It is the biggest financial scandal in
 Malawi’s history. Known as “cashgate”, it
 has affected the country’s relations with
 donors and caused outrage among
 Malawians. And with elections in May this
 year, the scandal could cost President
 Joyce Banda and her People’s Party votes,
 writes the BBC’s Chakuchanya Harawa.
 At the centre of the scandal is a computer-
 based financial information storage system.
 Some government officials have allegedly
 been exploiting a loophole in the system to
 divert millions from government coffers.
 It is estimated that up to $250m (£150m)
 may have been lost through alleged
 fraudulent payments to businessmen for
 services that were not rendered.
 According to a report in the local media, an
 audit by managers of the financial system
 has established that records of some
 transactions carried out between July and
 September 2013 were deleted.
 Allegations of the massive looting of
 government money became public following
 the shooting of the finance ministry’s then
 budget director Paul Mphwiyo in September
 2013.
 Just days before, a junior civil servant was
 allegedly found with bales of cash totalling
 more than $300,000 in the boot of his car.
 More cash was confiscated from some civil
 servants’ homes and car boots.
 ‘Crisis of confidence’
 The country’s main donors were infuriated.
 They have withheld $150m pending further
 investigation into the scandal.
 Woman in Malawi (file photo)
 Malawi is one of the world’s poorest
 countries and is reliant on donor funding
 Up to 40% of Malawi’s annual budget is
 donor-funded.
 The EU ambassador to Malawi, Alexander
 Baum, told the BBC: “It is a crisis of
 confidence, and unless there is transparency
 and everybody has the feeling and trust that
 the crisis has been addressed with full
 determination, confidence will not return.”
 But it is not all doom and gloom for the
 government.
 The IMF, which had been withholding
 funding for the same reason, has just
 decided to give nearly $20m to the country.
 A government preliminary report looking
 into the alleged fraud, carried in conjunction
 with British experts, has now been
 completed although it has not been made
 public.
 Police have since impounded vehicles,
 houses, apartments and office buildings
 belonging to those suspected of
 involvement with “cashgate”.
 The Director of Public Prosecutions, Bruno
 Kalemba, told the BBC: “People have to be
 afraid of government money. In a country
 like ours, the needs are enormous and to
 imagine that just a few people were able to
 get their hands on this much money is quite
 discomforting and unpatriotic.”
 With the start of the trial this week of two of
 the 70 people charged so far, many will be
 hoping that more revelations will come into
 the open.
 But while the legal battles are being fought
 in the courts, on the political front cashgate
 could become a major issue in the
 forthcoming elections.
 ‘Scandalous’
 It is already dominating campaign rhetoric.
 The opposition has criticised the
 government’s handling of the scandal,
 portraying the current administration as
 corrupt.
 Protesters in Malawi – October
 2013
 Many Malawians have been shocked by the
 allegations
 President Banda argues that she initiated
 appropriate steps, including investigating,
 apprehending and prosecuting suspects as
 soon as she became aware of the
 allegations.
 Some have linked the scandal to the
 president, saying her party was trying to
 raise funds for the May election campaign.
 Her office described the allegations as
 “scandalous and baseless”.
 Some of the top names facing charges were
 until recently senior officials of the ruling
 party.
 Sacked Justice Minister Ralph Kasambala,
 who has been charged with the attempted
 murder of the former budget director, has
 told a magistrate he wants President Banda,
 her sister and two other senior officials to
 be his witnesses when his trial starts.
 Another former ruling party executive
 committee member and businessman has
 been charged with theft and money-
 laundering.
 It is alleged that his company pocketed $
 6.5m for services not rendered. Both deny
 the charges.
 The financial management system was
 adopted in 2005 by the late Bingu wa
 Mutharika administration.
 President Banda has suggested that the
 looting may have started as far back as
 2010 following a directive by the former
 president that banks should honour all
 government cheques without asking
 questions.
 Ms Banda became president in 2012
 following the sudden death of Mr Mutharika;
 she had been vice-president although she
 had been fired from the then ruling party
 and had formed her own party.
 For the moment, the political effects of the
 trial are not not clear – the scandal could well
 hurt both Ms Banda’s People’s Party and Mr
 Mutharika’s Democratic Progressive Party
 (DPP), possibly allowing another party to
 gain ground.