A decision by the Reserve Bank of Malawi (RBM) to slash executive salaries in 2020 has resulted in costly compensation payments to former senior officials after the Industrial Relations Court (IRC) ruled that the reductions were unlawful.
The ruling, delivered on November 14, 2025, found that RBM unlawfully reduced the salaries of executives after its Board had already approved a new executive salary structure in 2018.
The judgment has since become a legal basis for compensation claims by several current and former senior officials, with reported payouts ranging from about MK800 million to MK1.5 billion.
Those reportedly affected include Deputy Governor Henry Mathanga, Grant Kabango, William Matambo, Macdonald Mafuta Mwale, Mercy Kumbatira, Clemence Chinkono, Joseph Milner, Frazer Mdwazika, Ralph Tseka and Donnex Chitsonga, among other former senior executives.
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The developments have also shed new light on reports that Mathanga received about MK1.5 billion following his reinstatement, suggesting that the payment was part of a wider compensation dispute involving several officials rather than an isolated settlement.
Court finds salary cuts unlawful
The case arose from Matter No. IRC 803 of 2022, in which former RBM Director of Administrative Services Clemence Chinkono challenged the reduction of his salary following the Bank's 2020 decision to revise executive remuneration.
Court records show that Chinkono's monthly salary was reduced from MK12,046,436 to MK9,885,937 after RBM implemented a downward revision on December 30, 2020.
IRC Deputy Chairperson Annie Zinenani Gumulira ruled that although the RBM Board had authority to determine employee remuneration, the Bank could not unilaterally reduce salaries that had already become contractual entitlements.
The court noted that a 2018 functional review had altered RBM's grading structure, after which the Board approved a revised executive salary framework. Executive directors had reportedly recused themselves from the decision-making process to avoid conflicts of interest.
'One illegality cannot cure another'
RBM argued that the salary reductions were necessary to correct anomalies in its remuneration structure.
The court rejected that argument.
Describing RBM's conduct as a "classic example of unfair labour practices," the court held that the Bank could not correct an earlier irregularity by violating employees' contractual and statutory rights.
In one of the judgment's strongest observations, the court said:
"We cannot cure injustice by perpetrating another form of injustice."
The court found that RBM's actions violated employment law provisions protecting employees from unilateral deprivation of agreed remuneration.
It ordered that Chinkono receive the amounts claimed, together with interest, while damages for unfair labour practices would be assessed separately.
The parties retain the right to appeal to the High Court within 30 days.
A dispute worth billions
The Chinkono judgment could have implications far beyond one former RBM executive.
Several other current and former senior officials whose salaries were similarly reduced may rely on the same legal reasoning in seeking compensation.
The dispute traces back to a 2020 remuneration decision implemented during the tenure of then RBM Governor Wilson Banda, when executive salaries were reportedly reduced by as much as 50 percent.
The resulting legal battles have now exposed the potentially enormous financial consequences of decisions made by public institutions when employment contracts and labour laws are not properly observed.
FND: Taxpayers need accountability
Forum for National Development (FND) National Coordinator Fryson Chodzi said the saga should serve as a lesson to public institutions and leaders whose decisions can ultimately leave taxpayers carrying the bill.
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"We cannot fault the recipients of the money or RBM for complying with a court order," Chodzi said.
He said concerns had been raised when the salary reductions were introduced and that the court's ruling had now validated those concerns.
Chodzi argued that public debate should focus not only on the officials receiving compensation but also on accountability for decisions that courts ultimately find unlawful.
"Those who received compensation were vindicating their legal rights. The real question is whether decision-makers who knowingly implement unlawful actions should bear greater responsibility when those actions end up costing public institutions billions."
The controversy is likely to intensify debate over governance, accountability and financial oversight in Malawi's public institutions--particularly when administrative decisions later found unlawful leave taxpayers footing the bill.
