Reaffirming the role of parastatals

Statutory corporations have an important role to play in national development. They are organs governments use the world over to drive the development agenda in all spheres of life. They have the capacity to generate profits for government, create jobs and improve life for the majority of citizens.

A few weeks ago, Chief Secretary to Government George Mkondiwa warned non-performing government-owned companies. He said they “have lost a sense of direction or have forgotten their purpose”.  Mkondiwa blamed the poor performance partly on the management and board of the parastatals. His observation is correct. Many of these parastatals are failing to deliver because of poor management.

Many parastatal CEOs misuse resources and have found a way to enrich themselves through lavish packages such as buying expensive vehicles which they later buy at unreasonable prices. Equally, board members have also not played their oversight role in terms of providing strategic direction.

One has in mind the Malawi Savings Bank (MSB) which has been giving huge loans to organisations and has ended up with bad debt. One would have expected the board to play its rightful role by advising management to have a credit ceiling. Moreover, the board should work professionally and not be influenced by political consideration in its decisions.

Parastatals have also failed to deliver partly because of political interference.  Presidents have been making illegal appointments of CEOs in contravention of the law. This has created two problems. Firstly, many of these CEOs have been appointed in wrong positions. As a result, they are not able to deliver. CEOs should be matched with their relevant academic qualifications and experience so that they add value to the organisation. This can be done if the board advertises the job and people compete. The best person should be offered the job regardless of who he or she is or where they come from.

For example, one would expect Escom’s to be an engineer, someone who knows about energy. Similarly, an Admarc CEO should be someone which a qualification in Agriculture. Unfortunately, these appointments are based on regional and tribal lines which has resulted in misplacement of resources. Little surprising that many parastatals are not functioning properly.

Secondly, political appointees owe their allegiance to the appointing officer. Even if CEOs are incompetent, it is practically impossible for the board to remove them from their positions because their allegiance is more to the President than to the board. Hence, they feel more accountable to the President than to the board. They become haughty and untouchable. Government ends up paying for incompetence and not contribution to the efficiency of the organisation.

Political parties have also used parastatals as a cash cow. Parastatals have been contributing huge sums of money as gifts to ruling parties and organisations linked to political leaders under the guise of corporate social responsibility (CSR). For example, it was a norm for Escom to provide vehicles to ferry party cadres to political rallies or contribute funds to political parties and NGOs linked to UDF, DPP and PP in the name of CSR.

Yet, Escom is one parastatal that has failed to provide quality service. Malawians have been accustomed to blackouts for more than a decade and billing is still a crisis. Consumers still pay huge fake bills because Escom lacks capacity to take metre readings in all the residential areas. It is equally a nightmare to get connected to the grid. All these structural challenges need the board to assist the management to improve efficiency. However, this requires board members who are knowledgeable, possess skills, abilities, experience and expertise in the relevant filed.

If parastatals are to deliver and offer quality service, we have to deal with fundamental problems such as political interference, getting the right CEOs to fill positions, monitoring operations through the ministry of statutory corporations, appointing boards that would provide strategic direction and holding CEOs accountable for any failure. With proper management, parastatals can provide a more superior service than the private sector.