The year 2012 saw Malawi launching three key strategy documents, namely the second generation Malawi Growth and Development Strategy (MGDS II), the Economic Recovery Plan (ERP) and the National Export Strategy (NES).
But how do these policy documents interface and help restructure the economy? Our Reporter BRENDA TWEA writes about this and other issues.
ERP was launched on September 28 2012 in an attempt to save Malawi’s ailing economy. Most analysts viewed ERP as lacking a clear action plan for implementation.
The plan, expected to be implemented in 18 months, focuses on pillars of energy, tourism, mining, agriculture and transport infrastructure and information communication technology (ICT).
Malawians expect the plan to resuscitate the economy currently characterised by rising inflation (now at 33.3 percent), high interest rates and a weakening kwacha which was devalued and subsequently floated on May 7 2012.
But Malawi’s development agenda is set out in the country’s overarching blue-print, MGDS II whose main objective is to reduce poverty and assist the country achieve Millennium Development Goals (MDGs).
Under its forerunner, the MGDS I, Malawi achieved economic growth, poverty reduction and national food security, among other things.
On the one hand, the five-year NES envisages a reversal of the unsustainable trade deficit.
Essentially, NES seeks to transform Malawi to a producing and exporting country by building productive capacity such that exports may match imports in the long run.
Business analyst and managing director for Business Consult Africa (BCA), Henry Kachaje, in an e-mailed response, noted that the three policy documents actually build on each other.
He said: “The ERP is, by and large, a reflection of the MDGS II with more focus on areas that can bring quick economic gains for Malawi. The NES focuses on developing the productive base and the export potential for Malawi. It is more focused on trade development and this is a focused complement on some aspects of the MDGS II. The documents are effective policy and planning tools. The challenge lies in implementation.”
Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa agreed that the three are part of the much-needed policy cocktail strategically formulated to support the long-overdue economic reforms.
“For instance, the NES seems to say it all. It talks of all the right things in the right measure, except perhaps that it gives the much-needed assurance that such a strategy will go further to sustained action and implementation unlike what has happened to similar strategies in the past.
“The National Export Strategy, the MGDS II and ERP have a lot in common as they all emphasise on consolidating key virtues around learning from the past to shape our ideal future, with critical lessons for immediate action to develop Malawi’s ability to export,” he said.
Ministry of Industry of Industry and Trade spokesperson Wiskes Nkombezi said the NES supports ERP in areas such as agriculture, energy, transport and mining, among others.
‘A clear prioritised plan’
He observed that NES gives clear prioritised actions post Millennium Challenge Corporation (MCC) and post interconnector, particularly for the new energy policy and financial planning.
Apart from that, he pointed out that in agriculture, NES provides strategies for priority crops and clusters to diversify exports from tobacco and indicates prioritised actions on how to address disconnections between farmers and processors.
“In addition, NES provides a strategy for manufacturing, financial sector development, quality and standards, a strategy to develop institutions and skills, competencies and knowledge to ensure inclusive growth and job creation. All these are prioritised across each other,” said Nkombezi.
He argued that NES also ropes in MGDS II through its priority areas. The exports plan provides clear prioritised plans for energy, mining, tourism and also a comprehensive manufacturing (industry) strategy.
In terms of transport, infrastructure and Nsanje World Inland Port, NES provides guidance on matching rural feeder road infrastructure to key areas for priority cash crops to improve economic returns.
The clock is unfortunately ticking, according to Kubalasa, and action on these is long overdue if the country is to see the fruits yielded as soonest as 2013.
“The three policy documents produced through highly consultative processes are successfully consolidating and articulating the policy direction needed to restructure the economy,” he said.
If effectively followed up with implementation and the right measure and balance of good economics and politics at all levels, Kubalasa reckons that everybody will be inspired to be involved.
Kachaje said for Malawi to start reaping the benefits of the three plans, it will largely depend on the implementation process and resources allocated to the programs in the national budgets.
“When MDGS II was being formulated, private sector was concerned that government did not provide adequate feedback on the progress that the country made with MDGS I. The issue in Malawi is not lack of good strategies. Actually, Malawi has some of the best well formulated plans in Africa. The challenge is in implementation of the plans,” he said.
He further identified the NES as one of the best formulated strategies in Malawi’s recent history, stressing that the real challenge is again whether there will be political will to implement it.
The ERP, which government described as urgent in the wake of worsening economic situation in the country, proposes measures aimed at cushioning the poor from the impact of economic reforms, especially the exchange rate policy adjustment.
According to the 15-page recovery document, immediate policy reforms include exchange rate adjustment, foreign exchange reserve cushion and fuel pricing adopted in May. Short term reforms, on the other hand, include social support package and budget framework which prioritise expenditures to sectors that are deemed to enhance economic growth and boost production, among others.
In her State of the Nation Address in May 2012, President Joyce Banda observed that the country’s agenda is being realised through the implementation of the MGDS I, and that MGDS II is the medium term national development framework for the country for a five-year period from 2011/12 to 2015/16.
She added that the strategy is designed to lift Malawi from poverty to prosperity.
MGDS II focuses on nine priority areas including agriculture and food security; transport infrastructure; energy, industrial development; mining and tourism; education, science and technology and greenbelt irrigation and water development among others.
NES has provided a prioritised road map for developing Malawi’s productive base to allow for both export competitiveness, economic empowerment and to generate sufficient exports to match the upward pressure on Malawi’s imports.
‘Allocate adquate resources’
Kachaje asserted that if government took the implementation of these documents seriously, allocating adequate resources to the key ministries charged with the execution of the plans, Malawi could see its economy stabilising and going on the right path within the next three years.
“The NES, if well implemented, can actually see Malawi’s exports diversifying from tobacco from the 2014 harvesting season. We should not expect the NES to start showing results during the 2013 harvesting time as the NES was launched when farmers had already decided on which crops to plant during the 2012/13 growing season,” argued Kachaje.
He further said as a country, Malawi needs to have a strategy to get off donor dependency gradually over the next five years.
Said Kachaje: “If the 2013/14 budget can reduce donor dependence to for instance 35 percent; the following budget (2014/15) to 25 percent until the dependence reduces to zero, that will be very wise.
“Malawi’s economy must develop; 40 percent reliance on donor aid for our national budget is unhealthy. This puts our economy at great risk as it is heavily dependent on external forces. Any slight annoyance of our donor partners or misunderstandings can greatly affect our economic stability.”
He stated that Malawians need to exercise patience in as far as economic recovery is concerned.
Kachaje personally believes that economic recovery could only be expected within 12 to 18 months. Nevertheless, with better fiscal management by government and right investment especially in programs aimed at growing the industry base, Kachaje asserted that the country can see quick economic recovery.
“The budget to Ministry of Industry and Trade should be increased substantially with specific programs to improve the ranking of doing business in Malawi, boosting the growth of the small and medium enterprises (SMEs) sector and diversifying the economy from tobacco dependence as far as forex generation is concerned,” he proposed.
Furthermore, Kachaje proposed that government should be serious with the development of the private sector through appropriate reforms as well as improvement in infrastructure, especially power generation and distribution.