The aggregate loss for profit-making State owned enterprises (SOEs) worsened to about K47 billion in 2024 from K16.8 billion in 2023, Ministry of Finance and Economic Affairs data show.
The consolidated report for SOEs in Malawi published indicate that social services aspect for most of these SOEs subdues the level of profitability.
The report said this is despite clarity on the Dividend and Surplus Policy for statutory bodies regarding financial performance.
Reads the report in part: “It requires commercially-oriented SOEs to strive to be efficient and effective as they are required to operate on a private sector model to ensure their long-term financial sustainability.
“However, it also takes cognisance of the fact that most of these SOEs also provide social services while fulfilling their commercial mandates.”
But the report says strides are being pursued to have cost-reflective financing assumptions while being mindful of the social obligation requirement.
Ministry of Finance and Economic Affairs says to guarantee that the budget is adequately supported by the investments made in the SOEs, “the dividend and surplus policy’s implementation needs to be reinforced”.
Nevertheless, actual remittances remained below the statutory requirement at K20.5 billion in 2024 from K10.2 billion in 2023.
The dividend pay-out ratio moved from 15 percent in 2023 to 22 percent in 2024, and despite the increase in the payout ratio, the actual dividend paid still remained below statutory requirement.
This was largely due to cashflow challenges experienced by SOEs, especially due to increasing trade debtors especially public institutions, according to the report.
On the other hand, government arrears to SOEs increased to K41.2 billion in 2024 from K36.9 billion in 2023.
In comparison, the amount of tax arrears that SOEs owed Malawi Revenue Authoritydecreased from K123.1 billion to K90.2 billion in 2023.
A recent trend analysis by the Economics Association of Malawi showed that many SOEs are depleting public wealth and increasing the government’s contingent liabilities.
In an interview on Tuesday, corporate governance expert Jimmy Lipunga observed that there could be multiple factors affecting the profitability of SOEs, adding that it was important to examine their cost structures and establish whether there are opportunities for rationalisation or restructuring to lower the costs.
“The bottom line is whether a particular SOE is creating value or destroying value,” he said.
Comptroller of Statutory Corporations Peter Simbani is quoted as having said government is implementing a phased turnaround strategy with a practical roadmap for restoring value and reducing fiscal risks for SOEs.
He said within two years, the proposed strategy will be focusing on quick wins, including mandatory independent audits with public disclosure, automation of billing settlements to curb revenue leakages t.
The report shows that although Malawi Housing Corporation recorded profit at K14 billion, Electricity Generation Company of Malawi at K2.2 billion and National Economic Empowerment Fund at K814 million from a loss-making position in the 2023/24 fiscal year, huge losses recorded by Electricity Supply Corporation of Malawi at K65.3 billion and Blantyre Water Board at K37.8 billion.
