Parastatals struggle to remit dividends
Parastatals are struggling to remit dividends to Treasury, despite the entity having implemented some reforms to help improve parastatals dividends remittances. .
In the past five years, for instance, (2018/19 to 2022/23), Treasury data shows that out of a projected K164 billion, the parastatals only remitted K82.2 billion.
This means that the State-owned firms missed their targets by K81 billion.
In an interview, economist Bond Mtembezeka observed that the implication of the poor performance is that government does not have resources that would have otherwise been made available if the entities were remitting dividends.
He said: “So there are potentially two reasons why they are failing to remit dividends; either they are not making profits because you can only remit a dividend once you turn a profit or laxity in control and oversight over the remittance process.”
In January this year, Comptroller of Statutory Corporations Peter Simbani told the Parliamentary Committee on Government Assurance and Public Sector Reforms Programme that utility firms were operating at a loss and struggling to remit dividends to the government because they are owed billions of kwacha in unpaid bills.
Meanwhile, Ministry of Finance and Economic Affairs has projected that five of the 25 parastatals or 20 percent, will post losses at the close of the 2022/23 financial year ending on March 31 2023.
Blantyre Water Board (BWB) and Northern Region Water Board are expected to post losses of K21.1 billion and K5.8 billion, respectively, while Southern Region Water Board is expected to post a loss of K216 million largely due to high energy tariffs, frequent blackouts and the unpaid debt held by public and private institutions, among others, according to the report.
As of September 2022, debtors owed BWB about K9.1 billion in unpaid bills, of which K4.3 billion was held by public institutions and K4.8 billion by private debtors.
On its part, the Southern Region Water Board was owed K12.3 billion, K8 billion by public debtors and K4.8 billion by private debtors.
The failure of the water boards to collect revenue on time has worsened their insolvency position, which is a company’s capacity to pay its debts.
National Food Reserve Agency and Lilongwe Handling Company Limited round up the list of companies set to post losses of K662.3 million and K171.4 million, respectively, at the end of the financial year.
According to the 2023 Malawi Government Annual Economic Report, 18 of the 25 State-owned enterprises (SOE) cannot pay their short-term obligations, especially those due within one year.
Only seven SOEs are projected to record a quick ratio above the recommended threshold of 2:1.
Earlier, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni urged the utility companies to switch from post-paid to pre-paid systems to improve their capacity to collect their revenue on time.
Minister of Finance and Economic Affairs Sosten Gwengwe is on record as having said commercial SOEs have been registering losses, borrowing heavily from commercial banks or persistently requesting for government bailouts to finance their operations.
He said: “Some contingent liabilities for SOE have eventually turned into actual debt and responsibility of the Government. To address the fiscal risks posed by loss making SOEs, government will continue to conduct fiscal risk analysis to detect potential areas of fiscal risks facing SOEs in the country.
“Those that continue to make losses may have to be restructured or indeed closed altogether. Over 90 percent of SOEs have opened revenue holding accounts with RBM.”
