Fraud, nepotism in egenco audit

Electricity Generation Company of Malawi (Egenco) is under a forensic audit and investigation expected to probe mismanagement of resources and reports of favouritism in the recruitment of employees.

Egenco acting chief executive officer Dr. Maxon Chitawo said the exercise is expected to be completed by mid next month.

The Secretary to the Treasury (ST), who is the major shareholder in Egenco with a 99 percent stake, has commissioned the investigation, according to Ministry of Finance and Economic Affairs spokesperson Taurai Banda.

He said: “The forensic audit was activated following various kinds of allegations of unlawful activities at Egenco. Under such circumstances, the ST is mandated by the PFM [Public Finance Management] Act, 2022 to conduct investigation.”

Terms of reference for the consultant to conduct the forensic audit indicate that the main objective is to probe “various kinds of allegations of unlawful activities with a possibility that the evidence gathered would be used in court”.

There are also allegations of abuse of public funds through misprocurement and negligence in maintenance of Kapichira Hydropower Station dam spill gates, which led to its extensive damage during Cyclone Ana in January 2022, thereby causing prolonged nationwide power outages.

Reads the TORs in part: “It is reported that procurement has generally been designed and implemented to maximise rent-seeking tendencies by staff and the board.”

The auditors have also been tasked to establish whether or not it was necessary to hire vehicles for operations as well as make a comprehensive assessment of the excessive overtime, duty allowances and other financial provisions provided to staff.

Besides financial mismanagement allegations, there are also claims that  some managers have had sexual relationships with their junior employees in exchange of promotion and other favours.

Reads the terms: “The consultant should investigate a sample of recruitments, staff welfare treatments carried out during the selected time-frame, comment on the alleged differential staff treatment [in promotions, performance awards, capacity building, training and special consideration], nepotism, sexual harassment, indecent behaviour by managers.

“How do these relate to the annual average staff turnover ratio? Incremental performance from one year to the next? Staff motivation?”

The TORs were developed on August 17 2022, but the forensic audit only began on October 16 this year, over a year later.

There has been no financial audit report in the past three years until the forensic investigation.

 Commenting on why Egenco has gone four years without a financial audit, the office of the SPC said it was due to a bill dispute between the Electricity Supply Corporation of Malawi (Escom) and Egenco.

“It’s important to note that the lack of financial audits is not exclusive to Egenco. Escom, too, has faced a similar situation. The root cause of this issue can be traced back to a longstanding bill dispute between Egenco, the power generator, and Escom, the power distributor and ultimate revenue collector. This dispute is rooted in a Power Purchase Agreement [PPA] signed between the two entities in 2018,” office of the SPC said in a written response yesterday.

 But Auditor General’s office spokesperson Rabson Kagwamminga said the delays were on account of the absence of the board and processes to procure a private audit firm.

Prior to the commencement of the forensic audit, ST McDonald Mafuta Mwale sent Egenco chief executive officer William Liabunya and director of corporate services Videlia Mluwira on leave.

The two obtained a court injunction against the ST’s decision, but government vacated the injunction and set the audit in motion.

In May this year, speaking at the opening of the 33rd International Trade Fair and the Malawi Bureau of Standards complex in Blantyre, President Lazarus Chakwera expressed displeasure with Egenco after his deadline to fix Kapichira Hydropower Station Dam by Christmas last year was missed and there was no report to his office for over five months.

Kapichira Hydro Power Station suffered extensive damage, particularly at its intake dam following the flooding of the Shire River due to Tropical Storm Ana in January 2022.

This forced Egenco to shut down the station, taking 129 megawatts off the national grid, consequently  leading to national blackouts that hit industries and consumers alike.