Abstract
The history of state-owned enterprises, or statutory corporations, dates to as far back as the 1930s, particularly just after the two World Wars. Governments have used statutory corporations to meet various social, economic and political motives. Overtime, however, it has been observed that the performance of statutory corporations worldwide has generally not been impressive. In Malawi, for instance, there has been a public outcry that statutory corporations have performed poorly financially, resulting in them being a drain on the public purse. This study was therefore undertaken with the over-arching aim to investigate how commercial statutory corporations in Malawi have performed financially.
Although there has been a public outcry in Malawi on the financial performance of statutory corporations, there has been no backing of a comprehensive analysis on the financial performance of the corporations. In addition,the literature mentions several factors that have affected the financial performance of statutory corporations. These factors are only too broad and it is not clear how applicable they are to the Malawian context. These deficiencies necessitated that the research be carried out.
The research was carried out in two phases. The first phase involved collecting quantitative data in the form of audited financial statements for eight commercial statutory corporations from 2008 to 2012, and then 2016 to 2017. The 2016 and 2017 financial statements were included to provide a fresh insight, and so inclusion of the years 2013 to 2015 was not found necessary. The financial statements were analyzed to determine the financial performance of the corporations in terms of profitability, liquidity, and solvency.
The second phase involved gathering qualitative data in the form of views on factors that affected the financial performance of the statutory corporations in Malawi. Given the nature of the research, case study was chosen as the appropriate research method for this part (the other research methods of ethnography, action research, and grounded theory were not found suitable). Face to face Interviews were held with senior employees of the corporations, and some top government officials. More data was obtained from the newspapers, board papers, and management reports. In the seven years under review, it was found that the financial performance of the commercial statutory corporations was much below expectation. Among the corporations under study, only one was seemingly making profits while the rest were generally in losses and were in a poor liquidity position.
Even for the exceptional case, its profitability was not good enough to make a difference in terms of dividend contribution to the national treasury. In addition, of all the eight case corporations, none provided a financial return to government, but instead the government provided in total a large financial bail-out to some of them.
The quantitative data was analysed through comparison of revenues and expenditures to determine absolute profit or loss, as well as through ratio analysis to determine relative profitability (return on capital employed), liquidity (current ratio and quick ratio), as well as solvency (gearing ratio, interest cover, and cash flow ratio). On the other hand, the qualitative data was analysed on a thematic basis. The analysis (both quantitative and qualitative) was done manually by the researcher.
The study has revealed that the poor financial performance of these corporations is attributable to a number of factors, and these included: the poor state of the economy, povertyamong people, climate change, corruption, inadequate investment, lack of autonomy, competition, lack of cost consciousness, poor management, and use of statutory corporations by government as warehouses for political appointees in terms of the board and senior management. The study has made theoretical and practical contributions. On the theoretical side, the research adds to the body of knowledge on the hurdles that statutory corporations face in Africa and how such hurdles may be minimized.
The practical dimension of the study includes the various strategies that have been suggested which, if implemented, should contribute towards an improved financial performance of statutory corporations, and eventually lead to improved socio-economic welfare of the citizens in Malawi. The findings and recommendations of this research should also be of use in other developing countries in Africa and probably beyond.