Economic underdevelopment, poverty in Malawi

 

After many years of passive existence, I am finally persuaded to arise from deep slumber and comment on the economic and political goings-on in Malawi, my once beautiful Mother Malawi—the warm heart of Africa.

Malawi has come from afar both politically and economically. Those of us who were not yet born during the reign of Kamuzu’s one-party rule, or were too young to understand the social, economic and political developments of that period, may not appreciate what life was like in those good old days. Nevertheless, a basket of changes was anticipated to come with the advent of multi-party democracy.

Amongst the changes that were eagerly awaited included the following: Freedom of expression—the freedom to talk intelligently and express your views without fear of reprisals including political incarceration by those in authority), freedom of association—the freedom to keep the company of your choice without fear of any recrimination including social discrimination and freedom to own and run a business of your choice, without restriction.

Going by what has happened since, it is quite evident that Malawians have very much been short-changed.

The advent of multi-party democracy has been a source of tears to most. Perhaps let us remind each other what used be Malawi then.

Kamuzu Banda’s legacy

Notwithstanding the known sour grapes of the one party era, Kamuzu’s reign left a legacy of a growing economy.

Companies such as Malawi Development Corporation (MDC) with a host of subsidiary and associated companies such as David Whitehead & Sons, Portland Cement, Agrimal, Agriculture Development and Marketing Corporation (Admarc), which had regional and performing satellite markets country wide.

The subsidiaries and associated companies of Admarc included Grain & Milling, Cold Storage, National Oil Industries Limited (Noil), Cotton Ginners Malawi Limited, National Bank of Malawi (NBM) and other investments in the banking sector. And we had Small Enterprise Development Organisation of Malawi (Sedom) and Development of Malawian Enterprises Trust (Demat) just to mention a few.

Malawi was a proud owner of an efficient national airline (Air Malawi), a performing and growing railway system rolling up to Mchinji in the name of Malawi Railways and Malawi Lake Services, a national bus company, Shire Limited.

Today, all these companies are either dead or on life support having been stripped of their assets in the name of reorganisation, privatisation or simply plundered for the benefit of a few.

Agricultural schemes established almost in all districts which provided a food basket to the nation have been allowed to go under as if they were not national investments.

During Kamuzu era, Malawi had one of the most efficient postal service in cities and rural areas, public telephone booths worked both in towns and cities, and these were hardly vandalised. The Post Office bank took banking to the people.

There was also a highly disciplined and reliable police service—albeit some officers were brutal— and above all, a performing civil service that was considered by all accounts second to none.

There once was access to quality education and health services by all, rich and poor. Plant and Vehicle Hire Organisation (PVHO) was responsible for managing and maintaining an entire fleet of government vehicles and plants.

The Ministry of Works and Supplies, as was the ministry was known then, was responsible for all government infrastructure development and maintenance.

In the private sector the country boasted of companies such as Press Group of Companies, British American Tobacco (BAT), Lever Brothers, Encore Products; Brown & Clapperton Malawi (B&C), Import & Export Malawi Limited, Chipiku, Kandodo and many others.

Graduates were almost always assured of employment after leaving university irrespective of tribe, religion or district of origin.

Cost of living was almost always affordable because of price controls on basic and essential commodities.

None talked about fighting corruption in any form, at the time, because it was unheard of just as much as blatant thievery of government resources with impunity was a strange animal to all if not most.

None talked about fighting crime including white collar crime at the time because the level of greed was exceedingly low.

Beyond the borders our neighbours knew Malawians as friendly, organised, hard-working, loyal and trust worthy. Malawians were in essence known as people with moral values.

Under Kamuzu, there was no room for corruption in the public, civil or judicial service. Not surprisingly, payments were only made for goods supplied and services rendered or received. Again, issues of theft in the public or civil service were also dealt with decisively.

What went wrong?

What then has made us to be what we are today – a people badly in need of redemption?

To answer that, there is need to understand the changes that took place shortly after the multi-party government was ushered in, many of which should not have been accepted let alone introduced in our economy without weighing the pros and quos.

 

This paper will focus only on two major changes out of many. At the request of Bretton Woods Institutions—World Bank and International Monetary Fund (IMF)—Malawi was asked to liberalise trade and remove exchange controls.

It was argued that barriers of trade were a hindrance to the growth of a vibrant manufacturing industry base and the introduction of free trade would promote competition and accelerate development thereby reducing poverty in the country. How so attractive it sounded, just like concerto in one’s ears, but we were soon to wake up to a dire reality.

Within months of liberalisation the retail stores in the country were awash with imported goods of all sorts, many of which were not necessities.

Worse still a very small percentage of these imports represented raw materials for the manufacturing industry. Locally manufactured goods were now competing with imported goods in terms of price, quality and demand.

Because the level of production by most local manufacturers was relative to local demand, the benefits of economies of scale were also not comparable to levels enjoyed by manufacturers in South Africa and elsewhere and effectively made the goods less competitive on the local market.

Not long afterwards and due to ever falling demand, local manufacturers realised that they could not compete with imported goods.

Companies that had operated under State protection to create demand for labour were now exposed. David Whitehead and Sons in the textile industry was one of the companies that suffered heavily from competition.

Press Clothing, Crown Fashions, Lever Brothers and others became victims of this liberalised economy. In no time, companies like David Whitehead were operating on one shift per day instead of three, leading to massive retrenchment.

Lever Brothers shut down its manufacturing unit just as BAT opted for importation of its brands instead of manufacturing locally.

Needless to say that the continued importation of goods for consumption with little export earnings resulted in foreign reserves that had built up over the years being quickly eroded.

Until then, Malawi had not experienced any shortage of foreign exchange. In 1993 the Malawi kwacha was trading at K4.43 and K6.65 to the dollar and pound sterling respectively and rising sharply to K8.85 and K13.67 respectively a year later, in 1994.

As a matter of fact during Kamuzu’s reign, Malawi was known to have import cover in excess of six months—with ample supply of fuel and seasonal farm inputs such as fertilizers, chemicals and seeds timely delivered.

By the end of the first 10 years the multiparty government in Malawi had nothing to show to the people for its existence. Some observers have gone to the extent of describing that decade as ‘a wasted period’.

 

Vexing questions are; how do you liberalise trade when you do not have a solid industry base that can compete favourably with imported goods? Why would you want to liberalise the exchange control regime when you do not have a sound export base to bring in foreign exchange earnings?

One would have thought these reforms warranted a serious constructive debate for the benefit of the nation before implementation. According to War on Want, 2005 (a fight against causes of poverty) trade liberalisation has undoubtedly resulted in a closure of a large number of manufacturing industries in countries such as Cameroon, Malawi, Mozambique, Tanzania, Zambia and Zimbabwe.

In few words one can say that the first multi-party regime was far from honest with its electorate.

It gave the impression that there was no need for hard work, accountability, law and order, education but business dealings—kutakata.

There was a lot of emphasis on democratisation with little or no emphasis on “responsibilities” that go with it.

Economic drivers

Malawi is not short of technocrats in fields of economics, business management, accounting or monetary policy.

What appears to be crystal clear is that Malawi is terribly short of people who are honest with themselves, people who can say no to bad policies or reforms from any quarters, people who are selfless, people who are willing to resign from their positions when ‘forced into obedience’ by the executive arm of government.

For instance, why did Malawi agree to devalue the Malawi kwacha and also to float it at the same time? Surely, considering the nature of our economy which by a big margin is a net importer (negative trade balance of 100.8% percent in 2010, 72.1 percent in 2011 and 76.5 percent in 2012) you do not need a professor to tell you that devaluing of the kwacha and floating it at the same time was suicidal.

In the short-term, it provided Malawi with immediate needs such as fuel, some raw materials and essential commodities, but nothing more.

As a result of adopting these policies Malawians are in dire straits. Fuel pump prices have gone up to nearly twice as much and exchange rates to the dollar rose from K165 in December 2011, K338 in December 2012 and now K558.

Naturally the cost of living has had to respond to these changes and unavoidably has gone up sharply. Unemployment rate has gone up as well due to downsizing of operations or complete closure.

Impact of Cashgate

Sadly in the face of such heart-breaking developments, there are those who have benefitted from Cashgate, the untamed plunder of government resources at Capitol Hill and elsewhere.

The unconfirmed reports about nearly K700 billion not having been accounted for in government is quite sickening to say the least.

One can be excused for being selfish with personal property but to behave in the same manner with public property is nothing short of greed and is criminal.

Unfortunately the whole structure of government is involved without exception. Laws of the land were changed to accommodate people with crooked minds.

Currently, prosecution needs to prove that property was ill-gotten before an arrest takes place whereas before, the person was to prove the source of his wealth.

The change in this provision was, in my view, done to facilitate the committing of crime rather than to discourage it. Similarly, the repeal of the Forfeiture Act was also done in bad faith.

By Malawi standards K700 billion, then equivalent to about $3 billion, is a fortune and would have been felt if it was in circulation in the country.

You then learn that some public officers enjoy fuel allowances in the range of 1 000 to 2 000 litres per month, which can only be described as obscene, for lack of better words. It is beyond reason that a public officer, with an office, can use so much fuel in a month unless a mini filling station is opened within the private compound.

Way forward

Malawi needs the kind of leadership that does not tolerate corruption at any level, leadership that will not allow the plunder of public resources including vandalism of public property, leadership that will devise laws for the benefit of the nation and not politicians, leadership that will tell the World Bank and IMF, and others why some proposed policies cannot work in Malawi.

We want leadership that will leave a legacy worthy of our history books, leadership that will set an example for posterity and the tone for development like Hastings Kamuzu Banda. n

*Amos Banda is prominent Blantyre-based accountant writing under a pen name