Statutory corporations have failed to remit dividends to Treasury amounting to K8.8 billion as part of their contribution to the 2016/17 budget.
So far, government has collected K2.8 billion out of the K11.6 billion target.
This has resulted in the Ministry of Finance, Economic Planning and Development revising downwards the proposed K1.14 trillion budget by K20 billion, The Nation has learnt.
Minister of Finance Goodall Gondwe said he had not analysed the reasons for the underperformance of the parastatal dividends as non-tax revenue, but was optimistic that one dividend from Reserve Bank of Malawi would cover up for the losses in the first half of the financial year.
The mid-year review document sourced from the Ministry of Finance, Economic Planning and Development indicates that the non-tax revenue target was set at K34 billion at mid-term, but this has underperformed owing to the poor performance of parastatal dividends.
The actual outturn showed that K28.8 billion was realised missing the target by K5.2 billion on account of underperformance in parastatal dividends which only registered a collection of K2.8 billion, missing the target by K8.8 billion.
According to the report, apart from parastatal dividends, the government had expected non-revenue collections from receipts from government departments such as Immigration Department, the Department of Civil Aviation and Registrar General’s Department which all did well by exceeding their targets.
The government departments were expected to remit K8.7 billion, but contributed K10 billion with the Immigration Department beating its target by K1.8 billion, the Department of Civil Aviation by K314 million and the Registrar General’s Department by K225 million.
“The actual outturn shows that K28.8 billion was realised, thereby missing the target by K5.2 billion. This was on account of underperformance in parastatal dividends which only registered a collection of K2.8 billion, missing the target by K8.8 billion,” the mid-term review report reads.
The poor performance by parastatals might spell doom for Minister of Finance, Economic Planning and Development Goodall Gondwe’s non-tax revenue revised projection of K85.6 billion up to June 30 2017 from K74.5 billion due to a higher than originally anticipated dividend from Reserve Bank of Malawi.
But the Budget and Finance Committee of Parliament has said government has only itself to blame for crippling the parastatals with arrears.
By June 2016, the government owed the five water boards and Electricity Supply Corporation of Malawi (Escom) about K10 billion. It also owed Lilongwe Water Board K2.2 billion, Blantyre Water Board K1.3 billion and about K4 billion to Escom.
The Budget and Finance Committee estimates that statutory corporations have lost at least 40 percent of revenue as a result of the zero coupon bonds which have not been paid out yet.
The Committee’s chairperson, Rhino Chiphiko said parastatals cannot be expected to perform when they have no funding for operations due to the huge debts owed by government.
“Most of the parastatals have indicated that they are not carrying out their operations to the maximum. The government is stifling their operations, not just by not paying their dues but also because of too much political interference,” he said.
Chancellor College economics professor Ben Kalua concurred with Chiphiko, saying he was not surprised that the parastatals have failed to live up to expectations.
He said government has too much control over parastatals, dictating their tariffs, especially those which should be self-financing such as Malawi Housing Corporation.
“The objectives of the parastatals should be reviewed to audit out non-commercial part of it so that they generate enough revenues to remit adequate dividends to the government after expanding service delivery.
“They cannot do that when the revenues are constrained and they continue to provide services to the government which has proven to be a bad customer,” Kalua said.
But Treasury spokesperson Alfred Kutengule said there were many factors contributing to the low dividends from parastatals apart from slowdown of productivity due to the economic situation.
He said Treasury believes dividends by parastatals would still be paid out after the institutions are audited.
“Audits of parastatals are usually finalised between October and December and some have not yet completed the exercise. We believe between now and June, once the boards meet and approve the dividend, the targets will be met,” he said.
But this did not explain why Treasury overestimated the mid-term outturn at K11.6 billion when they knew some parastatals would not have completed their audits.
Kutengule admitted: “There is always a chance that the expected amounts would be overestimated because of the factors that we expected to contribute to better performance.”
Meanwhile, as the parastatals are failing to live up to their expectations to the 2016/17 budget, income earners, ordinary citizens and the struggling private sector are shouldering the tax burden. According to the mid-term review report, taxes on goods and services exceeded the target by K3.1 billion, value added tax by K7.9 billion (7.3 percent), excise tax by K3.1 billion (9.5 percent), while individual income tax over-performed by K11.8 billion. n