City council, parastatal finances under probe

Parliament’s Budget and Finance Committee has embarked on a probe of the country’s city councils to investigate reports that revenue is being lost through ghost-workers and dubious tender processes.

It is the committee’s mandate and function as outlined in Standing Order 158 to examine revenue and expenditure estimates presented by the Minister of Finance to report to the House.

Committee chairperson Rhino Chiphiko, who has been unanimously re-elected for a third one-year term at the helm, confirmed in an interview on Monday that in its first week of the meetings, committee members will scrutinise budgeting and finance mechanism of councils, among them, Blantyre City Council and Lilongwe City Council, which are public entities that should not be receiving subventions from Treasury for operations.

Councils, including city, district and municipalities, operate various funds, among them District Development Fund (DDF) and Local Development Fund (LDF).

Chiphiko said it was the committee’s duty to probe inlets and outlets of government funding which would inform budget formulation and monitoring.

He said: “The committee would like to understand progress of these funds and whether they are giving value for money to the people of Malawi. There are contracts and procurements involved through which money for councils is lost and we would like to understand how these are performing.”

Following the increase in the funding to Public Works Programmes under the Malawi Social Action Fund (Masaf) IV, the committee fears some of the beneficiaries of the fund do not exist and that most of the money goes towards administration.

“There have been reports that [some] council officials are listing people who are dead as beneficiaries of Masaf IV,” Chiphiko alleged.

In the 2016/17 budget, government has allocated K34 billion towards LDF and will transfer K36 billion to local authorities whose major beneficiary is the education sector, which will get K9 billion followed by the health sector with K7.2 billion.

Blantyre City Council and Lilongwe City Council, which the committee has in its sights, will be given K3 billion each in the 2016/17 budget.

Besides city councils, the committee has planned meetings with parastatals which contribute to the government’s revenue collection, but are being milked dry by the same government and failing to perform.

Among the parastatals are Electricity Supply Corporation of Malawi (Escom), Blantyre Water Board (BWB) and Southern Region Water Board (SRWB) who the government owes billions of kwacha in utility bills.

Government has offered to repay the utility bodies using promissory notes, but Chiphiko said this was not viable considering that they are crippling under debts amounting to K3 billion.

“What plans will Treasury put in place this time around to ensure that debts with parastatals are cleared? There has been a payment plan in the previous budgets, but since utility bodies don’t charge interest, the funds are of no consequence in the long run,” Chiphiko said.

In the 2016/17 budget, government put public debt charges at K116.2 billion.

Following the visits to parastatals and city councils, the committee has summoned the Ministry of Finance officials next week Thursday to present their findings on the way forward.

In the Malawi Government Annual Economic Report for 2015, several State-owned enterprises or parastatals posted losses. These include BWB, Central Region Water Board (CRWB), Malawi Housing Corporation (MHC), Malawi Posts Corporation (MPC) and Agricultural Development and Marketing Corporation Limited (Admarc).

On the other hand, some State businesses made profits or surpluses. They are Lilongwe Water Board (LWB), Northern Region Water Board (NRWB), Southern Region Water Board (SRWB), National Construction and Industrial Council (NCIC), Malawi Energy Regulatory Authority (Mera), Malawi Communications Regulatory Authority (Macra) and Escom.

In an earlier interview, corporate strategy expert James Kamwachale Khomba, a professor of finance and corporate strategy at University of Malawi’s The Polytechnic, attributed the underperformance of parastatals to leadership and management style.