Business Columns

Pressure off the farmer

It has been torrid weeks with our currency on the fall. Those that have made to the banks have a shocker every day. And if you also looked at other currency traders, it has even been very scary. It is not surprising that the inflation is taking a hike as businesses reposition themselves to absorb exchange losses.

But if we look closely, one comes to the realisation that many currencies have been battered. From within the region, the Zambian kwacha, the South African rand and others have consistently lost ground to the greenback. At global level the euro, the British pound, the Japanese yen, the Chinese yuan and the Australian dollar have all become much weaker against the American dollar.

The United States (US) economy has been recovering very fast quarter on quarter. The massive bond buying programme came to an end months ago, signalling recovery. Sentiments and speculations had been rife of a rate rise. It never happened with analysts looking at the US recovery as shaky amid the looming crisis in China. Had it been that the US Federal Reserve increased the rates, the US dollar could have even become much stronger and could have battered most of our currencies.

Now if I was a spin doctor, I would simply look at this. All currencies of major trading partners are getting weaker. Furthermore, I would reckon the fact the global reserve currency, the US dollar getting stronger is reason why ours is getting weaker. It would not be a tough spin to sell and all and sundry would believe.

Unfortunately currency economics are not about spinning. Certain things are not worthy spinning and that is why we have not seen any. Any trader or business person is not always concerned at the rate they trade in currencies, but rather the stability that comes with prices of foreign currency markets. This is always true except for elements that thrive on currency speculation and the current state of our foreign exchange market plays well into their traps. That is the beauty or is it the ruthless nature of free markets, assuming we have one in the foreign exchange market.

But the main issue, to me is something very different. This is the season. They are out there in the sun with their wooden shoes. They are tending to their tobacco nurseries watering their seedlings in rural Malawi in a very hot sun. Over their shoulders, they carry the hopes of all elites that flock into dealer banks to buy foreign exchange to finance their obscene appetites that flow with affluence.

Come early 2016, everyone, including thousands of experts will be back on track opining about the kwacha as the tobacco selling season opens. And when the kwacha tends to get even weaker as we sell tobacco, we will opine again possibly thinking someone is playing mind games. It is not mind games. The reality is tobacco revenues cannot cover a mere fuel import bill let alone our other needs. Similarly, tea, our second major export crop does not bring a lot and its production has traditionally been stuck at an average of 43 million metric tonnes. The sugar business does not look good too as the duty free market into European Union (EU) markets is gone.

As we pin our hopes on tobacco farmers, one also thinks about the balancing act that is required. Some pessimist thinks that at the current rate of population of growth, by 2080 Malawi will completely run out of land. That is where it gets tricky as the average farmer will play into hedonistic calculus. Grow an export crop or grow something to feed oneself.

As we think throughout diversification or the export strategy, at the moment the evidence is ruthless. Farmers with wooden hoes and plastic watering cans growing tobacco cannot carry the hopes of a consumer nation whose appetite for imports is too huge. Worse still, they are at the mercy of rainfall. Conceding that land is so limited and that agriculture has no future and taking those steps that see our service exports a reality, every season, opinions will galore about how weak or strong the kwacha is.

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