Parastatals register mixed performance
State owned corporations continue facing deteriorating liquidity positions as only a handful show some signs of improvement in their performance, a government report has shown.
The Malawi Government 2022 Annual Economic Report indicates that out of the 17 public enterprises assessed last year, 11 parastatals posted profits while six registered losses.
But according to the report, on aggregate, trade debtors continued to erode State owned enterprises (SOEs) working capital, thereby worsening the liquidity position, a situation prevalent among the public utility companies and other trading parastatals.
For instance, Blantyre Water Board’s (BWB) liquidity position was weak as indicated by the current ratio of 0.15:1 as at June 2021, which is still below the required benchmark of above one.
Reads the report in part: “The board’s insolvency is largely due to non-payment of water bills by both private and public institutions.
“In monetary terms, this translated to a total of K6.5 billion, of which government debtors stood at K2.5 billion while private debtors stood at K5.9 billion.”
Similarly, Central Region Water Board (CRWB), Airport Development Limited (ADL), Malawi Posts Corporation (MPC), National Food Reserve Agency (NFRA) and the Malawi Institute of Management posted losses during the review period, largely on account of an increase in debtors for the parastatals with liquidity positions below one.
But the Malawi Energy regulatory Authority (Mera), Malawi Accountants Board, Malawi Bureau of Standards, Malawi Housing Corporation, Malawi Communications Regulatory Authority, Malawi Gaming Board and National Construction Industry Council have registered profits.
According to the report, Mera’s revenue grew by 41 percent in 2021 to K11.2 billion from K7.9 billion registered the previous year.
But despite recording a relatively higher surplus in 2021, Mera’s liquidity position deteriorated with current ratio declining from 2.03:1 in 2019/20 financial year to 1.35:1 2021 on account of the adjustments in the pump price not reflecting the prevailing market conditions.
Commenting on the parastatals’ performance, an industry insider Martin Kansichi Banda observed that the performances could be as a result of some inconsistencies and mismanagement in a number of parastatals and positive reforms.
He said: “For some time now, MPC, NFRA, ADL, BWB and CRWB have been making losses owing to, among other reasons, the fact that they have been rigid which calls for the need for serious diversification. A lot has been tried, but maybe it is time to think about shedding it off in two years’ time if the losses continue.
“For other institutions, the losses come for various reasons including politics. There is need to seriously consider some turnaround strategic plans leading to profitability.”
University of Malawi economics professor Ben Kaluwa also observed that the poor performance of the institutions, if left unchecked, could pose risks to the collection of the much-needed revenue in the country.
“We need proper policies that govern such institutions. We should also close all loopholes because we do not want to create a situation where the government will be forced to be bailing out institutions that are ideally supposed to be generating income for the country,” he said.
