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| Business |
| Groups fear more ills in parastatals |
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by
Ephraim Munthali, 28 October 2004
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08:12:49
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Society of Accountants in Malawi (Socam) and Malawi Economic Justice Network (Mejn) say revelations that MDC Limited faces closure due to poor financial health shows that government had something to hide when it failed to present a report on parastatals to Parliament.
“The kind of rat we were smelling is revealing itself and confirms our fears that government had something to hide when it failed to present a report on parastatals to Parliament,” said Mejn deputy national coordinator Mabvuto Bamusi yesterday.
“If the current regime is not careful, our position will be that the government lacks transparency and accountability. Our worry is that most parastatals are in similar situations,” said Bamusi.
Socam executive director Hennox Mazengera said the situation at MDC proves a point that people should be formally informed about developments in the state-owned companies.
“We don’t have to get information about our companies through the press,” said Mazengera.
He said if MDC continues to operate knowing that they cannot pay their debts, the board of directors would be guilty of an offence under corporate governance principles.
Mazengera also blamed the board for the mess at MDC, saying the directors should have been monitoring the financial activities at the company.
Last month, Socam, Mejn and Consumers Association of Malawi (Cama) said they were “disturbed and shocked” that Finance Minister Goodall Gondwe did not present to Parliament a report on how state-owned companies performed last year.
The groups said since parastatals benefit from public resources in form of tax and get loans from the World Bank and other international financial institutions for restructuring and major projects in the name of Malawi, people have the right to information about the companies.
Although it has been a tradition for finance ministers to give the nation yearly reports on major state companies regarding their performance and measures put in place to ensure efficiency and profitability, new the finance minister did not.
“It is not a ritual that the budget speech should have a report on parastatals,” Gondwe told The Nation when asked to explain the omission.
Observers say political interference and abuse have led to losses in the companies and landed them in financial problems that have in the past forced government to cough billions of tax payers money in subventions to bail them out.
After Nation Business Review broke the story exposing MDC’s dilapidated financial base, government told Business Times the following day that it was not aware that the company was so sick and promised an investigation.
MDC was formed with a mandate to develop various sectors of the Malawi economy in accordance with sound business principles.
In 2003, the corporation was reorganised as a limited liability company governed by its own memorandum and articles of association. The Malawi government, through the Ministry of Finance, is the sole shareholder of the company.
MDC’s main objectives are to create value added business opportunities, maintain financial health and capacity through a carefully structured divestiture of its matured investments and reinvesting its proceeds in new and viable projects with higher returns.
It also aims to support industrialisation, achieve a pre-eminent position in the financial sector through sustenance of portfolio profitability and growth.
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