Thoughts on the sale of Malawi Savings Bank (MSB) , and more

The trouble with capitalists (as with politicians) is that they think only about themselves. Until after things begin to go wrong, after which they still think only about themselves. Need proof of that?  What happened in the 2008-2009 financial crash?

Dont get me wrong, I’m pro Capitalism. Totally. May not entirely be proud of it, but I am pro ‘responsible Capitalism’, for lack of a better term. My line of work is made possible definitely only because of Capitalism. And yes, I enjoy what I do.

But when your only motivation and greatest priority is making money; and everything else including other human beings come second in the list of priorities, then it is more likely than not that you have lost the plot; that you need salvation.

But without digressing too much, why is the sale of MSB the wrong decision?

Well, firstly assets fetch more when sold at the peak of their value. When they are sparkling and in pristine condition; for companies, it’s when business is going well and the profits are pouring in in bucket-loads. During such times, the sale of a business can command serious financial digits and can really bring value to their owners. But when the business is  loan-laden with toxic debts it issued (some alleged to be politically influenced backdoor deals), when a bank is infested with inefficiency, corruption or dodgy deals, when there are some financial mishaps, you can’t possibly expect to get value for money, or for the bank to be sold for the real value it is worth. Had the management persevered and got its act together before selling, had the bank liquidated a significant part of the debts on its books, it’s likely that it could have fetched more on the market.

Think of it like selling your old car (which is partly owned by your friend who doesn’t want to sell it) when the windscreen has a chip in it, when the paint work needs improving, when one tyre is flat, and look! – .there’s a decomposing rat on the backseat..yuck!

Lets just say your car would have fetched a better price if you first reached an agreement with your friend, and fixed it; if you got it cleaned, …kuyikwecha bobo, before attempting to sell it.

Secondly, you can’t sell what you do not officially own. You can’t sell what you have no authority to sell. Imagine if I showed up to a potential investor and claimed that I owned the land on which the new stadium in Lilongwe is being built. Not only would my claims be laughable (and could possibly land me a stint in jail), but any foolish investor who dared believe such folly, without independent verification, would find themselves in the undesirable position of having to explain a useless contract – a piece of paper that would be completely unenforceable.

So, being state-owned, MSB is essentially a chattel held by the state in trust on behalf of the people. It is Malawians who should hold the key to its fate, they are the ones who can legitimately decide on whether to sell it or not. Malawians and not only the government of Malawi.

If that’s not currently the case, then that’s how it should be, for any state-owned property because otherwise there is a danger that the executive could make decisions befitting more of a dictator than a democratically elected president; that the legislature could act without consulting the people they represent.

Which is a problematic state of play since by selling the bank, the assumption is that the government is acting in the interests of Malawians – and has their blessing in undertaking such actions ; yet from the anti-sale demonstrations and all the opposition to the sale, it would be perfectly clear to anybody who was paying attention that there are many thousands, possibly hundreds of thousands, or even millions of Malawians who didn’t exactly approve of the decision (the very reason why it had been initially suspended). So without a vote or proper public consultation, wouldn’t the sale of MSB be undemocratic? Or illegal?

In addition, state-owned property is one means by which the state generates an income to pay for the business of government. Without enough state-owned property (or some other dependable source of an income), most governments are unable to generate enough funds from tax-collection alone. They struggle to pay for services, and the business of government (Civil servant salaries, Security and public order, food, medicines, infrastructure, education, etc) with the result they end up having to borrow money from institutions whose primary motive is making money; international banks who can’t possibly be said to have the best interests of the loan recipient country at heart.

It’s the capitalists I mentioned above who get to provide the loans, on their terms and not the recipient’s terms. Therefore, it must come as no surprise if they disregard the hungry children the poor country has.

North_Darfur_IDP_malnourished_childDisregarding overflowing maternity wards in the country’s hospitals – which desperately need upgrading; with no concern, sympathy or consideration for parents who can’t pay for medical care for their children. Make no mistake, Capitalists are not charities. They are not mandated as governments of western democracies are – to care for the people, especially the most vulnerable people in society. They work without care for the villagers who have no clean water, no electricity and no medicines in hospitals. They don’t think about the young people who have degrees but can’t get jobs in their own countries because there are no jobs available (and the government or domestic private enterprise are not investing in jobs or youth development initiatives).

It’s no big secret, but most Capitalists think only about how much money they can make for themselves, for their organisations / institutions and for their friends.

I may not have all the concrete data to support this somewhat wild claim, but I’m willing to bet a few quid that they do.

The result is inevitable; whole countries end up tormented by debt, with ballooning deficits which can never realistically be got rid of, as Argentina and Greece have found out the hard way in recent years. They become the butt of jokes and stand at the receiving end of blame. Unable to raise credit, and therefore unable to finance their activities. It’s virtually a coup.

greek-bailout-fund2Countries like Greece. Countries like Malawi.

This is the reason why so many countries are in debt, because their governments do not own enough assets from which to extract a dependable and sustainable income, and they have to rely on harmful debts which damage their economies more than they help. Put simply, these countries do not have a job that pays enough for them and ‘their families’ to survive on, so they go to loan sharks who tie a noose around their necks.

In Friedmanian economics (or what he termed neoliberalism), the same governments – most of whom at the time were operating surpluses or relatively small budget deficits in comparison to the current levels –  were told by mostly pro-capitalist economists to relinquish ownership of high yield assets (in industries which were dominated by few individuals/ merchants in monopolies that traded side by side with the state-owned enterprises) they owned, in the process ‘laissez-faire’ economics morphed into ‘market competition’… a phenomenon similar in effect to the fall of the USSR’s property ownership framework while urging in the rise of the Oligarchs. Before you had fewer players gnawing at the national cake, and the government was a significant player- now you have more players at the banquet(even though they are still a minority in comparison to the whole population), but this time, the government is not even at the table.

No prizes for guessing who bought those assets, but the state – these fellows argued, shouldn’t be in the business of running anything. As a result, several decades later – culminating in Thatcherism in Britain – everything from utility companies (including gas and electric suppliers) were mostly owned by corporations; so were the mines, railway and telecommunication companies, virtually every large industry with the capacity to raise huge sums for the government fell out of majority stake public-ownership, in preference to some private outfit, whose primary motive was profit and little else.

Some of these countries do not have oil, or other high demand resources on which to depend in the long-run (and even many which do struggle to manage them properly).They have to rely on a small tax base (~ heavily taxed citizens) for revenues, crops such as tobacco which are fast becoming unpopular, on tax-evading companies to pay their fair share of tax to the state; how crazy do you have to be to depend on profit-shifting (cost-shifting) corporations to stop their dirty tricks and behave (even though there is little indication this will happen anytime soon)? They rely on meagre inflows of Foreign Direct Investment, on aid organisations whose ethics/ morality is often in question. And if all that isn’t sufficient to support their budgets, these countries have a ‘safety’ net which can only be described as a poisonous concoction of interest-driven donors and austerity-prescribing institutions – to provide loans.

In contrast, countries rich in natural resources such as Saudi Arabia, Qatar and Kuwait own significant parts of their largest industries, and can therefore afford to finance almost all the business of government from the sale of their natural resources (in this case oil).

When was the last time you heard that Kuwait or Qatar had asked for a loan from the IMF?

They don’t need to hold onto many state-owned assets outside of the petroleum realm, because the petroleum industry generates enough income to cover the business of government and give them budget surpluses for every other luxury – from financing huge construction projects, to paying for a controversial world cup that’s now increasingly doubtful – thanks to the FIFA scandal.

What about all the bailouts, someone may ask, and loans and aid provided to struggling countries over the last 50 years, where has all that gone? Well, mostly to the banks. And to companies from the countries of the aid providers. In the case of Greece which is suffering the same kind of debilitating debt onslaught as most African countries but on a much larger scale, the money went back to the same capitalists (see another link here from the Guardian) who created the very same mess in the first place.

Thus, considering all this, and more, I have to say for me it’s entirely valid to believe that if you don’t have a large multi-billion dollar industry in your country, if you have few natural resources to exploit, and if many of the common problems African countries have to battle with plague your economy, then it makes perfect sense as a government to hold on to as much industry as you can – and try to make it profitable. Maybe in the same way as Norway has done.

Such a strategy to me has a better chance of achieving a zero deficit budget, giving your country a surplus of disposable income others fail to achieve.

And that is why I think Peter Mutharika and the government of Malawi has got it wrong on Malawi Savings Bank (MSB)

P/s: Go tell the Malawian commentator who appeared to be saying that Malawians were wrong to voice their concerns over the sale of MSB that he has got it completely wrong this time. If anything, Malawians should be mad  for being taken for fools! far from being silent more Malawians should stand up to be counted. Foolish ideas deserve nothing but condemnation!

Inequality in graphs and images

Lately, talk of inequality has dominated the media. Everybody is talking about it. Probably because of this year’s Davos Summit, but everyone seems to be keen on reminding us just how economically unbalanced the world is. Just how a few people own huge amounts of wealth, while the rest live on breadcrumbs.

Global Wealth 14Yesterday, it seems Mark Carney, governor of the Bank of England entered the fray, when he said:

“Without this risk sharing, the euro area finds itself in an odd position,”

While the context of Mr Carney’s statement may have been different to the subject of this post, and directed more to institutions on a country level, on a personal level, I don’t believe in the RobinHoodesque notion of ‘stealing’ from the rich to give to the poor. I don’t believe that such an approach works because it’s a dangerous idea that is not only open to abuse, but that can backfire. And before you jump on me and criticise my socialist credentials, let me qualify it.

I know inequality is real, and I know its crippling effects on people and communities across the world, especially in poor countries.

My contention is that if people work hard to earn their money, if they pay their taxes and do not accrue wealth using dodgy (or outright illegal means); if they do not use tax havens or other immoral ways of depriving governments of the much-needed lifeblood of corporation tax; if these business magnets are no more than scions bequeathed of inherited blood money (money tarnished with the proceeds of slavery and colonisation), if they have earned their way to the top, why should anybody sensible think it is a good idea to take it away from them?


wealth-gap-2I believe in fairness, I believe that corporations must pay their fair share in taxes. That the government must act in the interests of the people, not just working for the interests of corporations. I believe that those who are rich, or who have the means, must do more to help the disadvantaged – whose spending ironically often drives the profits. Doing all these things will likely lead to less inequality, less strife, and better social harmony.

And here’s why:

If you look at recent events, not only comments made at Davos, what you find is that it’s not so much that the money isn’t there. Instead the problem is that the money which is made on the back of extremely liberal national and international tax regimes – is stashed away in enclaves where cash-strapped governments be they in Africa or elsewhere cannot get to it.

As a result the government cannot sufficiently invest in services, cannot create jobs or help those at the bottom of the pyramid improve their lives. This increases inequality, including spurning side effects such as crime and social unrest.

So then, where’s a good place to start, when addressing this problem of inequality?:-

1. Change the laws to ensure that companies pay a fair share in taxes from the revenues they generate.

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Essentially, it also means being firm with tax havens to reveal the sources of blood money or any untaxed funds.


2. Crack down on corruption, and stop illicit financial outflows.

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3. Streamline services (a streamlined small government that is cheaper and efficient to run is preferrable to an inefficient large and bloated government that is expensive to run).

4. Stop unnecessary privatisation. But encourage responsible Investment

US_Africa_Summit_Day_1If you privatize everything, from where will the state earn its income??

Everybody knows that employment tax revenues are not a sufficient revenue source. That’s why there are so many governments across the world that have budget deficits, simply because all the tax companies pay plus the tax their employees pay – IS NOT ENOUGH to sustain all the functions of government. From Britain, the US, France, Ireland, Italy and Greece to South Africa, Malawi,  Ethiopia and Mozambique, and many others, budget deficits and debt are commonplace. As a consequence most of these countries fail to adequately invest in healthcare, in poverty alleviation, in education, in job creation for young people, in women’s health and advancement…because there isn’t enough money coming into the government coffers for them to spend on these things.

Simply put, the state has no full-time job and is only employed part-time. So how the hell can it spend, or raise its family properly?

5. Instead of privatisation, countries should enter into joint venture partnerships with businesses, for win-win deals because these will not only provide tax revenues from employment tax, and corporation tax,  but will additionally earn the government dividends (which can be significantly higher than corporation tax and employment tax combined).


It also means deals that involve raw materials should principally benefit the people of the country in which the raw material is first (NOTE I’m not using ‘politicians’ or a country’s leaders here. Contracts must benefit the people not a handful of politicians). As I like to put it, when was the last time an African mining company was given a 70% mining/ oil drilling stake in Europe or the Americas?

africas-natural-resource-wealth6. Empower young people by training them to acquire advanced entrepreneurial skills so that they become assets capable of adding real value to communities.

Providing Aid is not good enough, emphasis on ‘Trade not Aid’ (other than Fairtrade or better) is becoming cliché. Further, I think the advantages of possessing a first degree are overstated. In my experience they rarely equip students with entrepreneurial skills.

business-paper-clipWhat is required to begin denting inequality is to train young people to be ‘go-getters’. And that is a different ball game altogether over and above merely providing a quality education.

7. Finally invest in services (hospitals, transport, policing and security, infrastructure, the youth and women, etc) including investing in things like ecofriendly energy. Because if everybody paid their dues, such investment would create jobs. And they’d be enough funds for people to receive living wages.