A decision by the Reserve Bank of Malawi (RBM) to reduce executive salaries in 2020 has culminated in costly compensation payments to former senior management officers, following an Industrial Relations Court (IRC) ruling that found the salary reductions unlawful.
The case, determined on November 14, 2025, held that RBM unlawfully revised the salaries of affected executives after the Bank’s Board had already approved a new executive salary structure in 2018.
The ruling has become the legal basis for compensation claims by several former senior officials, with reported payouts ranging from approximately MK800 million to MK1.5 billion.
Among those reportedly affected are Deputy Governor Henry Mathanga, Grant Kabango, William Matambo, Macdonald Mafuta Mwale, Mercy Kumbatira, Clemence Chinkono, Joseph Milner, Frazer Mdwazika, Ralph Tseka, Donnex Chitsonga and other former senior executives.
The ruling has also provided broader context to recent reports regarding an alleged MK1.5 billion payment to Deputy Governor Henry Mathanga, suggesting that the payment forms part of a wider compensation exercise involving several affected officers, rather than an isolated payment.
Court found salary cuts breached labour laws.
The judgment arose from Matter No. IRC 803 of 2022, in which former 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 salary revision on December 30, 2020.
IRC Deputy Chairperson Annie Zinenani Gumulira found that although RBM’s Board had authority to determine employee remuneration, the Bank could not lawfully reduce salaries that had already become contractual entitlements.
The court noted that the 2018 functional review had changed staff grading structures and that the Board subsequently approved a revised executive salary framework after executive directors recused themselves from the decision-making process to avoid conflicts of interest.
“One illegality cannot cure another”
In one of the ruling’s strongest findings, the court rejected RBM’s argument that reducing salaries was necessary to correct anomalies in the salary structure.
“The Respondent’s actions are a classic example of unfair labour practices,” the court ruled.
The judgment further stated that RBM’s decision violated provisions of the Employment Act prohibiting employers from depriving employees of agreed remuneration through unilateral deductions.
“We cannot cure injustice by perpetrating another form of injustice,” the court observed.
The IRC ordered that Chinkono be awarded the sums claimed, together with interest, while directing that damages for unfair labour practices be assessed separately.
The ruling also preserved the parties’ right to appeal to the High Court within 30 days.
Broader implications.
The Chinkono judgment has significant implications because other current and former executives whose salaries were similarly reduced may rely on the same legal reasoning in pursuing compensation.
The dispute stems from a 2020 decision implemented during the tenure of then RBM Governor Wilson Banda, when executive salaries were reportedly reduced by up to 50 percent as part of changes to the Bank’s remuneration framework.
Reacting to the court outcome, Forum for National Development (FND) National Coordinator Fryson Chodzi said the case should serve as a lesson for public leaders whose unlawful decisions ultimately burden taxpayers.
FND says taxpayers are paying for unlawful decisions.
“We cannot fault the recipients of the money or RBM for complying with a court order,” Chodzi said.
“Some of us warned at the time that these salary cuts were unlawful. The court has now confirmed that those concerns were valid.”
Chodzi argued that public debate should focus less on employees receiving compensation and more on accountability for decisions that courts later found to have violated labour laws.
“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 ruling is expected to fuel broader discussions about governance, accountability and financial oversight within Malawi’s public institutions, particularly where unlawful administrative decisions result in substantial liabilities funded from public resources.
