Parastatals should be run like businesses

Yet another gloomy headline graced the front page of The Nation newspaper edition of February 28 2017. It read: ‘Parastatals miss target by K8.8 billion’.

The story said State-owned enterprises or parastatals remitted K2.8 billion in dividends to their shareholder, the Malawi Government through Treasury. That amount was against a set dividend target of K11 billion as the statutory corporations’ contribution to the 2016/17 National Budget.

Reasons for the underperformance of most parastatals have been varied. However, political interference from the State has topped the list in most cases of underperformance.

Records show several performing parastatals that have previously remitted dividends to Treasury. Besides, there are also “sick babies” among the statutory corporations who have been on life-support machines year in and year out.

In the current situation where the enterprises missed the target by K8.8 billion, government itself might have contributed to the problem as some of its ministries, departments and agencies (MDAs) owe parastatals colossal sums of money.

In June last year, we learnt that the MDAs or government in general owed the Electricity Supply Corporation of Malawi (Escom) and the five water boards in excess of K10 billion. Escom alone was owed K4 billion in unpaid electricity bills whereas Blantyre Water Board (BWB) was owed K1.3 billion and Lilongwe Water Board (LWB) K2.2 billion.

Given the picture above, it is clear that the huge arrears are impacting negatively on the operations of the statutory corporations.

In an earlier article under the title ‘Corporate Governance in the Reforms Era’, I argued that there has been little or no talk about corporate governance related to public enterprises. The situation is compounded by the apparent political interference by authorities in the running of the affairs of some State-owned businesses.

This political interference is evident, for example, in the recruitment of the top brass, especially chief executive officers (CEOs) and their boards.  I argued for merit in recruitment of the top brass which should be given targets and goals to achieve if we are to move forward.

My thoughts were vindicated by corporate strategy expert James Kamwachale Khomba, a professor of finance and corporate strategy at University of Malawi’s the Polytechnic, who attributed the underperformance of parastatals to leadership and management style.

To turn around the ailing State enterprises, the Public Service Reforms Programme underway should stress and embrace corporate governance in the enterprises to realise their worth instead of carrying them on the shoulder through subventions and bailouts. Take Admarc for example, why should it make losses when everyone needs the food it sells? Is it run as a business?

If government advertises positions for CEOs for parastatals such as Escom and the five water boards, why should the same government, through the head of the Executive, the President, of course backed by some laws, handpick people to similar positions in other State-owned ventures? Why the double standards?

Executive management of parastatals should be hired on merit and given performance-based contracts. Political appointees, despite having relevant qualifications, often see their role as first and foremost to please the appointing authority or weird decisions made by managers in some State institutions that leave one to wonder what they were high on to make such schoolboy blunders.

Without change, I foresee continued losses and poor performance by government-owned businesses and progress will elude us.

If parastatals were left to be run like businesses, surely, most of them would perform  better and pay the required dividends to government.

Many governments or the public sector have not been known to be good entrepreneurs. This was one of the reasons private sector based or led economic policy frameworks have been prescribed as keys to economic success.

So, if Treasury expects to get its desired dividends from parastatals, it should pay up and undertake necessary reforms in the running of their affairs.