State produce trader Agricultural Development and Marketing Corporation (Admarc) says it needs at least K300 billion for re-capitalisation to help the institution run its operations, including buying of farm produce.
Admarc acting chief executive officer Felix Jumbe said this on Wednesday when Minister of Agriculture Lobin Lowe visited the parastatal’s head office in Blantyre.
In an interview, Jumbe said the biggest challenge Admarc has been facing in buying maize and in its operations, among others, is that although some reforms have taken place, there have been no deliberate programmes to re-capitalise the parastatal.
He said Admarc has been operating on hand-to-mouth basis in its quest to deliver its mandate.
Said Jumbe: “Ministry of Agriculture is a holder of policy on food security. All they need is to give direction on what we should do, what is the food security holding capacity that we need and then capitalise us to deliver on the mandate of the government.
“We are looking for over K300 billion and once that happens, be [assured] that government would stop giving piecemeal amounts every year like K12 billion which is not even enough. That is just for one district to buy produce.”
He said, among others, the money would be used for maintaining some of Admarc’s infrastructure, including warehouses, construction of new houses, buying of property in warehouses and creation of new markets to ensure that they are close to farmers.
The call for re-capitalisation, however, comes as the 2020 Malawi Government Annual Economic Report prepared by the Ministry of Finance indicates that Admarc’s performance has varied for the past five years.
According to Jumbe, Admarc planned to buy 600 000 metric tonnes (MT) in the current buying season, but such plans have been frustrated because they do not have money.
In addition, he said the parastatal has taken the task of cleaning the system from corrupt practices by reviewing its operations where in the process, others have lost their jobs.
In a separate interview, Lowe said capitalising Admarc is a necessity, emphasising that the parastatal can do better and deliver to the satisfaction of Malawians.
He said: “The infrastructure of Admarc, it is in a bad state. It is high time that we had new or modern infrastructure and capacity should be there in terms of funding.”
Lowe also bemoaned high levels of corruption at the parastatal, saying there is need for reforms to flush out all corruption from the system.
The minister, who was accompanied by his deputy Agnes Nkusa Nkhoma and Principal Secretary Erica Maganga, further warned that under the new government, it will be business unusual so that Admarc should reclaim its lost glory.
He further said poor performance of Admarc continues to be an issue of concern; hence, government is eager to revive the parastatal.
On their part, both Civil Society Agricultural Network executive director Pamela Kuwali and Farmers Union of Malawi president Frighton Njolomole said it is important to let Admarc operate without political interference.
This is not the first time that the Admarc acting CEO has spoken about the parastatal’s recapitalisation.
In June this year, when Admarc management met four parliamentary committees of Agriculture and Food Security, Budget and Finance, Industry and Trade and Public Accounts, Jumbe said the parastatal needs $300 million (about K222 billion) for recapitalisation.
In April this year, Admarc also indicated that it wants to borrow K100 billion from the Export Development Fund, a development finance institution, to revamp itself as a serious business entity.
Jumbe said as a majority shareholder, government cannot manage such a huge capital injection; hence, external financing would be ideal through the Parliament’s Loan Authorisation Bill.
He said alternatively, they can list on the Malawi Stock Exchange if government relinquishes the current 99 percent of its shares to the public.
The 2020 Malawi Government Annual Economic Report indicates that Admarc’s revenues in 2018/19 financial year fell below the 2017/18 position with K131.97 billion reported, of which actual sales were K16.9 billion while the cost of sales were K15.2 billion, translating into a gross profit of K1.8 billion.
Reads the report in part: “As at half year 2019/20 financial year, Admarc recorded a negative gross margin of 0.61 percent which translated to negative K3.8 billion.”
The report states that this loss was because all revenues for commodities were below budget as Admarc did not achieve export sales budgeted for legumes.
In addition, the report indicates that Admarc’s debt ratio is at 47 percent while debt-to-equity ratio—the financial ratio indicating the relative proportion of shareholder’s equity to debt—is at 87 percent, as of June 2020.
The parastatal’s liquidity position in 2018/19 financial year was barely on the margins at a current ratio 1:1 while leverage was at 72 percent as measured by debt/equity proportions.
At mid-year, however, the current ratio had worsened to 0.91:1 and it was projected to further worsen to 0.71:1 by June this year, indicating its inability to meet short-term obligations as they fall due.