Malawi road sector arrears peak at K27 billion

The European Union (EU) has said that the accumulation of road sector arrears, which as at June 2013, stood at K27 billion (about $54m), risks derailing the gains made by Malawi in the road transport sector.

EU Head of Delegation to Malawi Marchel Gerrmann, speaking during the opening of the Sixth Joint Sector Transport Review meeting in Lilongwe on Monday, said they are not only worried with the arrears, but also the overdue payments which have emerged in the last two years as a result of over commitment of new road construction contracts.

Said Gerrmann: “The transport sector has not been spared by the macro-economic problems that have affected the country in these last years as a consequence of the Cashgate scandal. Of particular concern for the financial stance of the sector is the accumulation of road sector arrears, which as at June 30 2014 stood at K27 billion and have increased further.”

He said overdue payments have emerged over the last two years mainly as a result of over commitment of new upgrading contracts without consideration to the cash flow required by these multi-annual projects.

Gerrmann also said the EU is concerned with the lack of appropriate financing for infrastructure maintenance and, in particular, for the road network.

“Lack of maintenance accelerates depreciation of assets and by postponing routine maintenance, the cost to bring roads back to appropriate standards will increase every year and will shorten the service life of the roads,” he said, stressing that lack of maintenance makes roads more dangerous and impacts on road users by increasing vehicle operating costs, thus increasing transport costs and rendering Malawi exports less competitive.

Minister for Transport and Public Works Francis Kasaila admitted the challenges, but said government is working to solve them.

“We acknowledge the existence of huge arrears, which have crippled the capacity of the construction sub-sector. As government, we are working hard to find a solution and, during this week, the Ministry of Finance will give us the way forward,” he said.

Apart from the huge arrears, Kasaila said encroachment and vandalism continue to retard achievements already made, while a weak legislative framework has also negatively affected the proper delivery of service in some sectors.

He said the dollar value of the fuel levy continues to dwindle in the face of a depreciating kwacha, leading to reduction in resources for road construction, maintenance and rehabilitation.

The joint sector review meeting aims at addressing some of the challenges government is facing in improving the transport sector.