritius suggests ETG and Agro Industries could also be linked.
However, there is an attempt for some semblance of autonomy by having different members of the family in different boards by the Mulli, Gianniks and some of the Patel owned family businesses.
One of the Patels, however, sits on the Ghedia company board, thereby contravening the competition law that when one is a board member in two companies, only one company can be considered for that particular tender under competition law.
Minister of Agriculture Kondwani Nankhumwa has vowed to launch an internal investigation into the alleged emergence of cartel-like business dominance in the FISP in an interview recently.
“FISP remains one of our key programs. As such, we expect it to be managed in compliance with the laws and ethics that govern public procurement. I will personally see to it that allegations of cartel behavior, corruption and any business malpractices are properly investigated,” said Nankhumwa.
The minister also clarified that although FISP is financed through the ministry of agriculture, the SFFRFM – a state-owned lead importer, distributor, wholesaler and retailer for assorted farm implements – was tasked with the bidding on behalf of the ministry.
In a follow up interview, SFFRFM Chief Executive Officer (CEO) Andy Kalinde acknowledged the existence of multiple family owned enterprises among companies contracted to supply FISP but stressed this should not be cause for concern.
“The awards granted to these companies are not a result of flouting procedures. All of the companies involved fully complied with the Companies Act upon registering their companies. They were all cleared by all the oversight committees created under the Public Procurement and Disposal of Assets (PPDA) Act,” said Kalinde.
He, however, admitted that the bidding process should be strengthened to check against anti-competitive behavior.
As a public procurement best practice, institutions such as the World Bank do not allow bidders from the same group of companies to participate in the same tender to avoid compromising outcomes and as a measure to avert corruption.