Rising prices of goods and services in the past three months are eroding consumers’ incomes and pushing more Malawians into poverty, economists and consumers have said.
The hike of fuel and transport costs and electricity tariffs in a short period and their knock-on effect on consumers’ incomes betray the Tonse Alliance administration’s campaign promise to put more money in people’s pockets once voted into government.
Between December last year and March this year, fuel prices have increased by an average 16 percent.
Malawi Energy Regulatory Authority (Mera) approval to raise prices of petroleum products also triggered Minibus Owners Association of Malawi (Moam) to effect price adjustments on minibus fares.
On Monday this week, Mera also approved a 10.6 percent electricity tariff hike for Electricity Supply Corporation of Malawi (Escom), which means consumers will be paying K104.46 per kilowatt-hour (kWh) from K94.43 per kWh.
Electricity, housing and water as well as transport contribute 21.2 percent to the consumer price index (CPI), an aggregate basket of consumer goods and services for computing inflation.
As of January 2021, a family of six required at least K314 914 a month, against the minimum wage of K50 000, figures from the Centre for Social Concern (CfSC) show.
According to CfSC economic governance programme officer Bernard Mphepo, the figures show that levels of income for the average Malawian is below minimum requirements.
He said: “The increase in cost of living, which has been worsened by the Covid-19 situation, is impacting the living standard of Malawians yet most Malawians cannot afford basic necessities such as food, transport, education and health.
“While the minimum wage was raised to the current K50 000, which is commendable, some workers have been pushed out of employment as some employers could not manage to pay their workers. This has been another blow to Malawians.”
The 8.68 percent fuel price rise on March 8 and the 10.6 percent electricity tariff increase on March 29 are expected to further erode people’s incomes and affect their livelihood.
Meanwhile, the country’s headline inflation has been on the rise to 8.6 percent on account of the rising food and non–food prices.
The higher electricity tariff is also expected to leave more people with no choice but to use firewood and charcoal as their source of energy, thereby frustrate government’s efforts to arrest deforestation.
In an interview on Wednesday, Consumers Association of Malawi executive director John Kapito said consumers are now feeling the pinch.
“The recent price increases on both fuel and electricity have had a serious knock-on on consumers’ incomes and have seriously affected their livelihoods. We have seen prices of goods, especially basics, going up by high percentages and beyond the reach of many people.
“Electricity and fuel prices are key drivers of the market and economy and any price movements of these products have negative implications on most goods and services and the most hurt are the ordinary Malawians who survive on minimum wages and small scale hand to mouth businesses.”
Kapito lamented that Malawians are suffering a double blow with the hard economic market pressures and the Covid-19 which has forced most businesses to be closed.
With a monthly average income of K60 000 realised from her vegetable business, a Chiwembe Township resident Martha Chabwera, says she has cut electricity for cooking and other uses.
“The same K4 000 which could take me close to a month might now take me two weeks or less. I have to go a day without using electrical appliances just to save on power,” she said.
For one Esmie Gombwa, life has moved from bad to worse in view of the rising cost of living. The mother of eight also based in Blantyre confided in Weekend Nation in an interview, that it has become hard to purchase, even a small lot of charcoal now selling at about K300, from K200 early this year.
She says she needs three or four mounds in a day, which means using K900 a day or K27 000 a month.
“Things have not been any better for me as I have shifted from one business to another to make ends meet. I now sell fried fish [kanyenya] which fetches me about K4 000 in a day.
“But with the rise in transport costs, everything has also been hiked which has left me with little for my survival. I am forced to find extra piece-work, including on weekends, just to earn additional money to support my family,” she explains
Similary, Hamza Seleman, who runs a salon at Ginnery Corner in Blantyre, says he is also reeling from the high costs of utilities and transport.
“With the rise in transport costs, I am forced to help my employees with bus fare from the little that I earn. Now, with the rise of electricity tariffs, I have no choice but to increase my service fees, which might lead to loss of customers in the process,” he said.
According to Economics Association of Malawi (Ecama), the increases in fuel prices and electricity tariffs would continue to negatively affect the welfare of the people.
“Both of these price increases will significantly lead to an increase in non-food inflation which also determines movements in headline inflation. Another threat to the inflation is the slow depreciation of the kwacha which may also translate to price increases as cost of importation of various goods and services increases.
“The challenge with non-food inflation is that it is sticky downwards unlike the food inflation which is seasonal. Nevertheless, these factors compounded have potential to negatively affect the welfare of the people and it is important to ensure the people’s welfare is safeguarded,” said Ecama president Lauryn Nyasulu in an interview on Thursday.
According to her, it is important for government to ensure that farmers, who are majority of the population, get better prices for their produce, to get better incomes.
“It is also important for government to continue with efforts to support entrepreneurship to ensure that most people have diversified sources of income. Overall, as an economy, there’s need to enhance the productive base to support economic stability and growth,” said Nyasulu.
On his part, University of Malawi’s The Polytechnic associate professor of economics Betchani Tchereni observed that any price increases which do not come with a corresponding increase in incomes erodes the welfare of households.
Government spokesperson Gospel Kazako, who is also Minister of Information, said it is true that the pump price for fuel and electricity tariffs have gone up, but attributed the increase of the two commodities to the increase in fuel prices on the world market, and depreciation of the kwacha.
He said: “The depreciation of the kwacha is temporary because the supply of the country’s foreign exchange will soon be boosted by the start of the agricultural marketing season for export crops such as tobacco.
“Government is implementing sound economic policies to cushion their effects and ensures that Malawians prosper together.”
He said to that effect, President Lazarus Chakwera recently directed all ministries, departments and agencies (MDAs) to buy supplies from local small and medium enterprises, including those owned by marginalised groups.
As for how the Democratic Progressive Party managed to get things under control, former minister of Finance, Joseph Mwanamvekha said keeping exchange rate stable played a major role.
He explained: “An unstable exchange rate is a recipe for disaster for it eats in the incomes of people. If you control the exchange rate, you also control fuel which is key in all economic activities.
“We also had an upper hand in managing the economy because donors had confidence in us and often disbursed budgetary support to us, which we used to buffer our reserves and support the kwacha.”
Mwanamvekha also said the Peter Mutharika administration tried as much as possible to increase salaries annually in accordance to inflation.
“This was to ensure people don’t suffer much,” he said.