Hybrid Economies – 5 Practical Solutions for fixing Malawi’s Economy

Malawians have huge expectations of the new government in Malawi.

If you speak to anyone who has been following politics in Malawi the last few years, you’ll understand why. Malawi is a country that has many problems.  However, before I get into some of the most pressing of those problems, please allow me to first make an introduction.

The Oxford Dictionary defines the word hybrid within the field of biology to mean, the offspring of two plants or animals of different species or varieties.

If you dig a little deeper you will find that some hybrids inherit the best qualities or characteristics from both parents; essentially the desirable genes from both species may feature in a hybrid. This can include resistance to disease, greater fortitude and stamina, more desirable crop yield, more patience and less obstinacy (in animals). This means a hybrid can be a much better specimen than both the parents, with characteristics which make the hybrid more desirable (or more valuable) than organisms within either of the parent families.

In economics the name Hybrid Economies has been used to mean a mixture of commercial economy and open source / sharing economy (see more here). In the ‘Hybrid Economies’ series of articles, I’ll use ‘Hybrid Economy’ to mean a quasi-planned economy that uses Commercial Agriculture, Financial Services, Technology and Manufacturing as methods of generating income for the government.

So, what are the 5 things the Tonse Alliance Government of Lazarus Chakwera and Saulos Chilima must do right now, to turn the prospects of Malawi’s economy.

  1. Revamp Public Institutions & Parastatals to become productive Again

Dissolving and suspending the bloated boards of all parastatals was a necessary and welcomed move. But a lot more is required.

The truth is Malawi’s parastatals and public bodies are inefficient, operate at a loss or are simply not productive. Certainly not to they extent one would expect a state owned institution to be, with all the advantages such can have.

Revamping state institutions and public bodies is long overdue, and it must involve bringing in implementors, managers, technocrats and scientists who are qualified to lead change, and who know how to turn-around failing institutions. It means employoing people from all sections of Malawi and beyond, to contribute to the new Malawi. This is necessary so that the lucklustre performance we are all so accustomed to, at bodies such as MACRA, ESCOM, MBC, MRA, NOCMA and many others is transformed, and these bodies begin to be led and managed by competent professionals who can actually transform them for the better. The process must also entail weeding out those people who found themselves in positions of authority or who got jobs only because of cronyism, nepotism and tribalism.

The Office of the President and Cabinet (OPC) should instruct the Anti-corruption Bureau (ACB) to review all civil service appointments that have occured the last 5 years, in these Parastatals, and even government ministries, and ascertain whether such appointments were undertaken in accordance with the law, following all procedures, and based on merit. If not, such appointments should be terminated, and the positions re-advertised

2. Issue low-interest Sovereign Bonds as a way to raise money without taking on too much external debt, & to prevent being bound by restrictive conditionalities

Malawi is indebted. We owe the IMF, the World Bank & co lots of money. We owe the Indians lots of money, we owe the Chinese lots of money. We even owe the African Development Bank … lots of money.

2 years ago, that debt stood at US$4.1 billion, which was 62.91 % of GDP.

We have to do something decisive about this debt once and for all. We have to try and emulate countries like Japan which has been known to raise significant funds from their own institutions and their own citizens, and use those funds to create new revenue streams for their countries coffers. It’s not good enough to say “All countries have debt” (which is one response I often get when I raise this issue) because developed countries don’t suffer from the same problems (nor to the same extent) as most poor countries.

Further, and this is an important point; if a country goes to the World Bank or IMF to ask for a loan, that country will be expected to operate within the rules and conditions set by those institutions. They’ll control the narrative, and dictate any penalties. You will have no choice but to play by their unfair rules. However, if you issue Sovereign Bonds, you control and set the conditions of that issue, and can adjust the terms to suit your economy. You’re free to invest that money in a way that has the greatest impact and benefit to your country’s economy. You can play by your own rules. I’ve said this several times in the past, and it is my hope that the current government in Malawi will begin to think critically about these things.

3. Create an International Money Transfer arm of the Malawi Postal Services (MPS)

I have written about this issue before, here. It’s important because those of us who form the Diaspora, and who regularly send money back home use private companies- that (unfortunately for us) make significant profits out of our hard-earned cash. In 2018, the market size of remittances made using companies the likes of Western Union, Money Gram, Ria and Transferwise was a mouth-watering $689 billion dollars (See this). When some Money transfer companies are charging up to 10% of the transfer amount in fees, this is prime potential territory for innovation, which the government of Malawi can take advantage of. Because why should I pay £50 to a private company when sending money back home, if a state run institution could provide a comparable service that helps me move money relatively cheaply, with the added advantage that the transfer fee I pay is instead used to help my country raise the funds it very much needs for development programs.

And it doesnt have to be a complicated affair. Initially, it can be a case of incorporating MPS branches in countries with significahnt Malawian diaspora populations, like South Africa, the US, the UK, Canada, Australia, Germany, Zambia and a few others, to facilitate a peer-to-peer money transfer service. This can be followed by opening bank accounts in these countries, and developing an App, much like that developed by World Remit (which works with Airtel Malawi’s Mobile money wallet) or like that developed by Transferwise.

4. Lower the cost of phone calls and Internet data

Pretty much every month, we hear stories of people complaining about how high the cost of making phone calls and data is in Malawi.

Last week, someone published a complaint that their 10GB data bundle disappeared within three days, even though they were not using any data intensive applications. It’s a story that is all too familiar, and while I’m not suggesting of any wrongdoing on the part of the major Telco operators in Malawi, including Airtel and TNM, the government ought to look at this issue to see if there is something they can do to help the country’s citizens. This is important because ideas are the bedrock of the 21st Century economy and if people are not able to communicate cheaply or face impediments in accessing content, it will have a negative effect on the country’s capacity to adopt progressive ideas, the capacity to deliver digital content, improve learning and be an active participant in the world economy.

In discussions with a friend who once served as the Technical Director at MACRA, one quick solution to ensure citizens get value for their data and voice call costs is not only to lower the taxes levied on these, but to ensure full implementation of the CIRMS at carrier sites.

Yes, Malawi is a country with a free market economy, but where things are not working, good aspects of a planned economy are necessary.

5. Launch a ‘New Deal’ program for major Construction Projects, Jobs and Entrepreneurship

Malawians have been crying for development for too long. It’s time for the Tonse Alliance to heed this cry and truly build a country that works for all. This is where the vice President Dr Saulos Chilima in his new ministerial portfolio can truly shine.

Our country needs better roads (which won’t disintegrate within a few years), our country needs better hospitals with high quality standards to match hospitals in South Africa, England or Malaysia, our country needs infrastructure fit for the 21st century. It’s not just about building hotels, golf resorts or holiday resorts for the rich that will bring jobs, jobs and more jobs. Indeed with creative planning half a million to a million jobs can be created within 4 – 5 years if you factor in employments in building new factories, new commercial farms, new schools, new Universities, new bridges, new airports, new business centres and new conferencing facilities … across the whole country. Also, how many people are going to be working in some of these new places?

Yes, we will need a lot of equipment, yes, we’ll need large amounts of capital (already addressed above) with which to purchase all the equipment that will be needed, and a lot of technical expertise (something I will address in a few weeks). But it is achievable, if we put our minds to it, and work together.

It should no longer be the case for politicians to fly abroad in search for medical treatment. Why would they need to, if we build state of the art hospitals in our cities across Malawi?

Malawian children should no longer be learning in leaking mud shacks that have thatched roofs and no desks.

A welfare system should be established to assist those who for all manner of reasons are unable to work, or are in hardship, with a priority given to orphans, households where the bread-winner is a child, people with a disability, and the elderly and infirm.

Malawian youths need low interest loans, guaranteed by the government. Because many of the current financial providers have taken advantage of people for too long. Interest rates on personal or business loans should no longer be over 10%. You cannot build a functional economy when Financial services Companies are predators, who predate on people’s poverty and vulnerability. Loan providers’ first mandate should be to help businesses and individuals make money, and achieve financial independence, and not to make extortionate profits from vulnerable and underpaid citizens. This also calls for strong government regulation within the area.

Further, where will a smart 23 year old graduate with a 1st class or 2nd class degree, who is fresh from University find collateral with which to support their loan application? Not everyone comes from an affluent home….

Zinthu zikufunika zisinthe. Malawians have spoken. It’s time to act now.

Links

Renewable Energy in Malawi? A Sustainable Future for the Warm Heart

A sustainable future is something we should aspire to. Expending natural resources in order to provide energy is a worldwide problem. In Malawi, the Warm Heart of Africa, only about 9% of the population has access to electricity. Electricity in Malawi is controlled entirely by The Electricity Supply Corporation of Malawi (ESCOM) , a company owned by the government. This government-owned entity controls all of the power centers in all of Malawi. ESCOM provides limited electricity that is out of the financial reach of the majority of Malawi’s 16.7 million people. A lack of electricity has created additional problems within Malawi, as satisfying the energy needs of so many people has inevitably led to the exhaustion of natural resources. [with minor edits]

More at Renewable Energy in Malawi? A Sustainable Future for the Warm Heart  via http://worldcampforkids.blogspot.co.uk

Leadership: of standards and calibre

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Two days ago I heard something unusual. I was talking to a friend when he informed me that a recent Malawian who not too long ago was working as a junior supervisor at a McDonald fast food restaurant here in Britain, is now a Minister in Joyce Banda’s government. This friend wondered whether there was even a criteria that was used when appointing ministers in Malawi, let alone regular performance reviews to audit their performance, to ensure that they were doing their jobs properly.

“Tandiwuzeni bwana” he said “I hope I’m not being big-headed here, but what does someone who was working in a McDonald’s just yesterday know about public service in a ministerial capacity? Have they had extensive experience in governance, learning about government and public administration, listening to the needs of the people, observing the many dynamics in society, soliciting advice from several stakeholders, making comparisons with what has worked elsewhere – outside Malawi, and produced positive outcomes, what have they done to ensure that the decisions they make will be proportionate, relevant, effectual and not prejudicial?”

I was surprised to hear of this news and told him that maybe there was a good reason as to why this man had been appointed as a minister, but that his analysis was more or less spot on; without being qualified for a particular role, and having the essential experience in public office, logically, it was more likely than not, that this minister would either perform badly in his role, or utterly fail.

“If it had been someone with a proven record, who has got extensive training in governance, and experience in the specific field he will work, on the ground in Malawi, or even abroad, who had studied the environment carefully and had formulated a way of balancing difficult interests, maybe, just maybe you could say okay forget his less than glamorous stint at McDonald’s, this guy has a realistic chance of performing, lets give him the benefit of the doubt and see how he does”

My friend’s words reminded me of a Facebook status I once read [a snapshot of which I kept :-)]:

leadersip

[For those who do not know who some of the above personalities were, I’ll helpfully provide some profiles (external links):  [Oliver Tambo; Jakaya Kikwete Julius Nyerere; Albert Lithuli]

I couldn’t agree more. Leadership in Africa , and particularly in Malawi is in critical need of a fresh injection of calibre, the quality of leadership is simply not good enough. It leaves a lot to be desired, and in Malawi, the calibre of leadership is appalling.

My friend continued:

“We need a soft dictatorship in Malawi, like the way Paul Kagame is doing. Although I’m not entirely sure of his politics, his style is an example of how to do things. He runs his country like a corporation, with targets and regular performance reviews, whereby if a minister does not meet their targets, they are out, that’s how it must be done, otherwise if there is no incentive, no fear, how will you get lazy buggers from actually doing work?”

I told him that I didn’t know about this, but read somewhere that Kagame got his whole cabinet to read Dambisa Moyo’s Dead Aid [see one book review here], and that subsequently the country was performing well economically.

“When you speak to insiders at State House in Lilongwe, who do not want to be identified, but who know of the wrongdoing happening, you get to this point of disbelief…I’ve lost Faith in the leadership of Joyce Banda” my friend said “I’ve lost Faith in Peter Mutharika, I have absolutely no faith in Atupele Muluzi, and Chakwera, he’s come too late to the crime scene”

“It will take time” I said. “It will take time for Malawians to learn how not to do things”

I reasoned that my understanding of what is currently happening in Malawi is the classic Kleptocratic story of abuse of power, which has been seen over the ages in various countries, but which is being perpetrated by leaders who should know better.

“You have to be willing to dig into history to understand this.” I said

In Malawi, MCP did it in its time, although then it was a dictatorship, and only a handful of people were corrupt; the Muluzi’s did it en-mass when fate brought leadership to them; the Mutharikas did it to the tune of K61 billion ( £116 million) and now we have a lady who began very well, but who has fallen to the trappings of power, and is surrounded by corrupt wolves,  against whom she appears powerless to act decisively to clean up her government’s image.

“Take Muluzi for example” this friend continued ” When he came in power, there was one particular politician who corruptly amassed a fortune, as most other UDF people did at the time. Somehow this guy found himself implicated in a scandal the trail of which the media were following. Guess what they did, UDF got him to confess to claiming too much on expenses. He repaid those fictitious expenses (which were miniscule in comparison to what he had actually embezzled), and then he was advised by insiders within UDF to go and live in the UK for 6 months, for the dust to settle, for people to forget,  and after that period, he went back to Malawi, and was given the chairmanship of ESCOM..tell me, as bizarre as that sounds, how does a country develop with such blatant corruption and nepotism?”

I replied that the that the problem with leadership in Malawi is that of ignorance and lack of integrity. Most people in leadership do not understand who a leader is, what a leader does, why they should do things that way, the ramifications of not acting properly.

Also, there is a problem with our judiciary, whereby we have few transparent and incorruptible judges with integrity – but a number who are known to be corrupt; then there is the object of fear in that some people (including journalists) are afraid (to an extent for good reason) of revealing corruption because they will be ‘punished’, including losing their jobs, or face threats to their lives.

The public also have a part to play, most Malawians are ill-informed of what is really happening in the world today. Add to that illiteracy, poverty and a peace-loving predisposition (markedly different to that common in peoples of a gung-ho attitude, some of whom were probably responsible for the revolutions that swept North Africa -in Egypt, Libya and Tunisia), you will neither see a warlord emerge to fight against a corrupt government nor millions take to the streets of the capital to demand change anytime soon. It’s simply not happening…

Further, it seems most forget of the ill-treatment they received under Dr Banda, the rampant corruption under Muluzi, and the debilitating economic struggles they faced during Bingu wa Mutharika’s last days.

Putting aside the issue of what a leadership role will actually involve (e.g. needs of the people, firefighting one crisis or another, pushing agendas, etc.) in my view, Public office in Africa  requires someone who has a certain attitude towards their job, life and other people. Someone who has a deep conviction to lead, a Gandhi, a Mandela, a Maathai. These kind of people don’t care whether they drive a Maybach, top of the range Mercedes or not, or whether they own a house in the Bahamas and in New York. They don’t care for material things. That’s why you never ever heard of corruption allegations against Nelson Mandela, or against Ghandi, or against Wangari Maathai. Instead these kinds of leaders care about leaving a real legacy, having a real positive impact (on a large scale) and giving a genuine and honest service to the people they represent; they are at pains at trying to always achieve fairness and equality, utilizing resources for the benefit of all (not just an elite few), they care about truly ending poverty for the benefit of everyone (because they understand the knock-on effect of ending poverty), they want to help the majority (not just their own families) achieve some form of prosperity, on being real and exceptional (as opposed to being two-faced and mediocre), these kind of people care about making life better for others – irrespective of whether those others support the same political party as the leader, or indeed whether those others like their leadership or not.  Great leaders are not afraid to disobey the party line, if what the party demands doesn’t fit well with their personal ideology and convictions, or if the party line is clearly unethical or wrong.

To lead and serve in an exemplary fashion as a leader of a country in Africa, one has to think about nothing but service; to abandon their needs and crucify the lusts of the flesh (personal wealth / fortune, fame / popularity); to be willing to punish shady associates who cross the line – setting an example that corruption will not be tolerated. Yes, a leader must be diplomatic and unite factions; treading a thin line in which they attempt to balance mutually exclusive requests while fending off arrows from opponents, but crucially they must also maintain integrity while doing so, and not pay a blind eye to wrongdoing or rampant corruption in top government positions.

In addition, it seems politicians in Malawi have either taken lying to a whole new level– for all sorts of wrong reasons, or have the worst advisers any leader could have. Recently this fiction saw the Malawian president declare her assets to parliament, but the speaker of Parliament refused to make them public, apparently because the constitution is silent on the specific matter. How can anybody criticise the former president for amassing billions but obstruct the process of publicly declaring the assets of the current president? Do they think that the public are that stupid not to know that something is amiss? You’d wonder which leaders they emulate… let them ask themselves whether Wangari Maathai or Mahatma Gandhi would have done what they are doing?

And to make matters worse, most bad leaders have no shame at being exposed as shady, even on the international stage. If Richard Nixon had been a Malawian President, he’d probably have served a full second term, even after Watergate, and would have received a presidential medal afterwards…that’s how low Malawian politics has sunk lately.

Typically, business as usual often goes as follows: tell the donors what they want to hear, make promises to the voters which you have no intention of fulfilling  [typically just before elections], travel the world sweet-talking donors and painting a good picture, but at home get in bed with dodgy businessmen/ corporations, receive bribes through your family’s going concerns, concentrate your efforts on staying in power and award contracts (with inflated prices) to non-existent, shady or unexperienced companies in order to embezzle, money from the government…

No thought towards a conflict of interests, or what the long-term implications of your actions ( or the actions of your ministers) will be. Little intention to discipline or disciple those who take the wrong turn. Sometimes one wonders whether some ministers even know what a conflict of interest is??

But the truth always comes out. Lying to voters or the international community(including donors) will not get Malawi or any African country where it needs to be. Greed, lies and corruption can never develop a nation. It never has, it never will.