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Statutory corporations under Treasury’s radar

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ISSUED A STERN WARNING—Gwengwe

Minister of Finance and Economic Affairs Sosten Gwengwe has said he will summon Electricity Supply Corporation of Malawi (Escom), National Oil Company of Malawi (Nocma) and the Malawi Housing Corporation (MHC) for failure to comply with policies governing Public Financial Management and Reporting.

Gwengwe disclosed this during a signing ceremony of the 2022-23 shareholders’ letters of expectations for State Owned Enterprises (SOEs) in Lilongwe Tuesday.

Among other things, the three institutions failed to submit their Performance Management Plans and Budgets to the Ministry of Finance for the 2022-23 fiscal year in time and also failed to remit 40 percent of their dividends to government as required by law.

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According to Gwengwe, such failures are due to laxity and a feeling of entitlement among controlling officers and thus charged their boards to advise their secretariats accordingly; warning that no one would get away with such conduct.

“We have been lenient in enforcing these principles and it has not helped matters. Going forward, non-compliance will be sanctionable according to the law. Section 109 of the Public Finance Management (PFM) Act has laid down clear sanctions for errant controlling officers,” he said.

Section 109 of the PFM states that a controlling officer will be liable to sanctions due to misconduct if he or she fails to comply with timelines on submission of performance management plans and budgets, fails to comply with reporting timelines under the Act and fails to service a debt obligation among others.

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Gwengwe then highlighted that a majority of SOEs operate and think that the money they generate and the surplus profits they make is not public money.

He then stressed that all SOEs are government investments mandated to provide services to Malawians on its behalf as a way of upholding citizens’ rights.

“You may wish to refer to the definition of public money in the PFM Act…for your clear understanding,”

In response, MHC Chief Executive Officer (CEO) Jordan Chipatala admitted the poor performance but attributed the development to low revenue collection from their rentals which, he said, are on the lower side.

“We do not generate profits but government, beginning this year, approved a 21 percent house rentals’ hike and we are committed to increase investments so that we are able to generate enough money such that we would be able to remit dividends,” Chipatala said.

Chipatala said in the year 2020-23 they projected to remit about K100 million to government but did not remit anything.

Meanwhile, government has announced that tenure of office CEOs and director generals for government parastatals will no longer be automatic and that plans are underway to draw performance-based contracts for the officers in an effort to enhance service delivery of the institutions.

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