Malawi conglomerate named in Panama Papers9 May 2016
PANAMA PAPERS: Press Trust Corporation, an organization established through an act of parliament and run by political elites in Malawi, is secretly registered in the tax havens of British Virgin Islands, Jersey and Channel Island. INK Centre for Investigative Journalism and Centre For Investigative Journalism Malawi, through the support of International Consortium of Investigative Journalists and African Network of Centres for Investigative Reporting have established.
Collins Mtika and Ntibinyane Ntibinyane
An organization established through an act of parliament and run by political elites in Malawi, is registered in the tax havens of British Virgin Islands, Jersey and Channel Island.
Press Trust Overseas Limited, a subsidiary of Press Trust Corporation, is amongst the 214 000 offshore companies that were registered by discredited Panama based law firm Mossack Fonseca, documents seen by INK Centre for Investigative Journalism reveal.
Early this month, the International Consortium for Investigative Journalists and its international partners began reporting stories on the leaked 11.5 million documents that shows that the law firm Mossack Fonseca systematically assisted the rich and powerful to hide money and evade taxes.
The new revelation that a statutory organization, Press Trust Corporation, has used the discredited law firm since 2008 to handle its offshore services is stunning. As a public organization, its financial report and annual reports does not indicate that the company is registered in Tax havens such as British Virgin Islands.
By all account, Press Trust is a huge organization in Malawi, a country considered to be one of the poorest countries in Africa. Press Trust Corporation Limited has footprints in companies both listed and unlisted at the Malawi Stock Exchange ranging from banks, telecommunication, beverages and fuel service stations.
The main object of the Trust is to provide funding by way of grants, donations or contributions to any person or institution for charitable purposes which are in the interest and for the benefit of the people of Malawi including for the advancement of their education, health, social welfare and housing, it says on its website.
In the 2015 financial year, the Trust raked in almost US$3 million in revenue but doled out almost US$700,000 in charitable expenditure. As the CEO refused to make any comment, it is also unclear how the Trust justifies the amount of money it dispenses by way of charity compared to the administration charges it levies.
Evidence unearthed by INK Centre for Investigative Journalism, Centre for Investigative Journalism Malawi through ICIJ shows that the company was registered in the British Virgin Islands in May 26, 1999. The organization then appointed Switzerland and France based businessperson, Roger Ronald Matthews, to be its first director.
For more than a year Matthews ran the affairs of Press Trust Overseas Limited before seven other Malawians with political connections were appointed in September 14, 2000. Matthews was subsequently appointed the company secretary in July 2014.
The company (PTOL) got off the ground with US$50,000 worth of shares, according to the documents. But, as of March 31st 2014, had net assets of US$5.2 million after it had written off intergroup loans of US$8.7 million.
According to the documents the investments in the global capital and money markets are managed by IMARA Asset Management (Zimbabwe) Limited. IMARA also manages other 300 unnamed entities, mostly from Africa
The directors of the PTOL are persons of considerable influence in Malawi. They include former Members of Parliament and cabinet ministers. According to records provided by ICIJ, on July 17, 2014, the directorship of the organization significantly changed for the first time with former cabinet minister and well-known Malawian politician Professor Peter Mwanza taking the leadership of the organization as chairperson.
Other directors were Tony Kandiero, Ben Chidyaonga, Doctor George Kayambo, John DS Gray, Esther Chioko and Nancy G Tembo. (See story, ‘Faces behind Press Trust Overseas Limited’)
Both Professor Mwanza and Ben Chidyaonga ceased to be Press Trustees after serving their maximum two terms of six years each. But they were shifted to the PTCboard to start other new terms as board members.
The current Press Trust Board has Dr. George Kayambo as Chairperson, Tony Kandiero, Esther Chioko, Nancy G Tembo, Mayer Chisanga, Wilson Chirwa and Jim Nsomba.
While the organization has never mentioned in its official documents that the organization was registered and domiciled in Tax heavens, this week the organization maintained that it was above board and that it has nothing to hide.
“PTOL was never formed secretly neither is it a shell company. PTOL was registered in the British Virgin Islands in 1999 under the International Business Companies Act (CAP 291),” said Chief Executive Officer Patrick Mhango in an emailed response.
Mhango further claimed the Reserve Bank of Malawi approved the foreign subsidiary’s incorporation and basis of operation in 2000. Mhango could not explain why the organization chose to invest in tax havens and not in other jurisdictions.
The PTCBoss further piggybacked on PTOL saying it has a clean slate and its accounts are audited by Deloitte Zimbabwe. He however did not back this claim with documentary proof. Mhango even tried to gag the publication and/or use of the documents on PTOL found in the Panama Papers saying they were confidential.
“Indeed, I have never heard of a company sharing its documents such as minutes with the public. Therefore, these will remain confidential to PTOL” he said.
Asked about the rationale behind investing in a tax haven, Mhango said that as far as they are concerned BVI is a credible jurisdiction in which to do business. He added, “By the way, Press Trust being a public trust does not pay taxes either here in Malawi or indeed anywhere else. Therefore, the objective of PTOL was never to take advantage of the ‘tax heavens’. It was a purely commercial business decision to expand the investments of Press Trust globally in the well-established global capital and money markets”.
While it is true that Press Trust as a holding company is not required by law to pay tax, its commercial subsidiaries pay tax. The registration of PTOL in tax havens like BVI makes it difficult for Malawians to scrutinise the affairs of the organization, a public entity.
Asked about the organization’s association with Mossack Fonseca Mhango claimed ignorance adding that their legal counsels are Obelisk Secretaries Limited. This is appears to be far from the truth as documents show that Mossack Fonseca has been working with PTOL for many years now.
Press Trust Mauritius operation
Press Trust Overseas Limited, which is 100 per cent owned by Press Trust Corporation, is domiciled in Jersey, Channel Island and British Isles but conducts its activities in Mauritius as an investment holding company, according to a copy of the declaration form from Mossack and Fonseca signed by Roger Mathews, Company secretary on 20th May 2015.
Alongside Bermuda and Luxembourg, Mauritius is a recognized tax haven where major Banks stash illicit cash according to non-profits U.S. Public Interest Research GroupCitizens for Tax Justice and International Business Times.
The World Bank study of Illicit Financial Flows in Malawi and Namibia estimates that revenue lost to corruption and tax evasion accounts for between 5% and 10% of the GDP. Illicit Financial Flows include practices used to reduce tax liability and diminish a country’s revenue, such as tax holidays or transfer pricing.
Malawi lost close to US$500 million due to illicit Financial Flows, about 17 per cent of its GDP, according to the June 2015 Global Financial Integrity report. The lost funds could have paid the Civil Service wage bill for one year.
Malawi’s anti money laundering expert and private practice lawyer, Jai Banda, said while there is no law that prohibits the formation and registration of offshore companies in tax havens there is need to investigative the real reason for doing that.
“They might want to use that company to facilitate importation and exportation of goods. Or they might want to use that to externalise forex,” he said.
There is no evidence that the Press Trust or any of its trustees are involved in these illicit activities. However, legitimate businesses registered in tax havens do partake of the secrecy those jurisdictions offer. It would be difficult for someone in Malawi to ascertain how a trust registered in Panama conducts its business beyond what it chooses to declare. The Trust’s reports only mention that the organization ‘has invested overseas’, but these overseas places are not mentioned by name. This seems to fall short of the level of transparency generally expected of public entities. The still unanswered question is how and why a legitimate trust performing work in an African country running a worthy charity would end up on Mossack Fonseca’s books.