Tie SoEs bailouts to performance—CfSC

The Centre for Social Economic Concern (CfSC) has urged the government to attach measurable performance conditions to financial support for State-owned Enterprises (SoEs) to ensure taxpayers are getting value from billions of kwacha spent sustaining financially weak public firms.

CfSC economic governance officer Agness Nyirongo said support for SoEs providing essential public services can be justified, but government should demonstrate what taxpayers receive in return and whether the funding improves financial performance and service delivery.

She said every kwacha committed to a financially distressed SoE also represents resources that could potentially have been allocated to health, education, social protection or infrastructure.

Struggling Blantyre Water Board’s employees install a customer’s prepaid meter. (Inset): Nyirongo. | Nation

“The real accountability question is therefore whether public financial support is producing measurable improvements in service delivery and financial performance,” Nyirongo said.

Her remarks follow findings in the World Bank’s 23rd Malawi Economic Monitor (MEM), Building Stability to Unlock Growth, which identifies financially weak SoEs as a significant fiscal risk.

The report estimates that quasi-fiscal activities undertaken by SoEs generate implicit subsidies equivalent to about two percent of gross domestic product (GDP) annually.

A The Nation analysis of government’s 2025 Consolidated SoE Report also shows commercial entities received about K292.17 billion in government grants between 2022 and 2025.

Nyirongo said continued financial support should therefore be tied to performance agreements containing measurable targets on financial management, debt reduction, revenue collection, service reliability, operational efficiency and customer satisfaction.

She warned that simply injecting more money into struggling enterprises without addressing underlying weaknesses risks creating a cycle in which taxpayers repeatedly finance the same problems.

“If government support merely allows inefficient enterprises to continue operating without fundamental reforms, the country risks creating a cycle of bailouts in which taxpayers repeatedly finance the same weaknesses,” she said.

Nyirongo, however, cautioned against applying a blanket approach to SoEs because their financial circumstances and public-service responsibilities differ.

Government’s SoE report, for instance, shows Electricity Supply Corporation of Malawi (Escom) moved from a K65.3 billion loss in 2024 to a reported K4.8 billion profit in 2025, while Blantyre Water Board’s loss narrowed from K37.8 billion to K10.2 billion.

Nyirongo said government should determine which enterprises have a strategic public-service justification for State ownership, which can become commercially sustainable, which require restructuring and which may need alternative ownership or operating models.

In an earlier interview, African Institute for Development Policy executive director Eliya Zulu similarly cautioned against assessing SoEs solely on commercial profitability because some exist to provide essential services that the private sector may not provide affordably.

“They are meant to help provide services that may not be easily provided by the private sector because they also have a social component… but at the same time, they also have a commercial aspect,” he said.

The World Bank recommends separating such public-service obligations from commercial operations and explicitly financing them through the national budget rather than allowing their costs to accumulate as SoE losses.

Nyirongo backed that approach, saying where government requires an enterprise to provide services below cost for social reasons, the associated subsidy should be transparently identified and budgeted.

She said reforms should ultimately result in fewer bailouts, improved services and less pressure on public finances.

“For taxpayers, the measure should be whether every kwacha transferred to an SoE is accompanied by greater transparency, stronger performance and a credible path towards sustainability,” Nyirongo said.

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