Malawi Demands Billions from US Gemstone Company for Alleged Unpaid Ruby Taxes

The government of Malawi is seeking the substantial sum of $309 billion (£245 billion) in outstanding taxes and royalties from a United States-based gemstone enterprise. This claim pertains to rubies that were exported from the southern African nation over the past decade, as confirmed by Malawi’s attorney-general to the BBC. Columbia Gem House, an enterprise owned by a family that asserts its commitment to fair trade principles, rejected the accusation, labeling it “baseless and defamatory”. Attorney General Thabo Chakaka Nyirenda also stated that the government is pursuing $4 billion from the French energy conglomerate TotalEnergies, related to unpaid earnings from an oil storage agreement, and $9.5 million from the Turkish tobacco company Star Agritech. TotalEnergies chose not to provide a statement, whereas Star Agritech asserted that it did not owe any funds. The total sum requested from these three international corporations is approximately 300 times Malawi’s national debt, which stands at about $1.2 billion, and 22 times its Gross Domestic Product (GDP) of $14 billion. Last year, Malawi received a $174 million bailout package from the International Monetary Fund (IMF) following its encounter with financial difficulties. In an interview on the BBC Focus on Africa podcast, Nyirenda indicated that Columbia Gem House had allegedly understated the worth of rubies it had shipped from Malawi. He further stated that “some of the evidence that we’ll be using comes from Columbia Gem House itself, such as declarations they have made in the US, and what they have reported on their website, which they have now deleted”. Nyirenda clarified, “The amount is not just [for] one year, it goes over 10 years back. It also includes the interest.” Columbia Gem House contended that the government’s calculations are inconsistent. In a released statement, the company asserted that the $309 billion claim “implies Malawi has somehow produced and exported trillions of dollars’ worth of coloured gemstones”. It further commented, “They haven’t done this by any stretch of the imagination.” Columbia Gem House stated that it does not conduct operations within Malawi, but instead procures its gemstones from Nyala Mines, a company owned by Malawians, where the government holds a 10% share. Nevertheless, Nyirenda informed the BBC that, as a minority shareholder, the government did not participate in the company’s daily operations, and “the name of Nyala Mines had been changed to disguise its ownership”. An effort by the US embassy in Malawi to resolve the disagreement was unsuccessful after the attorney general did not participate in a virtual meeting, an absence he attributed to “technical challenges”. The mining sector accounts for merely 1% of Malawi’s GDP, although the government has disclosed intentions to increase this contribution over the coming years. Wisdom Mgomezulu, a Malawian economist, suggested that the government might be presenting these claims at this time due to its current financial struggles. He informed the BBC, “They’re looking at all potential sources of income, but if you look at the claim versus the size of the economy, it’s just way too much.” According to Nyirenda, the disagreement involving TotalEnergies originates from an agreement Malawi established with the company in 2001. He explained that the French multinational was supposed to supply fuel to Malawi and receive tax incentives in exchange. Nyirenda asserted that the profits from this arrangement were intended to be split evenly, but TotalEnergies “only paid for two years and stopped paying in 2006”. The government has subsequently initiated legal proceedings against the company in Malawi, and Nyirenda stated that the government seeks a $4 billion payment to resolve the issue. Regarding the contention with Star Agritech International, the government alleges that the company acquired three million tonnes of tobacco, valued at $15 million, from Malawi in 2013 via three subsidiaries registered in Mauritius, Hong Kong, and South Africa, but did not complete payment for it. Nyirenda reported that Malawi Leaf Company, the state-owned entity responsible for selling the tobacco, pursued legal action in Hong Kong and prevailed in the lawsuit. He stated, “Over $9.5m was proven in a Hong Kong court,” and further mentioned that Malawi expects Star Agritech International to remit this sum. He additionally claimed that Star Agritech International’s Hong Kong subsidiary was created “for the sole purpose of obtaining the tobacco from Malawi”. In reply, Star Agritech International informed the BBC that its tobacco purchase amounted to $5 million, contradicting Malawi’s claim of $15 million. Iqbal Lambat, the company’s chief, remarked, “This is completely wrong and is representative of the type of problems businesses face in dealing in Africa.” Mr. Lambat additionally asserted that the delivered tobacco was of inferior quality. He explained, “This transaction experienced difficulties as the tobaccos were not one uniform grade but a combination of leftover scrappy tobaccos.” Malawi is not unique among African nations in pursuing funds it claims are owed by multinational corporations. In the preceding week, Mali’s military junta issued an international arrest warrant for the chief executive officer of Canadian mining company Barrick Gold, contending that the firm owes the West African state $500 million. Barrick responded by threatening to halt its operations in Mali, stating that “local operating conditions have deteriorated significantly with employees imprisoned without cause and gold shipments blocked”. Furthermore, in November, the junta freed the director and two staff members of Resolute Mining, an Australian mining company, following the resolution of a $160 million tax disagreement. The company made an upfront payment of half the sum, committing to pay the remaining half in subsequent months.