Parastatals in loss-making business
The Agriculture Development and Marketing Corporation (Admarc) and the Blantyre Water Board (BWB) topped the list of loss-making parastatals in the country in the first half of the financial year 2019 to 2020 ended December 31, 2019, the Ministry of Finance has said.
According to government’s Annual Economic Report released on Monday, as at December 31, 2019 Admarc had recorded a negative gross profit margin of 0.61 percent which translate to a loss of K3.8 billion while BWB recorded a net loss of K3.2 billion.
According to the report, Admarc’s weak financial performance was largely because all revenues for all commodities were below budget as the state grain trader did not achieve the export sales that were budgeted for legumes.
“The liquidity position of Admarc in the 2018/19 financial year was barely on the margins at a current ratio 1:1 while leverage was at 72 percent as measured by debt/equity proportions,” the report says.
On the part of BWB, Treasury says the financial performance deteriorated in the 2018/19 financial year with the unaudited accounts indicating a loss of K4.5 billion compared to a K2.3 billion loss reported in the 2017/18 financial year.
Treasury adds that BWB also continued to report a net loss of K3.2 million at mid-year of the 2019/20 financial year.
“Based on the mid-year performance, the board revised downwards the budgeted revenues and expenditure resulting in projecting a further loss of K4.4 billion by the end of the 2019/20 financial year,” Treasury says.
According to Treasury, BWB continues to face serious challenges to finance its operations as monthly operating expenses continue to increase with 60 percent of the operating expenses committed to settling of electricity bill averaging K952 million per month, among others.
“Non-revenue water was still very high at an annual average of 37 percent. However, the board plans to attain 35 percent by June 2020 through installing bulk meters and conducting water balancing,” Treasury says.
Also swimming in troubled waters is the Malawi Posts Corporation (MPC) which posted a loss after-tax of K527.3 million as at December 2019 with a projection of a June 2020 loss of K1.1 billion.
Other parastatals which recorded losses include the Central Region Water Board which recorded a net loss of K196 million as at December 31 2019 against a planned profit of K63.0 million.
Also in red as at December 31 was the National Construction Industry Council which posted a deficit of K161 million due to challenges on construction levy collection and low turn-up for registration from the market players in the industry.
Another parastatal in trouble was the Pharmacy and Medicines Regulatory Authority which registered a loss of K117.1 million as at December 31 with a projection of a further loss of K120.6 million.
This was largely due to challenges faced in collection of product fees which constitutes 70 percent of the total revenues for the authority.
Finance Minister, Joseph Mwanamvekha, was not immediately available to shed light on how the government intends to turn around the financial fortunes of the struggling parastatals.
According to Treasury, on average, statutory bodies generated less than half of the projected revenue as at the mid-year. On the other hand, expenditures generally remained high due to the fixed nature of some expenditure lines.
