Of sleepy economy and snoring leadership

Most of the sounds from the industrial areas of Makata in Blantyre, Kanengo in Lilongwe and Luwinga in Mzuzu are thunderous snores being mistaken, largely, for factory activities.

A good chunk of the machinery is operating at ‘half mast’. In the major flea markets, there is a lot of noise as usual, but most of it is coming from screaming vendors trying to attract shoppers to their wares while, on the other hand, the shoppers are shouting back for bargain prices as they cannot afford those on offer.

In the end, the shopper and the vendor part with nothing to take home: the former without the goods and the latter without the money. No deal.

In the populous Ndirande Township in the commercial city, the deafening sounds of metals tell the frustrating story of the iron smelter. He has very little to show for his burnt and gnarled hands.

It has become a tough world out there. The real sector has gone to sleep. Of the lucky companies, most of them are blinking in and out of consciousness as guttural sounds squeeze themselves out of their under siege throats.

In the Cashgate City, Lilongwe, of the ‘anyamata amasitayilo ndi othamanga’ fame, the chorus of financial groaners is becoming more and more unified. It’s about time, too.

The popular pubs where strangers would throw crates of beers at strangers after money changed car boots, are deserted, at least by their standards.

The generally subdued hustle and bustle of Bwandilo and Chilinde could be a microcosm of a city in decline, if not finally settling into a long neglected slumber.

The Capital City economy has for years been fuelled by the Capital Hill largesse, aka, Cashgate, but there is precious little to steal from there these days—it is ransacked, so ravaged that the so-called seat of government is almost bankrupt to the extent that Treasury can’t figure out how to frame a budget whose half may have to be spent on retiring a historically high domestic debt stock and paying private sector arrears.

Last Friday, when he presented a financial resolution asking Parliament to authorise him to spend K210 billion to keep government offices open for four months ahead of a comprehensive budget set for tabling in the House in September, Finance Minister Goodall Gondwe shocked the nation when he announced that Joyce Banda’s People’s Party (PP) administration had “left behind” accumulated unpaid bills amounting to K158.5 billion and a domestic debt overhang of K340 billion that have to be factored into the next financial plan.

Ideally, this money (nearly K500 billion in arrears to government suppliers (of course real and fake ones, and domestic debt, some of which is Cashgate induced) should have gone to businesses and the financial sector to recapitalise enterprises to produce more goods, create more jobs and generate more taxes to government, but is now tied in at Capital Hill.

For an economy of our size, releasing half a trillion kwacha into the economy could put a lot of money into people’s pockets.

But with donors still clinging to their aid—which makes up 40 percent of the fiscal plan—chances of government paying this money in the short-term are near zero unless authorities throw all caution to the wind and order the Reserve Bank of Malawi to print the money—a foolish idea given the high risks of inflation.

So, yes, I feel sorry for my former boss, Gondwe, because he has a tough balancing job to do.

But Gondwe should also be honest enough to accept publicly that the Democratic Progressive Party (DPP) administration, under the late president Bingu wa Mutharika, shoulders most of the blame for the record high domestic debt although the figures appear to have doubled on the PP’s watch.

It was the DPP administration in 2005—following implementation of the Integrated Financial Management and Information System (Ifmis)—that loosened up all cash controls, instructing commercial banks to honour all government cheques from any of their branches for any amount without any limit on behalf of the central bank.

This change in payment policy—according to an interim report from a Treasury-sanctioned investigative audit of Ifmis done between 2011 and 2012 by the National Audit Office (NAO)—is being blamed for creating fertile ground for the looting that saw roughly K90 billion abused between 2009 and 2012 through the system and around K13 billion more between May and September 2013.

Before the decision, government used to have credit ceiling authorities (CCAs), which could limit the extent of payments and check excesses.

As I reported some time last year, the absence of CCAs may have left room for rogue civil servants and their private sector partners to siphon limitless sums of money out of government even when no goods and/or services were ever delivered; hence, Cashgate.

Indeed, it did not matter whether the budget had money or not. Furthermore, there was no regard to whether the pay cheque issued is way beyond the annual budget allocation for a ministry or department: the money is always paid.

Once that money was paid when the account was not funded, it was dutifully turned into a domestic debt. Treasury had lost control—any government ministry or department could borrow money from the financial sector.

It was a mess that the Bingu era DPP created and it is a mess that the Peter Mutharika era DPP must clean up.

Meanwhile, as President Peter Mutharika sleeps (very little seems to have been achieved as he approaches his first 50-day mark in the presidency), he will share the snores with the business sector and the rest of the economy.

It is one hell of a snore.