Mitigating Credit Risks in State Owned Enterprises: A Key to Revitalizing Malawi’s Economy

Post was last updated: November 18, 2025

Key Business Points

  • Debt obligations remain a significant challenge for Malawi’s state-owned enterprises (SOEs), with collective debts exceeding K495 billion, posing a risk to the government’s fiscal stability.
  • Policy interventions, such as timely approval of cost recovery tariffs and setting debt ceilings, can help mitigate this risk and improve the financial health of SOEs, allowing them to better serve the business community and support zinthu zokwana (economic growth).
  • Corporate governance best practices, including empowering boards and management to address constraints and risks, are crucial for a turnaround in SOEs, enabling them to make informed decisions and drive tsogolo la biashara (business success).

The recent risk assessment of Malawi’s commercial state-owned enterprises (SOEs) has highlighted the significant challenge of servicing debt obligations, with collective debts exceeding K495 billion. The assessment, which covered the period from March 2022 to March 2024, found that none of the 10 SOEs assessed were rated as low-risk, with 40% falling into the highest risk category. The primary causes of this risk rating include high operating and administrative costs, weak revenue collection and debt recovery systems, and outdated infrastructure, which can hinder biashara ya malawi (Malawian business) and uchumi (economy) as a whole.

The report notes that the risk could become more manageable with policy interventions, such as timely approval of cost recovery tariffs and setting debt ceilings for some SOEs. This would enable SOEs to better manage their debt obligations and reduce the risk of default, ultimately supporting maendeleo ya biashara (business development) in Malawi. The assessment also highlights the need for SOEs to develop strategies to address their financial difficulties and improve their debt payment capacity, which is essential for kujenga uchumi (building the economy).

The data reveals that some SOEs, such as Escom Limited and the National Oil Company of Malawi, have significant exposure to government debt, with present values of K152 billion and K192 billion, respectively. Other SOEs, such as the Electricity Generation Company (Malawi) Limited and the Blantyre Water Board, have lower exposure, but still face significant challenges in servicing their debt obligations, which can impact uzazi wa biashara (business growth).

According to corporate governance commentator Jimmy Lipunga, a turnaround for SOEs is possible if they commit to corporate governance best practices, including empowering boards and management to address constraints and risks in a timely manner. This would enable SOEs to make informed decisions and drive growth, ultimately supporting malawi kwa mtsogolo (Malawi’s future). Economists Association of Malawi president Bertha Bangara Chikadza notes that most SOEs rely on loans to cover operational costs rather than productive investments, indicating chronic cash flow problems, which can hinder biashara ya malawi (Malawian business) and uchumi (economy) as a whole.

Overall, the report highlights the need for urgent attention to the financial health of Malawi’s SOEs, which are critical to the country’s economic growth and development. By addressing the challenges facing SOEs, including debt obligations and corporate governance, the government can help support tsogolo la biashara (business success) and drive maendeleo ya uchumi (economic development) in Malawi.

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Vanessa Banda
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