By Mercy Matonga
Last week, we revealed a plan hatched to mortgage off Likoma Island to an investor.
Now we have gathered more details of that intended sale.
They include that government would have leased out that island for 99 years to a casino investor called Augustus Group which is domiciled in Germany.
That area would be what they call a Special Tourism Zone Project.
The nearly 100-year concession period would be extended for the same or a shorter period, counted from the date of signing of the contract.
In this investment plan, the laws of the Republic of Malawi would not apply to legal and natural persons in this zone.
Government would enact and implement legislation to protect all foreign and domestic investments in the zone including from expropriation or nationalisation of investments.
In addition, investors and companies located in the zone would enjoy holidays from direct taxes on any income or on any profits generated by any company, investor or financier of the company in the project.
These details are contained in a draft Memorandum of Understanding, dated February 4, 2024.
“At this point, the Republic of Malawi shall transmit and transfer to Augustus Group the concession for a period of ninety-nine (99) years of the total area of the Special Tourism Zone Project, where Augustus Group shall develop infrastructure and constructions, benefiting from the right to partially or totally transfer and/or sub-lease respective rights to third parties,” reads the MoU.
It adds: “The Republic of Malawi guarantees the exemption of the tax in accordance with Regulation No. 1 of Article 21 of the Industrial Free Trade Zone, Commerce and Services (ZFICS).
“However, further or new regulations to address the special requirements of a Special Tourism Zone may prove necessary,” reads the MoU.
Government would have to guarantee that there will be no competition for the Augustus Group and that no other party would receive more favourable treatment than Augustus Group.
The investor would also provide exclusive security through the installation of a Private Police Security Unit in the zone.
Companies to invest in the zone would include those in tourism, airports and aviation, banks and insurance, gambling, energy production, retirement homes and online commerce, among others.
During our investigation, we sourced a presentation of the Malawi Gaming and Lotteries Authority (Magla) detailing a plan to develop Likoma Island into a city.
We asked the authority whether the proposed August Group investment is a product of that Magla plan.
Magla’s Chief Executive Officer Rachel Mijiga indicated that the authority had a dream to tap into Likoma’s tourism potential but she suggested that dream is not the one contained in the draft MoU.
“We dreamt in colour [but] when we woke up we realised it was but just a dream and the same was confirmed when we were asked to stop. That’s my comment; please don’t ask me any more questions,” she said.
Curiously, Malawi News understands, several key departments were not involved in the negotiations over the drafting of the agreement.
One of the key ministries that was sidestepped in the deal is that of lands.
Minister of Lands Deus Gumba said he was not aware of the deal. He referred us to the Ministry of Tourism.
It is still unclear if it was the investor or the Ministry of Tourism that drafted the MoU.
But chief consultant for the Augustus Group, Vuwa Kaunda Junior, said the firm intended to invest $350 million but Malawi seemed unprepared for such kind of an investment.
“The Augustus Group and the Malawi Government have been in contact since Augustus Group learned of the investment opportunity at the London Tourism Forum.
“The group visited Malawi in February and toured Likoma Island. I am unaware of what happened next, as the discussions were at a high level, and the group did not make any payments; the Malawi Government hosted them,” Kaunda said.
Malawi News has learnt that a meeting was held at the Bingu International Convention Centre in Lilongwe around May with representatives from the Ministry of Tourism, Magla, the Malawi Institute of Tourism and the Ministry of Justice where the investors made their pitch.
However, according to our source, the meeting did not end well, as some government officials raised concerns about the deal, citing many missing requirements.
Sources that attended the meeting said representatives of the investor were unhappy with the reaction, upon which they claimed to have already paid some money to some officials in the system to facilitate the investment.
We obtained notes representing the views of some of the technocrats that attended the meeting.
In the notes, they said the draft agreement needed through consultation with all relevant departments for the necessary expertise.
They highlighted a number of red flags including the following:
- The focus of the draft agreement for the government to surrender total control of the islands of Likoma and Chizumulu
- Lack of clear economic benefits of for the country in the investment plan.
- Non-applicability of the laws of Malawi including financial related laws and overriding existing laws and regulations
- Need for clear definition of the project’s scope.
- Displacement of more than 10,000 on the island
Principal Secretary in the Ministry of Tourism Chauncy Simwaka, who previously said he had no knowledge of the issue, did not respond to our questionnaire or calls this week to comment on our new findings.
Attorney General Thabo Chakaka Nyirenda again confirmed receiving the agreement from the Ministry of Tourism but he declined to share further details.
“As AG, I gave them my recommendations, but I cannot disclose them to the media as it is against the law,” Nyirenda said.
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