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Escom faces fresh probe

 

Ministry of Finance, Economic Planning and Development says it has launched a probe into how Electricity Supply Corporation of Malawi (Escom) reached the point of requesting a K50 billion bailout barely two years after being financially stable.

Minister of Finance, Economic Planning and Development Goodall Gondwe told Parliament in Lilongwe yesterday that Treasury has since instituted a task force to undertake the investigation.

Escom workers fixing transmission lines

The minister was responding to observations from Parliament’s Budget and Finance Committee that Escom had in excess of K18 billion in February; hence, the bailout request did not make sense.

Said Gondwe: “The 2018/19 budget has not included resources for a possible bail out because the Treasury in liaison with the National Audit Office is still investigating how Escom could have lost this amount of money in such a short time. As we speak, the government has instituted a task force to conduct the investigations.”

Escom has attributed its poor financial standing to the unbundling and creation of Electricity Generation Company (Egenco) in 2017 as part of the Power Sector Reforms which have, among others, opened the generation business to independent power producers (IPPs).

The unbundling of Escom saw the parastatal entering into a power purchasing agreement with Egenco at tariffs approved by Malawi Energy Regulatory Authority (Mera).

In an interview with The Nation, new Escom board chairperson Thom Mpinganjira attributed the K50 billion deficit to mismanagement and bad procurement decisions.

Escom owes Egenco about K28 billion, Mera K2.7 billion in unremitted levies and K40 billion to various local and international suppliers.

Treasury’s revelations of a fresh probe come after Escom board announced it had ordered a forensic investigation into what it described as “blatant disregard of procurement rules and regulations” that threaten to bring down the whole power sector.

Meanwhile, government’s failure to pay what it owes the private sector has hit hard the budget as it has paid K237.7 billion through the issuance of zero-coupon bonds.

Initially, the arrears, dating back to June 30 2014, were pegged at K155 billion before examination by the Auditor General’s office.

But Gondwe reported to Parliament in his 2018/19 budget winding up speech yesterday that the Auditor General had examined arrears amounting to K314 billion of which K117 billion could not be certified due to lack of supporting documents.

He attributed the increase from K155 billion to K314 billion to the depreciation of the kwacha to the dollar, from K450 to K730 at the time the power utility was claiming from Treasury.

“Some ministries did not report all their arrears that they had accumulated as at 30th June 2014, and arrears from court cases were not included in the total amount of arrears that we had,” he added.

The government’s domestic debt currently stands at K1.2 trillion but Gondwe has promised to reduce the budget deficit to 3.8 percent of the gross domestic product to reduce borrowing.

“For Malawi to grow we will continue to borrow, however in a very careful way as has been advised by international organisations,” Gondwe said yesterday.

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