Cash flow pressures choke SOEs’ operations—ministry

Revitalizing State Owned Enterprises: Strategies to Ease Cash Flow Constraints and Stimulate Economic Growth

Post was last updated: December 24, 2025

Key Business Points

  • Cash flow pressures are increasing for State-owned enterprises (SOEs) in Malawi, impacting their ability to remit dividends to the government, with a dividend pay-out ratio of only 4% in 2025.
  • The aggregate profit of profit-making SOEs improved to K34 billion in 2025, but actual remittances remained low at K4.4 billion, below the statutory requirement.
  • The government is implementing a comprehensive SOEs reform agenda to improve liquidity management, debt monitoring, and revenue collection efficiency, and to enhance corporate governance through performance-based contracts for boards and management.

The Ministry of Finance, Economic Planning and Decentralisation has released a report highlighting the financial challenges faced by State-owned enterprises (SOEs) in Malawi. The report shows that while the aggregate profit of profit-making SOEs improved in 2025, the actual remittances to the government remained low due to cash flow pressures. The dividend pay-out ratio decreased significantly from 27% in 2024 to 4% in 2025. This is a cause for concern for the government, as SOEs are expected to operate efficiently and effectively, following private-sector principles to strengthen their long-term financial sustainability, as outlined in the Dividend and Surplus Policy for Statutory Bodies (2019).

According to the report, the performance of regulatory SOEs worsened in 2025 due to rising operational costs, trade receivables, and non-cost reflective tariffs in the energy and water sectors. The total debt of SOEs stood at 12% of the gross domestic product, with a stock of on-lent at K98.4 billion and guaranteed debt at K38 billion. However, government arrears to SOEs reduced from K41.2 billion in 2024 to K9.5 billion in 2025.

Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha stated that the government is implementing a comprehensive SOEs reform agenda to address these challenges. This includes improving liquidity management, debt monitoring, and revenue collection efficiency, as well as enhancing corporate governance through performance-based contracts for boards and management. Mwanamvekha noted that many SOEs are making huge losses, exerting pressure on the national budget, and that the government is working to address these issues.

Corporate governance expert Jimmy Lipunga emphasized that developing strategies is not the difficult part, but rather appropriating sufficient authority to boards and management to deal with constraints and risks in a timely manner. He noted that SOEs often lack leadership agility and resilience, and are hamstrung by ineffective boards, political interference, resource constraints, and weak capacities. To address these challenges, Lipunga recommended that SOEs focus on restructuring and reengineering their business models to improve their financial sustainability.

Overall, the report highlights the need for reforms in the SOE sector to improve their financial performance and contribution to the national budget. As the government works to implement its comprehensive SOEs reform agenda, it is essential for SOEs to prioritize effective governance, efficient operations, and strategic planning to ensure their long-term sustainability and success. This can be achieved by following private-sector principles, such as those outlined in the Dividend and Surplus Policy for Statutory Bodies (2019), and by appropriating sufficient authority to boards and management to deal with constraints and risks in a timely manner. By doing so, SOEs can improve their financial performance, reduce their reliance on government support, and contribute to the growth and development of Malawi’s economy, ultimately benefiting wachikulu (business owners) and wafanyizira (entrepreneurs) across the country.

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Vanessa Banda
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