On diversification, market power

Recently, the World Bank country manager Laura Kullenberg has been quoted urging Malawi to diversify both the agricultural and non agricultural sectors of the economy.

Almost at the same time, British High Commissioner Michael Nevin has informed us that there is a type of hemp which can be used for industrial purposes and has been used for such purpose in his country and other European countries.

We must welcome these voices from our well-wishers. The onus is on us to do something more than talk.

Almost from the time that we learnt that the World Health Organisation (WHO) has identified cigarette smoking as a health hazard, there has been talk in this country about reducing our dependence on tobacco as an export crop. This is a call for diversification. At least 20 years have passed; programmes for diversification do not seem to have taken roots. Who is to blame for this?

There are basically two reasons why the diversification of the Malawi economy has not made headway. The advent of multiparty democracy and five yearly election periods for President and members of Parliament (MPs) have come with short termism. Those who are in politics think in terms of winning the next elections or getting re-elected. To win the attention of the electorate, they focus on short-term projects, bets and benefits. These are, for example, fertiliser subsidies, a cow for each village and subsidised roofing materials. People are easily attracted to these largesse.

But for long-term development, the country needs irrigation schemes and pilot projects for new crops and industries. These do not bear fruits at once but they are ones which in the long run can make Malawi a better off country. If diversification is to take root, we must entrust the responsibility to those who can be guaranteed long-term tenure of office.

We must set up a quango with the title of diversification commission which should be staffed by semi-permanent officials, those who will not hold office at the pleasure of the party in office. They must be men and women of high calibre.

These people will invite suggestions for diversification, sponsor research into the resources of the country as well as studies of what is being done in other countries. Take for instance, some of us have learnt for the first time that there is hemp which is used in industries and is different from chamba or marijuana. Why did we not know this earlier? The first step in diversification programmes then is to set up an institution with people focused on diversification.

Secondly, the mode of operating the diversification scheme should be the one coined by the management guru Dr Peter F Drucker called management by objectives (MBO). This model involves assigning duties to specific persons planning projects, fixing dates when the managers should report what they have achieved or failed to achieve.

Open ended plans obey Parkinson’s Law which states that work expands according to the time available for doing it. In other words, if you do not fix targets for starting and finishing projects either you will never start the projects or having started them you will take 20 years to do what could have been done in 10 or even five years.

The chief executive of both the political and economic sectors of our society is President. It is up to him to identify the minister who could best handle the diversification programmes. Appoint him, let him originate the necessary legislation, report to the President periodically the progress he makes. The period of talking about diversification is gone. Now it is time for action.

Market power is the share of the market in an economy that a firm has. Tough capitalist countries advocate freedom of enterprise and their politicians become alarmed when one firm encompasses too large a share of the market. Such a share in America they call trust and in Britain they call it monopoly.

I remember reading somewhere that in Britain when one company dominates 25 percent of the market it is called monopoly and is not allowed to merge with another company because this would be at the expense of consumers who benefit when there is ample competition among sellers in the market.