Why it’s ‘shame’ old story on parastatal performance
This week, one of the stories that caught my attention was published in the Business News section of The Nation edition of March 8 2022. It had the headline ‘Parastatals register mixed fortunes’.
Quoting the 2022 Malawi Government Annual Economic Report, the story stated that State-owned enterprises (SOEs) continued to face deteriorating liquidity positions during the year under review. The report said that out of 17 SOEs assessed, 11 posted profits while six made losses.
From the picture above, one may easily conclude that there is some light at the end of the tunnel. But a closer look at the profit-makers points to institutions mostly earning income through receipt of levies and other fees which, I must say, are mandatory by law and have to be remitted by stakeholders. Here, I have in mind the listed profit-makers such as Malawi Energy Regulatory Authority, Malawi Communications Regulatory Authority, Malawi Bureau of Standards, Malawi Gaming Board and National Lotteries Board as well as Malawi Accountants Board.
On the other hand, the “sick babies”, as it were, include Blantyre Water Board (BWB), Central Region Water Board, Malawi Posts Corporation, Airport Development Limited, National Food Reserve Agency (NFRA) and Malawi Institute of Management. The nature of business for the listed loss makers is different from the profit-makers reaping from fees and levies.
For years, reasons for the underperformance of most parastatals or SOEs have been varied. But political interference from the State is one of the major contributors to the poor performance that has left most of the “sick babies” perennially on life-support machines.
The Malawi Government itself contributes to the problem as some of its ministries, departments and agencies (MDAs) owe parastatals, especially those in the utilities sector, colossal sums of money in unpaid bills. At one time, MDAs owed BWB in excess of K1.5 billion while Lilongwe Water Board was owed over K2 billion and Electricity Supply Corporation of Malawi K4 billion.
The unpaid bills negatively impact on the operations of the concerned statutory corporations.
In an earlier article under the title ‘Corporate governance in the reforms era’, I argued that there has been little or no talk about corporate governance related to public enterprises. The situation is compounded by the apparent political interference by authorities in the running of the affairs of some State-owned businesses.
This political interference continues to be evident in the recruitment of the top brass, especially chief executive officers or directors general and their boards of directors. I argued for merit in the recruitment of the top brass and that they should be given targets and goals to achieve if we are to move forward.
Corporate strategy expert James Kamwachale Khomba, a professor of finance and corporate strategy at Malawi University of Business and Applied Sciences, in one media interview also attributed the underperformance of some parastatals to leadership and management style.
Perhaps in apparent response to such calls, in the post-June 23 2020 Fresh Presidential Election period, we have seen some stage-managed recruitment interviews passing as merit and mostly politically-connected individuals coming out tops.
To turn SOEs into profit-making entities that pay dividends to the shareholder, it is time best practices in corporate governance were embraced. It is mind boggling to see parastatals such as NFRA and Admarc making losses when everyone needs the food they trade in and indeed private sector players thriving in the same business.
Political appointees, despite having requisite qualifications, often see their role as first and foremost to please the appointing authority or weird decisions made by managers in some State institutions that leave one wondering what they were high on to make such schoolboy blunders.
If we continue treading on the political appeasement path in as far as recruitment of top executives and boards of directors is concerned, every year, the Malawi Government Annual Economic Report will be reporting about the “shame” old story of SOEs making losses and seeking bailouts.
