Admarc, Neef, TC, BWB among worst parastatals

At least four State-owned enterprises, including Admarc, National Economic Empowerment Fund (Neef), Tobacco Commission (TC) and Blantyre Water Board, have been branded the worst performing parastatals in the last fiscal year.

Minister of Finance Sosten Gwengwe disclosed this in Lilongwe yesterday during the signing ceremony of the 2023/24 Shareholders Letters of Expectations of State Owned Enterprises (SOEs) and Statutory Bodies meeting.

Speaking on the sidelines of the meeting, the minister described as a mixed bag the performance of the 72 SOEs, and revealed 

plans to bring in consolidated audit reports of the companies for Parliament’s scrutiny.

Said Gwengwe: “We’re also going to be ranking all 72 of them in terms of some measures that we are putting together, just to see and let the public know how our SOEs are doing in terms of profitability, as well as public service delivery.”

He said there have been requests for bailouts from some SOEs including the Malawi Posts Corporation (MPC) and Auction Holdings Limited (AHL), but argued that government’s take is that SOEs should be self-sustaining, grow their revenue base and stand on their own.

Said the minister: “It is a bit surprising that, instead of graduating from being subvented to a fully-fledged institution, they are now asking to move back from a fully-fledged institution like a trading SOE to start being subvented. It means that somewhere, things are not going alright.

“That is why the agreement that has been signed today becomes very important so that we look at their cost structures, and how, going forward they can generate their own revenues, even if it means government allowing some of these SOEs to charge cost recovery prices so that they’re not subsidising their services.” 

According to the findings, Agricultural Development Marketing Corporation (Admarc) tops the list of poor performing companies in the trading sector while TC tops the regulatory sector.

The findings further show that Electricity Generation Company of Malawi(Egenco) is the best performing company in the trading sector followed by Lilongwe Water Board (LWB) and Airport Development Limited (ADL).

Malawi Communications Regulatory Authority (Macra) tops the best regulators followed by Technical Entrepreneurial Vocational Education and Training (Teveta) and National Construction Industry Council (NCIC).

Speaking during the meeting, Gwengwe observed that some of the government-owned companies continued to overspend the last financial blue print in disregard of the expenditure control measures, thereby eroding their own working capital in the process.

Said the minister: “I have noted that others continued to overspend in disregard of the expenditure control measures, eroding their own working capital in the process. 

“I wish to urge all of you to continue adhering to expenditure control measures failure of which will attract sanctions as stipulated in the Public Finance Management Act.”

He also noted that despite urging all utility companies last year–namely water boards and Escom–to ensure that all public institutions have functional prepaid meters in use by the end of the financial year,the target is yet to be met.

Gwengwe also bemoaned the failure by some of the companies to open and maintain a Revenue Holding Account at the Reserve Bank of Malawi (RBM) as stipulated by the law. 

According to him, to date under the pilot phase 18 out 22 regulatory SOEs have migrated their accounts while 4 are yet to finalise the process. 

Those that are yet complete the process include Medical Council of Malawi, National Water Resources Authority, National Construction Industry Council and Malawi Accountants Board.

Said Gwengwe: “I wish to reiterate the call I made last year to all board chairpersons that this is a directive in line with the provision espoused in the Public Finance Management Act of 2022. As such, all the four named above should comply with the directive as a matter of urgency, said Gwengwe.”

Some of the parastatals are also said to have done poorly in the timely submission of audited financial statements a situation that has resulted in failure to clear the backlog by the  by the subvented organisations and also failure by the Ministry of Finance to timely produce and lay before Parliament a consolidated SOE report as required by law. 

Gwengwe has since directed that all the backlog be cleared by December this year without fail.

He also noted that there is laxity and general entitlement by some parastatals that money generated and the profits realised belong to their organisation, arguing that this is a wrong misconception.

On his part, comptroller of Statutory Corporations Peter Simbani said among other things that have led to financial losses in some SOEs are the high levels of receivables such as debts being owed to these institutions; and operational issues such as issues of procurement, misprocurement and high debt levels, all of which culminate into the parastatals poor performance.

He said: “Going forward, what we want to do is to intensify the issue of monitoring. The Ministry of Finance will come up with a monitoring framework, and once that has been produced, my department will develop key performance indicators (KPIs) so that we can continue to monitor them in terms of their performance.”

Egenco was named as the best performing parastatal despite Kapichira Hydropower Station being down for several months in the year, leading to drastically reduced power generation capacity.

Egenco chief executive officer William Liabunya described the development as exciting.

He said: “It could be a surprise to others as it was the year that we had passed through the worst disaster when Kapichira was washed away, but while we were working on its restoration, we did not forget to follow the government procedures and the government laws.

“At the same time, we also follow the budget that we present to parliament and the board, when it is approved, so that at the end of the day we should be able to look back on the year and see that we performed as per the expectations of the government.” 

Liabunya said they only managed to pay about K500 million to government because the loss of Kapichira also led to losses on their planned profit— incurring over K1.3 billion losses in revenue every month because of that.