Africa-Press – Malawi. A report by the Economics Association of Malawi (Ecama) has exposed the precarious financial state of State- Owned Enterprises (SOEs), with most reporting negative returns and unsustainable debt levels.
These factors pose significant risks to the country’s already strained public finances.
The report, released last week, examined eight major SOEs between 2016 and 2022, revealing a landscape of persistent losses, liquidity crises, and escalating debt burdens that threaten macroeconomic stability.
It found that several SOEs experienced debt-to-asset ratios exceeding 1.0, indicating liabilities that equal or surpass their total assets.
The financial distress has been forcing government intervention, including a K22 billion debt guarantee issued to the Agricultural Development and Marketing Corporation (Admarc) in the 2020-21 fiscal year to facilitate crop purchases.
This pushed total Government Guaranteed Debt to K175.9 billion by December 2020, up from K159.50 billion in June 2020.
“The persistent negative Return on Equity highlights the failure of these entities to generate profit for the government as a shareholder. This erodes public wealth and limits the government’s ability to collect dividends,” the report states.
According to the report, the trend analysis reveals that many SOEs are “not only failing to operate sustainably but are also depleting public wealth and increasing the government’s contingent liabilities.”
Ecama Executive Director Esmie Kanyumbu said the findings paint a concerning picture of widespread inefficiencies.
Bertha ChikadzaEcama President Bertha Chikadza called for urgent reforms to address the crisis.
“We recommend implementation of annual performance audits for SOEs and establishment of independent pricing regulators to address tariff rigidity,” Chikadza said.
The study, supported by the US Embassy in Lilongwe, utilised the International Monetary Fund’s SOE Health Check Tool to analyze audited financial statements and conduct key informant interviews with enterprise officials.
The SOE crisis compounds Malawi’s broader debt challenges, with public debt standing at 86.4 percent of GDP as of September 2024.
The World Bank has described Malawi as being in debt stress, with debt service payments projected to consume 26.9 percent of the 2025- 26 national budget.
For More News And Analysis About Malawi Follow Africa-Press
