Absa suing Zambian govt

2009-07-03 19:48

Lusaka - The Zambian government is ready to face SA bank Absa in court for $74.3m (R589.8m) sought over the breach of a feedstock contract, the attorney general said on Friday.

"They have not yet served us with the summons but we shall wait for them to do so. I must however mention that we are ready to deal with the matter," said attorney general Mumba Malila.

The Amalgamated Bank of South Africa (Absa) confirmed it was suing the government.

"Absa confirms that it has instituted legal proceedings against the government of the Republic of Zambia for recovery of an amount of $74.3m," said spokesperson Patrick Wadula.

The Times of Zambia on Thursday reported that Absa entered into negotiations eight years ago to fund the Zambian National Oil Company (ZNOC) for the acquisition of feedstock from suppliers and for operations.

In a writ of summons filed this week, Absa argued that the government was liable on the basis of breach of collateral warranty for the payment of $74 394 060.21 plus interest, the paper said.

Negotiations with Zambia's government started after the ZNOC was liquidated, culminating in a revolving oil supply credit pact between the bank and private company Trans-Saharan Trading (TST) for $100m.

Absa advanced the funds to TST after the agreement and based on the strength of the government's undertaking, the newspaper said. Legal action followed after the company's defaulted on its obligations.

The Zambian government in 2002 withdrew the undertaking and terminated its contract with TST - which Absa said had impacted negatively and prejudiced the company while it owed funds to the bank, the report added.
 

- SAPA