Investigations into the cause of financial mess that prompted Escom to make an abortive K53 billion bailout request from Treasury, has exposed entrenched weaknesses, prompting a Special Task Team to recommend management consultants to resolve the mess.
In its confidential report titled Report on Building and Unleashing Escom’s Potential in the New Environment, dated February 7 2019, the task team, chaired by Comptroller of Statutory Corporations Stuart Ligomeka, has detailed failure of the procurement, stores, distribution and financial management functions as well as indiscipline and poor organisational culture.
The report says the Electricity Supply Corporation of Malawi (Escom) has significant weaknesses in governance and operations, leading to high levels of fraud and theft of public resources.
Since 2016, Escom wrongly procured goods valued at K8.3 billion, bought phased out wall-mounted three-phase prepaid meters worth K1.8 billion and items worth K122 million without local purchase order (LPOs) and Internal Procurement Committee (IPC) approval.
In the report’s Executive Summary, the task team states that unless its findings and recommendations are attended to, the situation at Escom would deteriorate further.
Further, the team observes that turning around the situation would demand the cooperation and commitment of all key and relevant players, including government, Escom board, management, staff and the public.
But the team points out that “Escom cannot achieve different results using personnel that created the problem” and, thus, has recommended recruitment of external management consultants to champion business and organisational cultural change.
Reads the team’s recommendation in part: “The involvement of management consultants will add value to the Escom rebuilding process through total and unwavering support that key stakeholders will need to provide in the implementation of the various recommendations that will come through their work.”
The Task Team was formed to look into the root cause of the financial deterioration of Escom after the parastatal in April 2018 requested a bailout of K53 Billion from Treasury due to financial distress dating back to 2016.
Besides Ligomeka, other members of the team include messrs Hilario Chimota, Patrick Matanda, Collins Magalasi, Professor Grant Kululanga, Chizaso Nyirongo, MacDonald Mwale and Headwick Banda, who was secretary.
The damning report states that Escom management does not appear to appreciate and take seriously the findings and recommendations from internal and external auditors.
The 2016/17 and 2017/18 audited financial statements of the corporation were qualified for, among others, misprocurement, non-compliance with the public procurement legislation and internal procurement procedures.
According to the report, Escom has seen power or revenue losses estimated at K21.9 billion and an understatement of concession fees for the Kapichira Phase II by K453 million.
While the Task Team undertook to establish whether there are improvements with respect to the foregoing significant findings, the report says it still discovered lack of financial discipline.
Further, the report notes lack of expenditure controls and queried “unnecessary expenditures” on rentals where in Blantyre alone, Escom had offices at Umoyo House, old Puma offices, Escom House, Mahindra building in Limbe.
Says the report: “This did not make sense because, at one point, the rented offices were usually not fully occupied.”
The team also faults Escom for spending more on hired motor vehicles (33 vehicles) despite having a fleet of its own comprising 520 vehicles.
The report also shows that the procurement function is one of the most abused functions and it could be in the top three contributors to Escom’s current financial challenges.
Further, it has also been established that there are cliques and syndicates at Escom which work together in a highly organised fashion in their dealings.
Yesterday, Escom board chairperson Thomson Mpinganjira, a highly regarded finance professional who founded and runs multi-billion kwacha financial services group FDH Financial Holdings and raised the alarm about the Escom mess soon after his appointment last July, said he could not comment on the matter because he was yet to see the Task Team’s 102-paged report.
But Ligomeka was surprised and pressed The Nation to reveal the source of the report, insisting: “I have not issued that report.”
Meanwhile, the Human Rights Defenders Coalition (HRDC) has written the Anti-Corruption Bureau (ACB) to investigate possible corruption, fraud and other wrongdoing at Escom between 2015 and 2018.
Escom Limited is a public utility incorporated as a private company under the Companies Act (Cap 46:03) of the Laws of Malawi in 1998.