Govt ponders on new parastatals’ policy

In the wake of non-remittance of dividends to government by many parastatals, Treasury says it is contemplating on garnishing assets of parastatals at the bank to enforce dividend payment.

In an interview on Tuesday, Minister of Finance, Economic Planning and Development Goodall Gondwe said non-remittance of dividends has negatively affected revenue collection; hence, going forward, government will have to be strict.

He said: “The poor performance is because most of the parastatals run short of money and instead of sending their money to us, they use it themselves. This is one of the reasons government revenue collection is underperforming because the statutory corporations are not remitting dividends.

“Going forward, we are going to be strict, I think we may even go for garnishing their assets at the bank so that we make sure they pay as scheduled and they will pay from their bank accounts.”

What this means is that Treasury will have to go to court to obtain a garnishee order, which is a form of enforcing a judgement debt against a creditor to recover money.

What has prompted this move is failure by parastatals to remit dividends to Treasury amounting to K8.5 billion as part of their contribution in the second quarter of the 2017/18 fiscal year, with government only collecting K1.8 billion out of the projected K10.3 billion. This represents a 82.3 percent shortfall.

In the second quarter of the 2017/18 fiscal year,  non-tax revenues amounted to K19.9 billion compared to a target of K28.2 billion, under-collecting by K8.2 billion.

“This unfavourable performance is attributed to the performance of the parastatal dividend and rural electrification levy which underperformed by 82.4 percent and 21.3 percent respectively,” reads the quarterly performance report.

The poor performance of the parastatals has already spelt doom for the current budget implementation, as there has been a K9 billion budget cut, bringing it down to K1.313 trillion from K1.323 trillion, with revisions expected to the recurrent budget, in particular travel.

It was, however, hoped that parastatals would be weaned from Treasury dependence and start giving dividends to Capital Hill after adopting the public sector reforms in March 2016.

This followed reforms in parastatals, which started in October 2015 after President Peter Mutharika approved areas of reforms after engaging the defunct Public Service Reform Commission and brainstorming on strategies to bring professionalism in parastatals.

During the 2016/17 financial year, parastatals posted mixed results largely due to low and subdued economic growth and high inflation levels, weather-related shocks, reduction in hydro-electricity generation and water shortages, according to the 2017 Annual Economic Report.

In a interview, Budget and Finance Committee of Parliament chairperson Rhino Chiphiko said the underperformance of parastatals is worrisome as it also affects budget implementation.

“We are concerned that most of the parastatals are not remitting their taxes, but this is because of governance issues which have affected their profitability. Most of the appointments in these companies are politically motivated and not based on merit. Again, with the blackouts, companies are not working to their full capacity.

“As a result, government is failing to generate enough revenues to deliver goods and services. At the same time, government is broke, with huge public debts,” he said.

Finance and corporate strategy expert James Kamwachale-Khomba earlier faulted the underperformance on leadership and management style of the public enterprises.

In October 2015, Mutharika recommended the finalisation of the State Corporation Policy and review of all outdated mandates of parastatal.