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Facing our realities - Malawi budget speech 2002/03
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| 7. Performance of state-owned enterprises
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- Mr. Speaker, Sir, the House may recall that in June 2000, the Ministry of Finance and Economic Planning established a Public Enterprise Reform and Monitoring Unit (PERMU) to monitor the financial performance of parastatals. I am pleased to report, Mr. Speaker, Sir, that the Unit is now fully operational and it has been able to focus on more than the ten major state owned enterprises it was originally intended to cover. There are no longer delays in the two-way flow of information between Government and the Parastatal Sector.
- Mr. Speaker, Sir, Government message to the commercial parastatals that they should carry their weight is now well entrenched. The Unit, which has proved to be an efficient ‘watchdog’, has ensured that parastatals are aware that the period for slumber is over and that they now need to declare dividends to Government. Government, through the Unit, will further ensure that profits made by the commercial parastatals are not immediately translated into increased wages and salaries for staff and increased allowances for Board members. Gone are the days when management of parastatals used to think that the remittance of dividends to the Government was a mere courtesy. In line with this, the Government will develop a dividend policy applicable to all parastatals.
General Overview of Performance
- Mr. Speaker Sir, allow me to briefly give the general overview of some of the key parastatals. The performance, Mr. Speaker, Sir, has been mixed in that some of them have registered profits and started declaring dividends while others have incurred losses.
Agricultural Development and Marketing Corporation (ADMARC)
- Mr. Speaker, Sir, ADMARC has for the past few years been performing poorly and in 2001/2002, it registered a loss of K225.6 million. This poor performance is attributed to a general reduction in the volume of crops purchased and sold due to unavailability of sufficient working capital and increased competition. Further, the situation was worsened by need to financially sustain some of ADMARC's sick investments, namely, David Whitehead and Sons, Cold Storage, Grain and Milling and Shire Bus Lines, which are now directly reporting to the Ministry of Finance and Economic Planning.
Air Malawi
- Mr. Speaker, Sir, Air Malawi has been consistently making losses and in 2001/02 it incurred a loss of K25.3 million. Currently, the organisation is undergoing restructuring pending privatisation.
Malawi Development Corporation (MDC)
- Mr. Speaker, Sir, MDC’s performance has improved somewhat following its restructuring. Although the corporation’s total revenue fell from K1.9 billion in 2000 to K1.6 billion in 2001, it registered a group net profit of K157 million in 2001 compared to K107 million in 2000. As a corporation, MDC registered a profit of K29 million in 2001 compared to a loss of K168 million in 2000. As a result, MDC has declared a dividend to Government of K30 million.
Malawi Housing Corporation (MHC)
- Mr. Speaker, Sir, Honourable Members of the House, the Malawi Housing Corporation (MHC) continues to make losses. In the year 2001/02, the loss was K46 million against the budgeted profit of K65 million. The loss is mainly attributed to non-implementation of the proposed 28 percent rental charge increase, which was taken into consideration at the budgeting stage and failure to adjust expenditures in line with the actual inflow of income in the year 2001/02. However, rentals have since been adjusted to get them in line with market based ones. It is the expectation of the Government that the Malawi Housing Corporation will in future undertake to adjust their rentals in line with the need for the organisation to operate on a commercial basis.
Malawi Telecommunications Limited (MTL)
- Mr. Speaker, Sir, MTL continues to show signs of recovery. Net profit before tax was K675 million in the year 2001/02 and it has declared a K100 million dividend to Government. To cope with the business environment of today, the entity is being restructured pending privatisation.
Electricity Supply Corporation of Malawi (ESCOM)
- Mr. Speaker, Sir, ESCOM's financial performance has improved remarkably following a substantial increase in tariffs and the temporary engagement of a corporate management team. In the period to December 2001, the corporation recorded a surplus of slightly about K1 billion. The Ministry of Finance and Economic planning is currently discussing with ESCOM management on the appropriate level of dividend to be paid out to Government.
Water Boards
- Mr. Speaker, Sir, Northern Region Water Board recorded a loss after tax of K9.9 million. This did not compare favourably with the anticipated loss of K4.7 million. The variance is accounted for by higher than budgeted expenses.
- Southern Region Water Board recorded a profit for the period of K12.6 million against budgeted profit of K10.7 million. This is attributed mainly to expenditures being far much lower than budgeted.
Malawi Posts Corporation
- Mr. Speaker, Sir, Malawi Posts Corporation continues to be in financial difficulties. The corporation is currently undergoing restructuring with the assistance of the World Bank.
- Mr. Speaker, Sir, Honourable Members, although some parastatals performed well in 2001, overall performance still remains below satisfactory. Many parastatals continue to make losses. Allow me to commend those parastatals that have made profits and declared dividends to Government. Let me call upon those parastatals that have not performed well to emulate the good example of those parastatals that have performed well. It is high time these parastatals restructured their operations for effective and efficient delivery of their services. These parastatals must also learn to face realities and live within their means. Let me also call upon Controlling Officers in various Government departments and ministries to ensure that they honour their utility bills.
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