How much forex do we generate?
Every time there is a crisis of some kind, it is interesting to see how suddenly everyone wants to appear the wisest. It is usually easy to give alternative positions in the aftermath of an event or happening.
I recall in the early 2000s, Danish coach Kim Splidsboel, who was coaching our national football team, the Flames, apparently fed up with critiques of the team’s performance in the media called the analysts and journalists “Monday coaches”. He said “Monday coaches’are usually quick to say what one should have done, but rarely anywhere closer when things are going haywire to offer a solution.
Splidsboel came to my mind at the weekend when, in the course of a discussion on the depreciation of the Malawi kwacha and its effect on Malawians’ cost of living, someone asked me: “Aubrey, the kwacha has and continues to lose value against the dollar and other currencies. Who is to blame?”
What amused me was an unsolicited response from someone who was overhearing our conversation who said: “Excuse me guys, we are all to blame for the mess that is our kwacha! Until we change our consumption patterns where we are obsessed with imported goods while generating very little foreign exchange, we will continue moving in this vicious cycle of high demand for forex with less supply.”
The kwacha’s seemingly never-ending woes go down to our sources of foreign exchange against the narrow export base we have. Malawi’s major source of foreign exchange is tobacco, which this year earned the country $362 million. On the other hand, the foreign exchange demand for the entire year is estimated at around $2 billion for the importation of medicines, fertiliser, vehicles, clothes and, of all things, toothpicks, vegetables and table eggs.
Other major sources of forex are development partners through budgetary support which, for now, has been withheld and, from what I gather through my diplomatic sources in Lilongwe, it is nowhere near being released.
Many of us import various goods and services. These include vehicles, electronic appliances, fuel, clothing, furniture and vegetables. Some of these we are justified as they are not locally made.
But, have we ever asked ourselves how much we contribute to the foreign exchange reserves as individuals or institutions? In most cases, the answer is in the negative.
No wonder our trade deficit with various countries and trading blocs continue to worsen or be in the negative
It is time as a country we emphasised the ‘Buy Malawian Campaign’ by encouraging our local manufacturers to make products that match international standards.
We should also accept responsibility and be accountable for our actions. Blaming past or present regimes or policies will not bring more forex. It is important to accept the resource constraints facing us and use what we have efficiently.
Aubrey, its time we started import substitution regimes seriously. We need $360 million to but fuels annually, we can 100% substitute petrol with ethanol and 100% of diesel with jatropha, all we need is to start developing large sugar cane estates all along the greenbelt to produce both sugar and ethanol. More sugar will increase our forex earning capacity. We can do another 10 big estates, each employing 7,500 people thereby reducing unemployment and increasing the number of people who pay taxes in this country. We also need to substitute the importation of fertilisers, almost 100% of Malawi fertilisers are nitrogen based, which is normally manufactured from Ammonia. Ammonia can be produced from the lowest grade coals that we have at Mchenga, Karonga, Lower Shire and elsewhere. The process to gasify coal and produce ammonia generates great ammounts of heat which can be tapped to heat water to steam and generate electricity through steam. Instead of asking the Chinese for projects to build stadia, palaces, hotels let us ask them for these technologies. Atleast they will generate money and pay for themselves in the long run.