Cut the Chaff

Too much hyperbole on rising cost of living

When all the politics, hyperbole and ill-informed social media ‘expertise’ are ignored for a bit, we can have a meaningful debate about the rising cost of living, based on cold, hard facts and context and maybe find practical solutions to the current crisis.

Earlier this month, the United Nations Food and Agriculture Organisation announced that global food prices have reached the highest peak in 10 years, climbing more than 30 percent in the last year.

Among these commodities are vegetable oils, sugar, cereals and meat. Last month alone, the much talked about vegetable oil, including what in Malawi we popularly call cooking oil, rose by almost 10 percent globally in October 2021 alone.

While the drivers of international prices are complicated by the intricacies of global trade among nations, regional blocs and continents, three factors are clear: fuel, Covid-19 and terrible weather.

The oil price rebound that started in April 2020 has sharply pushed the cost of producing and transporting food. Malawi tried to cushion the price of oil, but that could not be sustained and thus pump prices had to rise.

Covid-19 has been a nightmare. With lockdowns and other equally strict social distancing measures, producers of food throughout the world just could not find enough workers to grow, take care, harvest, process and distribute food.

All these challenges have created shortages just when world economies are opening up and humming again, demanding more raw materials, wanting more oil, forcing people around the world to scramble for the few that are within grasp—at whatever cost.

So, one Bon Kalindo can mobilise masses, cause social havoc in major towns and cities, but those demonstrations will not bring down prices of cooking or sugar, even fuel.

What are needed are two things: first, help people understand what is causing this price pain in clear, non-political terms, which I believe President Lazarus Chakwera has tried to do fairly well, although some of the political undertones that point to blame game, are unhelpful because they only serve to divide not unite the country towards a common problem.

Second, is to understand—and the government must show that it understands—that although rising prices affect everyone, they hit the poor more, especially when it comes to food.

The poor end up spending the greatest chunk of their income—sometimes more than they earn—on food, leaving nothing for anything else; nothing for their own healthcare; nothing for their children’s education; nothing for their water and housing and, in the end, nothing to lose anymore.

When they reach the level of nothing to lose; that is when the likes of Kalindo gain their relevance as channels for the frustrations people feel at being helpless to help their families. Through self-indulgent characters like Kalindo, good citizens can burn cities in the name of demonstrations, block roads, damage life and property and, yes, make the country ungovernable albeit to their own detriment.

We saw this is 2011. We saw this in 2019-2020. But we do not want to see this again. Part of showing that the Chakwera administration understands that the poor are the most affected is to come up with an emergency recovery plan that should have a strong social protection component with special emphasis on social safety nets.

For example, government can rapidly scale-up the current public works programme, which has proven very effective in the past. Donors such as the World Bank, the UK’s Department for International Development, United Nations Children’s Fund, the African Development Bank and even the European Union can support such a measure if proven to be well-thought in design, execution and fiduciary arrangements. I also have in mind cash-linked transfers. These can either be conditional or unconditional, in-cash or in kind.

To help include the urban poor into the cushion, government can also consider subsidies to ease people’s burdens of accessing education, housing, public utilities such as water and electricity. For example, instead of raising tariffs on water and electricity, government could reduce them and transfer the revenue loss directly to the water boards and Escom. This could be for a year or two.

On the same subsidies, government can cut by half tuition fees in public secondary schools and universities for two years and transfer the foregone revenue to the schools and colleges.

Where will government get the money?

As I said earlier there are several donors willing to listen to a good proposal that affects the poor. Secondly, government can freeze non-essential development projects such as stadia, even some roads and the houses for some security institutions, and redirect these resources to the recovery plan.

Social protection is not charity—it is actually a tool for economic growth as it boosts purchasing power. It can build human capital and thus boost productivity; cushion the poor from the harsh economic shocks and free them to apply themselves more into agricultural production and, when you look at public works; you have capital formation right there through infrastructure such as rural feeder roads.

This is why a Mid-Year Budget Review would have been critical as basis for this emergency road map because some of the fiscal decisions, including large reprogramming, would need the Legislature.

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