The perennial problems of utilities

Utilities are organisations which provide commercial services considered as extra essential to the public. These include water, electricity, telecommunications and posts. The services provided are not as free to the public as defence, security and medical.

But to charge full market tariffs is never considered right on the part of the State which exacts taxes from the public.

We learned recently that the Escom board chairperson of went to the Minister of Finance to ask for a subvention but was turned away empty handed. This may be justified on the grounds that parastatals are supposed to be operated in such a manner that they are self-supporting. But there are in-built difficulties in State corporations.

For a parastatal to operate profitably, it must be allowed to play the rules of the marketplace. But that would necessitate keeping at full arms length government interference.

State interference starts with appointments. First, the State appoints a board of directors who generally are political favourites, whatever else they may be. The board is empowered to appoint the parastatals chief executive. But this appointment is subject to the approval of the minister under whom the parastatal falls. You can rest be assured the President has approved the appointment.

Very often, parastatals hire more workers than they need due to political pressure. Even during the time of recession, all workers are guaranteed job security and may not be retrenched without government approval.

The Agricultural Development and Marketing Corporation (Admarc) during most of the Kamuzu/MCP era was making hefty profits, some of which it invested is in commercial firms associated with the State. It was able to make these profits because it was a monopoly of smallholders produce. Towards the end of the 90s, donors and foreign economists used to challenge the monopoly saying the peasants were not being paid the market (full) price for their produce and this was acting as a disincentive to maximum production. Under pressure from donors, independent buyers were allowed to compete with Admarc without the obligation to go into remote markets as required of Admarc. Since then, Admarc, like other parastatals, tends to look to Treasury to cover up its deficits.

Parastatals are the norm in socialist countries and States known as developmental. How do they solve this problem of operating as a social welfare agent and yet being self-sufficient financially? Have our managers tried the methods used in socialist countries?

The roles of the State go beyond providing defence and security. It must provide welfare and social services to those who cannot fend for themselves. Hence, there can be no question of privatising utilities. They must be state-linked albeit with some leeway.

It is alleged that some parastatals are perpetually insolvent because their chief executives are overpaid, that they tend to award themselves excessive perks.

Methods used in companies about bonuses or profits sharing options and anything that can make a chief executive profit conscious, waste averse, should be tried.