The country’s water boards are increasingly struggling to stay financially afloat as they bear extensive public service obligations (PSOs) at tariffs that are below cost-recovery threatening supply reliability. Weekend Nation has found that the utilities are further fiscally weakened because government does not often reimburse them for the services resulting in recurring losses and inadequate resources to sustain operations. Under the PSOs, these State firms are tasked with supplying life’s essential resource to public education and health facilities, low-income settlements and other public users at tariffs that cannot offset the costs.
The boards are Northern Region Water Board (NRWB), Central Region Water Board (CRWB), Lilongwe Water Board (LWB), Blantyre Water Board (BWB) and Southern Region Water Board (SRWB). However, the ministries, departments and agencies (MDAs) frequently delay or do not prioritise payments for the services rendered yet these water companies are expected to continue supplying water. Stakeholders have warned that without a clear compensation mechanism for the PSOs, the utilities’ ability to provide reliable and safe water will continue to deteriorate with consequences for economic productivity.
Acknowledging the problem, Ministry of Finance, Economic Planning and Decentralisation spokesperson Williams Banda said in an interview on Wednesday, government would now begin separating the PSOs by pre-financing all State-Owned Enterprises (SOEs) mandated to undertake social functions on its behalf. According to the 2024/25 Consolidated Report for State Owned Enterprises in Malawi, government arrears to all SOEs declined markedly from K41.2 billion to K9.5 billion. The report recommends that government should urgently implement cost-reflective tariff reforms supported by pre-financed subsidies for social obligations.
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According to statistics from Ministry of Finance, Economic Planning and Decentralisation, in the 2024/25 financial year, BWB, NRWB and CRWB registered a net loss of K10.2 billion, K14.67 billion and K1.694 billion, respectively. Only the LWB recorded a profit after tax of K1.238 billion but it also marked a significant decline from the prior year’s profit of K9.485 billion in 2023/24. But Banda said government would limit contingent liabilities from SOEs through strengthening their oversight and performance-based monitoring, separation and explicit budgeting of the PSOs.
“Government intends to fully separate PSOs from commercial operations and consider funding them directly through the national budget and also provide allowable sector specific debt ceiling,” he said. Water services Association of Malawi (Wasama) executive director Vitumbiko Mkandawire said while they recognise PSOs’ vital role in ensuring equitable access to water, particularly for vulnerable populations and essential public institutions, the current model is financially unsustainable.
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