Ministry backs Escom

Ministry of Natural Resources, Energy and Mining has backed Escom, telling a parliamentary committee on Tuesday that the power utility has instituted reforms in procurement and general operations to improve efficiency and regain stakeholder confidence.

The ministry’s chief director (Energy) Chimwemwe Banda gave the assurance in her response to a question from a member of Parliament’s Commissions and State Enterprises Committee on what action they have taken following reports of fuel theft, misprocurement and financial mismanagement at the Electricity Supply Corporation of Malawi (Escom).

The committee also sought clarification on how 3.8 million litres of diesel valued at K1.9 billion was stolen, rendering the diesel generators inefficient for several months.

In response, Banda said government was happy with the current Electricity Supply Corporation of Malawi (Escom) management, which included a new chief executive officer (CEO)Allexon Chiwaya and new directors. She described the team as a new broom that would sweep the corporation clean.

She said: “A task force has been formed by the board to scrutinise procurement transactions and there is a new procurement officer seconded from the government. There is a new CEO who was not there when the mess happened and there are new directors.”

The audit of Escom financial statements for the financial year ended June 30 2017 found that the corporation ordered goods worth K8.3 billion from about 23 suppliers without following internal procurement procedures and without the knowledge of key management.

Out of the K8.3 billion worth of items, Escom only needed K3.2 billion of them, rendering the remaining K5.1 billion useless, according to the report.

The goods included 24 550 meters valued at K1.8 billion only for 330 meters  to be used in 12 months.

But Banda said the task force the board established has been mandated to follow each step of the procurement procedure.

“Escom has also minimised the hiring of vehicles to reduce operational costs. The ministry is keeping an eye on Escom and will act if we see that things won’t change,” she said.

In his contribution, Chiwaya promised that misprocurement will be a thing of the past with the systems put in place to encourage investments.

Escom has also resolved to submit its procurement plan to the Director of Public Procurement and Disposal of Assets for accountability.

During the meeting, Chiwaya also disclosed to the committee that International Police (Interpol) had been called in to assist in the investigations pertaining to the stolen 3.8 million litres of fuel meant for diesel generators.

He told the committee that Escom noted that the diesel was not reaching Aggreko, the company where Escom leased the generators, when it noticed that the machines efficiency was below standards.

Said Chiwaya: “When we checked, we noted that they were not using the amount of fuel that was procured. There was a syndicate in the procurement chain.

“Following the arrests of several suspects, including security guards, the fuel trucks are now accompanied by an armed escort resulting in reduction of fuel stolen. We are looking to recover the money lost from insurance.”

Electricity generation is currently at 351 megawatts (MW) against a demand of 470MW.

There is 114 MW being generated from diesel generators which has reduced load shedding from 23 hours last year to the current six hours.

Only 12 percent of the population has access to electricity despite an intensive Malawi Rural Electrification Programme currently in the eighth phase.

Escom plans to increase tariff, by 60 percent from an average K73 per kwh to K117 per kwh within four years.

In June, new Escom board chairperson Thom Mpinganjira said his board had ordered a forensic investigation into—by his admission—blatant disregard of procurement rules and regulations that was sinking the power utility and threatening to bring down the whole power sector.

Treasury also rebuffed Escom’s K58 billion bailout request.

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