Masm members differ on demutualisation

Members of the Medical Aid Society of Malawi (Masm) have differed on demutualisation, a process that could turn the health insurance scheme from a member-owned organisation into a shareholder-owned company eligible to list on the stock exchange.

The Masm board was last year tasked by its members at an annual general meeting (AGM) to engage business and financial advisory firm Deloitte to carry out a feasibility assessment on the need to demutualise the society.

Deloitte presented its findings at an extraordinary general meeting (EGM) in Blantyre on Friday after which members engaged in a heated debate on the pros and cons of the process.

This is not the first time the issue has come out. In 2004, Masm members tabled the issue at an AGM compelled by the need for them to have a stake in the organisation which their contributions helped to build.

It was then felt that since members lose their benefits when contributions stopped, they would have nothing to show for the years of contributions; hence, demutualising would result in members owning a stake even if contributions stopped.

The board has been tasked to report on the way forward at the next AGM in June this year.

Presenting the findings, Deloitte’s senior consultant, Edric Prince, who spoke on the merits and demerits of the process, said demutualisation will, among others, foster a sense of belonging to members who receive shares, enable a better ability to source funds for any future expansion drive and improve the corporate governance structures within the organisation.

“It will enable management to better carry out its mandate without being susceptible to members’ vested interests and any conflicts between member groups. It will provide appropriate incentives for and impose market discipline on management,” he said.

Prince said the process, if it goes through, will also improve financial decision-making by ensuring that resources are allocated to business initiatives and ventures that enhance shareholder value and that it will spread ownership risk.

But on the downside, he said while members will have a stake in Masm, it is unlikely to be worth much given the current loss-making position of the society.

“A monopolistic for-profit company will likely seek to maximise profit by raising contributions and reducing costs, namely, expenditure at service provider level. The ownership of members shareholders may be diluted,” said Prince.

With demutualisation, he said, the society will also be liable for corporate tax currently at 30 percent.

Weighing in supporting the process, business mogul Thom Mpinganjira, who is also group chief executive officer of FDH Financial Holdings Limited, said members have to ask themselves who owns Masm because they will wake up one day and find that the society is no longer in existence.

“If we had done that [demutualisation] 10 years ago, we could not have been where we are today. We have to strengthen the powers of the board and reduce that of management,” he said, calling upon the board to think over the issue and report in June.

But Rafiq Hajat, executive director at Institute of Policy Interaction (IPI), said demutualisation actually means putting Masm into private sector hands which means the spirit of humanity will be diluted into a quest for profit.

“If you are a Masm member, then you should be very afraid because tomorrow what will happen is that your subscription fees will go up because they want to make profit and services will be less. Because they want to make profit, medi clinics that are set up will be stripped and sold because they are not profitable,” he said.

Hajat said instead of correcting what has made Masm to be making losses since 2008, there is a move to “throw out the baby with the bath water and reinvent the wheel”.

Demutualisation will, however, not automatically result in listing of Masm on the Malawi Stock Exchange (MSE) without fulfilling some conditions such as the corporate making profit for at least five years in a row.

Masm has been posting losses since 2008 due to, among others, hostile economic environment, governance issues, stagnation of numbers and non-performance of medi clinics.