Nine parastatals, including the country’s five water boards and the Electricity Supply Corporation of Malawi (Escom), are operating without boards following expiry of their mandates a week ago.
Governance experts have decried the development, with one describing it as “worrisome and a recipe for abuse” while the other urged the appointing authority to expedite appointments of new boards.
The affected water boards are Lilongwe Water Board (LWB), Blantyre Water Board (BWB), Northern Region Water Board (NRWB), Central Region Water Board (CRWB) and Southern Region Water Board (SRWB).
bad governance
Other State-owned companies whose boards’ tenure has expired are Airport Development Limited (ADL), Airport Company Limited (ACL) and Lilongwe Handling Company (Lihaco).
In an interview on Tuesday, Comptroller of Statutory Corporations Peter Simbani confirmed the boards’ tenure.
For Escom, Simbani said its shareholders will convene a general meeting shortly to appoint or reappoint directors in accordance with the Companies Act.
Said Simbani: “This will be done with the full realisation that any delays in doing so would have negative consequences on the operations of the company.”
He added that for the other parastatals, shareholders are working on reconstituting new boards in line with their respective statutes.
Commenting on the situation, Centre for Social Accountability and Transparency (Csat) executive director Willy Kambwandira described it as “worrisome and a recipe for abuse,” considering that some of the State-owned companies are struggling and require board oversight.
He observed that boards play an important oversight role, adding that there are certain decisions CEOs of these companies cannot make.
He said: “Government knew about the end of tenure for these board members and needed to act in time by appointing new members. This is a sign of bad governance, and any continued delays may raise speculation that some people would create chaos in these parastatals and benefit from it.”
In a separate interview on Thursday, governance expert Charles Kajoloweka, who is also the executive director of Youth and Society (YAS), urged the appointing authority to expedite the appointment of new boards.
He stressed that Malawians hope the new appointments will be merit-based.
“The oversight mechanism of these State institutions is critical at a time when most of them are struggling due to the economic situation and a culture of corruption and abuse of authority,” said Kajoloweka.
The Malawi Government Annual Economic Report 2024 shows that high cost of borrowing, inter-agency arrears and tariffs that do not reflect the costs of production continue to weigh in on the performance of State-owned enterprises (SOEs).
The report, released as part of the 2024/25 National Budget documents, shows that the performance of the SOEs in the water and sanitation sector was mixed as of March 1 2023.
It also indicates that CRWB recovered from a loss of K390.8 million in the 2021/22 financial year to post a profit of K1.95 billion in 2022/23 fiscal year while the Lilongwe Water Board continued its positive trend with a profit-after-tax of K395 million.
But BWB and NRWB, on the other hand, incurred losses of K20.87 billion and K1.7 billion, respectively, in the year under review, according to the report.
A similar trend was observed in the energy sector, with the Electricity Supply Corporation of Malawi posting a profit of K12.8 billion, largely attributed to the government writing off the company’s debt to its sister company Electricity Generation Company (Egenco).
But Egenco recorded a loss-after-tax of K2.1 billion, a significant drop from the K5.1 billion profit achieved in the 2022/23 financial year.
Economic statistician Alick Nyasulu said in an earlier interview that most of the SOEs underperform because they are prone to financial abuse by the leaders entrusted to provide corporate governance, thereby incurring financial losses that are not linked to their core businesses.
Corporate governance expert James Kamwachale Khomba said in an earlier interview that most of the parastatals underperform or fail to implement reforms because they are headed by boards that are usually recruited for political expediency.
“That creates a challenge when they have to provide oversight on the corporate side of the SOEs and implement reforms to make corporations more competitive,” he said.
