Escom posts k49 billion loss
The Electricity Supply Corporation of Malawi (Escom) recorded a K49.6 billion loss in the 2023/24 fiscal year due to the 44 percent devaluation which affected its foreign currency payables.
According to the government’s Annual Economic Report for 2024, the business which was on a profit trajectory having posted a K12.8 billion profit in the first-half of the year that ended on September 30 2023 was hugely affected by the November devaluation.
It attributed the improved performance in the first-half to the write-off of payables to the Electricity Generation Company (Egenco) and the installation of prepaid meters to new customers that improved revenue collection efficiency.
Reads the report in part: “However, there is an expectation of a loss-after-tax of K49.6 billion at the end of the financial year, March 2024 largely on account of exchange losses which have affected the parastatal’s loan repayments.
“Despite the Meter Migration Project, Escom still faces challenges in collection of its revenue from government and quasi–government departments, including water boards.”
Meanwhile, as of September 30 2023, ministries departments and agencies (MDAs) and State-Owned Enterprises (SOE) owed Escom K6.5 billion, while water boards owed the organisation K20 billion.
Towards the end of last financial year, the government made a determination to write-off capacity charges amounting to K65.9 billion which were included in the cost of energy but were not the actual energy delivered.
Meanwhile, the utility provider is facing challenges in meeting terms and conditions of payments due to forex scarcity, where on a number of occasions, foreign suppliers are charging penalties against outstanding amounts.
In an interview, Economics Association of Malawi acting president Bertha Bangara-Chikadza said Escom’s reported first-half-year profit do not necessarily reflect improved efficiency, saying SOE in the utility sector face similar challenges, including revenue collection from ministries, departments and agencies.
“Both Escom and BWB reported negative profit margins between 2020 and 2022. To increase efficiency, structural issues that exacerbate the liabilities of both institutions need to be sorted out.
“Escom fails to clear debts with Egenco, and BWB fails to clear debts with Escom. One is at an advantage and ends up reporting a surplus, while the SOE that’s owed reports a deficit. It means the deficit in one parastatal may not be entirely due to unpaid bills but mostly it’s one of the most significant reasons above offering services that are not cost-reflective.
In a separate interview, Consumers Association of Malawi executive director John Kapito said most parastatals are not performing well because they are not being run as business entities.
“Time has come for us to run our parastatals as businesses. We need to vigorously and strategically start to rethink our business models in the parastatals. These are entities most of whom are monopolies that can begin to make money and good investments to expand their operations and are able to pay their shareholder who is the taxpayer.
“The weakness in most of the parastatals begins with the governance structure, which is mostly political, with no single element of knowledge about the institutions and their dynamics,” Kapito said.
