- Category: Q & A
- Written by Mwereti Kanjo
Many businesspeople, including hotels and car hire service providers have been disappointed with the cancellation of the African Union summit, claiming they invested a lot in preparations for the event. Some are asking government to compensate them for cancelled business contracts.
Mwereti Kanjo talks to Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer, Chancellor Kaferapanjira, on whether this is plausible.
Q: With the cancellation of the African Union (AU) summit, how much have we lost as a country economically?
A: I do not think anyone calculated how much the country was going to gain [or] lose. But if you go to businesses like hotels, they will tell you how many bookings they had. I know a number of hotels, especially those in Lilongwe, which I have interacted with that had bookings for a number of days. We have lost as a country because the money was going to trickle down to the business community.
Yes, some of our businesses were going to benefit, but we must look at the issue broadly. Let us look at where the country is now. The Minister of Finance announced that extent of the deficit the country is going to incur in this financial year will be 7.3 percent.
The 7.3 deficit means the country has used services and goods from the private sector which it has not paid. You go around and ask construction companies, they will tell you how much they are being owed. Similarly, with service providers. Most of the time this obligation remains with local companies because normally, they are quick to pay external creditors.
So, if the government owes the public sector K74 billion, according to the budget, and this same government is going to pay for all the costs minus the contribution by South Africa, it does not make business sense. For the business community, it was going to spell more challenges. The country is in serious problems and it does not make economic or business sense to continue spending when you are in problems. Broadly speaking, as an organisation representing the private sector, we think the shifting of the holding of the AU summit is a blessing in disguise.
The President and her government have been talking about the need to recover, which we all agree with, and this is why we have supported all her policies, including devaluation, as we think that is the only way forward. Yes, it is painful, but it had to be done. This is the way to recover. Let me say here that this is not an IMF concoction; this is our own doing because we are in problems.
Q: Some businesses are now asking government to cushion the losses they have incurred in preparations. Should it be the responsibility of government to cushion these businesses when government did not exactly ask them to take out loans?
A: We believe that the businesses asking government for some sort of compensation are missing the point. Businesses will take risks, everybody takes risks and government has also lost. You expect certain things to happen and if it doesnâ€™t happen, you write it off and take that as an investment for the next period. Yes, you take out a loan for A, B,C,D and if it does not happen, that is a risk you took. I do not see any justification in business asking government to come to their rescue or to compensate for any loss. It is not justified.
To make matters worse, we are talking about a government that is already thin and failing to pay salaries. If you read the budget, government has over K600 million in pensions gratuity and salary arrears. I know this is true because I know people who were promoted two years ago, but have not been paid since. These are the most vulnerable people who do not have the pleasure for compensating for business risk.
Q: If government were at all to do something, how best would it help these people out?
A: We need to move away from escapismâ€”that is, blaming other people for our problems. On what basis is the government being blamed because it was not its decision to move the summit elsewhere? Even if the government had money, on what basis was it going to give out this money? Every expenditure by government has to be approved by Parliament. Government has to justify why they are spending money and on what basis would they explain giving business money or whatever form of assistance. I will say it againâ€”these businesses are missing the point and it has never happened. If I may ask, if the summit were going to happen in Malawi and these businesses made money, would they give part of the profits to government? It is the same thing.
Q: What sort of advice would you give these businesses?
A: I think they need to understand what it means to be in business. We have a lot of formal business in there and informal businesses know what it means. I know some businesses that were going to supply a lot of things and already they are thinking of how to write off these things or how they are going to treat these losses because they understand that these things happen. A business is about taking risks. Yes, government would ask the hotels to improve their services for an event and if that event does not take place, it is a risk that business took. Government is not going to take away the investments that they have made. If a car hiring company went to the bank to get a loan, I can assure you that they did not use the holding of the summit as security. So my advice is business is what it is, sometimes you make money and sometimes you make losses, but in the long run, it balances out. This is why businesses continue to exist.
Q: Any last comments?
A: When the economy is not in balance, the first sufferers are businesses. When inflation goes up, so do prices. And if things are not being bought after a huge investment, it becomes challenging for a business as well as consumers. Right now, the economy is doing very badly and that is why government is undertaking these reforms. Having a deficit of 7.3 percent has a lot of implications, that is why inflation is expected to go as high as 18.4 percent on average in addition to devaluation. There was so much pressure on expenditure without the money. If government continued to do that to save face, it would have been worse for the businesses that are complaining. The cancellation of the summit in Malawi is a blessing in disguise. The fact that government is going to save what it was going to spend means that the economy is not going to be as worse as it was going to be.