100 Voices: No 3

This slideshow requires JavaScript.

My next guest is an Accountant and someone who I have known for many years.

Mr Lusayo Mwalilino, thank you very much for taking the time to do the 100 Voices interview.  But before we begin, could you please take some time to summarise your background?

My name is Lusayo Mwalilino, I am an accountant, currently working as an auditor, in Lilongwe. I come from Karonga, bachelor, challenge addict, some say I’m extremely cool, but that’s their opinion… 🙂

  1. As a Malawian, how important is Malawi’s Socio-Economic stability to you and your family? – Malawi’s Socio-Economic stability is very important to me because it gives me hope for the future and makes it easy for strategic planning, but most importantly I think it makes it possible for one to realise their full potential in such an environment.
  2. After nearly 50 years since independence, what visible progress do you think Malawi has made since independence, and in your view, what pressing challenges remain? In view of those challenges, what do you think is the role of government and the people in tackling those challenges? – After nearly 50 years , there has been  some  general improvements in the country’s  infrastructure such as roads, hospitals, schools, introduction of democracy, improvements in  ICT, although it should be mentioned that the infrastructure mentioned above is mostly in poor condition and there is still so much that needs to be done in terms of progress as a country.
  3. What modern and progressive ideas in other foreign countries have had the greatest impact on you, and why? – I have not lived outside Malawi however I have read  and heard  of modern & progressive ideas in other countries. Most countries moved from developing to developed economies by moving from  agricultural based to industrialised economies – making goods that they were able to trade on the world market, also up there is putting ones country first, collective patriotism.
  4. What lessons do you think Malawians and the Malawian leadership can learn from those ideas? – Malawians need to revolutionise their agricultural methods for example sophisticated irrigation methods and extensive R & D in agriculture, manufacturing of fertilizer etc. In addition to this revolutionise tourism, this could then fund a much-needed thriving industrialised economy.
  5. In your opinion, what is the greatest sign of improvement or development that has occured in Malawi in recent years? – I live here in Malawi so I would say the way the HIV/AIDS has been managed is quite remarkable, also improvements in ICT, it seems more people are using the internet, it also seems more people have access to clean water, not sure what the stats are though.
  6. What has struck you the most as the biggest sign of stagnation or regression? – The biggest sign of stagnation is just generally the state of the economy and of course the greedy and corrupt leadership.
  7.  Malawians will be going to the polls in 2014, to elect a new president. In your view what kind of leader does Malawi NEED, considering the country’s current challenges? And specifically, how should that leader approach the top job in terms of creating sustainable development and foreign reducing aid dependency? – Sometimes it feels like African countries are going through perpetual cycle of ‘elect and regret’; however one must remain hopeful, I believe Malawi needs an exceptionally intelligent, selfless, driven leader who is truly passionate about making changes to the country.
  8.  As you know, Tobacco is Malawi’s biggest source of export revenue. Looking at the problems that have plagued the tobacco industry in recent times, what alternatives do you think Malawi has besides Tobacco, and why are they viable alternatives? – Other viable alternatives are; cotton, coffee, supplying fresh bottled water to Middle Eastern countries, rice, fish exports. Some of these are already being done but could be done in a more sophisticated way, and on a larger scale.
  9.  Considering our troubled history with donors and funders such as the IMF and World Bank, most recently when Bingu Wa Mutharika was president, how do you see Malawi progressing from this relationship in view of the criticisms these organisations have received in the media across the world? – Malawi cannot win by depending on these institutions, which do not understand our economy, and may advise us with ulterior motives. Our leaders should strive to think of what is best for their country and not just adopt a herd mentality, fiscal discipline is key.
  10.  We now know that Malawi has some precious minerals, including Uranium, possibly oil and other natural resources. How do you think the present government is doing regarding managing Malawi’s natural resources? – I would give the present government a  4 out of 10, not very impressive. Botswana on the other hand has done well in managing their minerals [see sources 1, 2], we could learn from a lot from them.
  11.  In your view, can the government do better to manage natural resources? If so, how can it do better? – Yes they can, basically by making sure the interest of the country , not an individual or any mining organisation  are put first, come up with mining contracts that ensure this is achieved, as well as thorough reviews of these agreements. Learn from other countries that are doing it successfully.
  12. What is your answer to increasing transparency and eradicating corruption which is plaguing most governments across Africa? – By putting in systems and controls that prevent corruption from occurring, as well as a system that annually reviews progress being made on corruption and transparency , from the highest office in the land to the lowest paid civil servants  by an  independent group of audit firms. This could mean amendments to the constitution.It seems possible in theory but may realistically, be extremely hard to implement, because as long as there is abject poverty, corruption will exist, which gradually becomes a culture, even at organisational level changing an organisations culture is a difficult task, it could minimise it though.
  13. Any famous last words? We cannot let the easy seductive funk of despair, negativity and doubt undermine the critical forces for change; hope, faith and action  –  Cory Booker

100 Voices is a collection of reflections, views, opinions, ideas and thoughts by Malawians across the world, regarding the past, present and future of Malawi.

100 Voices: No 2

My next guest is a Lecturer and Academic, writer, news media & communications scholar. His interests include political and social changes in Sub Saharan Africa including Malawi. You can find out more about him on his website Spirit of Umunthu.

Jimmy Kainja, thank you very much for taking the time to do the 100 Voices interview.

Q 1: As a Malawian, how important is Malawi’s Socio-Economic stability to you and your family?

Who wants socioeconomic instability? Can anyone succeed in anything where there is no socioeconomic stability?

Q 2: After nearly 50 years since independence, what visible progress do you think Malawi has made since independence, and in your view, what pressing challenges remain? In view of those challenges, what do you think is the role of government and the people in tackling those challenges?

Nearly 50 years of independence Malawi remain donor dependent country. About 40% of its annual budget come this donors, this is huge and its impact on Malawi economy was laid bare 2 years ago when Bingu wa Mutharika decided to chase off the donors. The economy nosedived in a blink of an aye. So political independence, yes, the battle now is for economic independence.

I am 1980s baby so it will be hard for me to analyse “visible” progress of the whole 50 years of independence. But I am sure everyone would agree that Malawi is much better than it was when it attained independence in 1964. More doctors, more schools, more universities, more roads, better communications services etc. However, all these fall way short of what would be expected of a country in its 50th year of independence. If there is a country in afrika that can objectively be used as a yardstick for Malawi, than its Zambia. Zambia has now graduated to a middle-income country while Malawi has not. In fact all development indicators show that countries surrounding Malawi are doing much better than Malawi.

Both government and private sector have a role to play in tackling the persisting problems. BUT the government is a prime and a key player. It needs to provide conducive environment for this to happen. It has an autonomy of what happens with the national boundaries, the influence of private sector is limited and in many cases secondary to the government.

Q 3: As someone who lived(or has lived) outside Malawi for some time, and has been exposed to modern and progressive ideas, what symbols of development in the foreign country in which you lived have had the greatest impact on you, and why?

Efficiency in public service delivery; people’s love for their country; and a shared national vision which ensures that national policies are priorities over personal and political party interests. In Malawi a change of ruling party means dismantling everything starting all over again. In developed democracies it is the civil service that is tasked with ensuring continuation of national policies, regardless who is in power. Malawi civil service needs to be independent of political influence. This is important.

Q 4: What lessons do you think Malawians and the Malawian leadership can learn from those ideas?

I don’t think it’s the lack of knowledge, I know a lot of people with brilliant ideas but they act otherwise. I think its the mind-set and the system that needs to change. People in positions of power do things with impunity, they do things simply because they can. This has to stop. Due process ought to be valued and respected

Q 5: When you last returned to Malawi, what struck you the most as the greatest sign of improvement or development since the last time you left?

I would say the younger generation. There are a lot of young, ambitious and determined Malawians to do and achieve things. Malawi’s ICTs industry has also taken off and most Malawians aware and they keep up with global events than they did a decade ago.  That said, I also noticed a huge and growing gulf between the haves and have nots. Urban poverty is a massive and grown problem, especially in the two major cities – Blantyre and Lilongwe.

Q 6: What struck you the most as the biggest sign of stagnation or regression?

Lack of opportunities for young educated population, both urban and poor; poor governance; lack of vision and lack of clear policies to lift Malawi from the poverty trap, most important wean itself from donor dependency.

Q 7: Malawians will be going to the polls in 2014, to elect a new president. In your view what kind of leader does Malawi NEED, considering the country’s current challenges? And specifically, how should that leader approach the top job in terms of creating sustainable development and foreign reducing aid dependency?

Everything I have said above, especially point 6. Also I don’t really think it’s the leadership he/herself that matter. We are past the age of charismatic leadership; you can’t replace charismatic leadership, what is need is proper structures and institutions in place. Leaders only need to be able to work and respect those institutions/structure. These are better guiders of development. Can you imagine one of the big talking points being the president’s refusal to declare assets?

Q 8: As you know, Tobacco is Malawi’s biggest source of export revenue. Looking at the problems that have plagued the tobacco industry in recent times, what alternatives do you think Malawi has besides Tobacco, and why are they viable alternatives?

These are kind of issues that should have been dominating public discourse by now but we are fixated on personal egos and endeavours. Malawi is a second largest producer of tea in Afrika, after Kenya, I don’t know why we have not encouraged more of that. Recently, the country has started paying more attention into extractive industry, I don’t know the amount of such commodities that Malawi holds, The Financial Times recently said Malawi could hold the largest deposits of rare earths in Afrika. So maybe there’s something, but it needs to be handled with care, to avoid environmental disasters and also because these are none renewable. Malawi is also seriously lacking expertise in this industry.

Another way of boosting the economy is to boost cross-boarder trade. We need better communication. This is a serious problem in Afrika. It is easier for me to catch a flight to London than Tanzania or Mozambique, yet these two are our neighbours.

Q 9: Considering our troubled history with donors and funders such as the IMF and World Bank, most recently when Bingu Wa Mutharika was president, how do you see Malawi progressing from this relationship in view of the criticisms these organisations have received in the media across the world?

Mutharika’s experiment has left a disaster for Malawi. Everyone who witnessed what happened when Mutharika rubbed donors the wrong way would not want to repeat that. This means leaders becoming subservient to donors, like Joyce Banda is at the moment. It’s easy to blame her but the fact is almost everyone in her shoes would have done it. Malawi needs a national policy, a clear direction to weaning ourselves off aid dependency. I am sure donors themselves would support such initiative. What happened to vision 2020? We need it revived. Malawi need it as early as yesterday! Read it if you haven’t.

Q 10: We now know that Malawi has some precious minerals, including Uranium, possibly oil and other natural resources. How do you think the present government is doing regarding managing Malawi’s natural resources?

Appalling. Paladin Africa was given “tax incentive” deal to operate at Keyekera mine, the result is that Malawi is losing huge sums of money. I don’t have figures on top of my head but annually, it is enough to pay for our cash-strapped university education system. As I have said, Malawi is seriously lacking experts in this area. I hear the ministry concerned have engaged experts from a Scottish University and one other to help establish courses/training on these issues at universities of Malawi and Mzuzu.

Q 11: In your view, can the government do better to manage natural resources? If so, how can it do better?

Engage experts, people that actually know what they are doing. Government knows it, hence the efforts to involve the above-said institutions. I think government should be commended for the idea but it needs to be implemented. There have been a lot of promises in this country that never materialise.

Q12: What is your answer to increasing transparency and eradicating corruption which is plaguing most governments across Africa?

Transparency is a key prerequisite for any development effort, it is the case in any given institution; it encourages trust and work ethic. Even at a family level, couples that talk and share stuff openly are happier and more effective.  But I don’t think corruption in Afrika is a sole cause of the persistent problems on the continent. In many cases I think it is a product of it. It differs from one place to another. It is easier to discuss Afrika the country, not Afrika the continent with 54 distinct countries.

Q13: Any famous last words

None

Rich Warm Heart

A Vision and Organisational Template for creating Sustainable Economic Growth in Malawi [Part 1]

(c) European Union
Image (c) European Union

When injustice becomes law, resistance becomes duty.

– Thomas Jefferson

 

“Consume less; share better.”

― Hervé Kempf

[This article is written in a non-academic accessible format primarily to provide as much information as possible. It is the writer’s personal opinion. A ‘cleaner’ peer-reviewed version with standard citation format, references and supplementary resources will be posted on this website at some point]

aid

Almost every Malawian I know agrees that Malawi’s economy cannot continue to rely on foreign aid for much longer. That by expecting others to help us run our country, we had effectively given up our sovereignty, and any incentive to make our own choices. But it’s much harder to find consensus on what the country must actually do to wean itself of developmental aid.  Some Malawians think the answer is in Agriculture. Others think Manufacturing is the way while another group think Information Technology and the next Facebook. Scores more think exporting Sugar, Kachasu, Chibukhu or even Nkhotakota Gold may be the way.

With tobacco exports declining in industrialised countries (see extensive report here – via Time Magazine) and a determined anti-smoking lobby, tobacco will soon (if it hasn’t already) cease to be to a reliable export crop which Malawi can lean on.

Presently, around 40% of Malawi’s annual budget comes from donors including the African Development Bank, Britain, Germany, Norway, the European Union and the World Bank. A greater proportion of the rest is raised from tax revenue.  Such monies are primarily spent on general government expenditure including salaries of civil servants, food, fuel and “fire fighting” one crisis or another, with few resources allocated to creating developmental projects with a potential to generate large Forex for the government.

Inevitably, this has created a situation where some donors have used this state of affairs to exercise influence over public policy, including erecting somewhat unreasonable demands like devaluation of the local currency.

When their demands have been challenged or are not fully met, they have threatened to withdraw, or have actually withdrawn budgetary support, which has led to economic instability.

The recent example of this came when former president late Bingu Wa Mutharika probably with good reason refused to devalue the Malawian Kwacha, citing the cataclysmic effect such an action would have on the fledgling Malawian economy, and the suffering it would cause. The donors pulled out, pushing the Malawian economy to the brink of collapse and causing a massive fuel and Forex shortages, and exponential rise in prices and commodities. There were sugar and water shortages, crippling businesses, including some well-established companies. Some businesses threatened to leave Malawi, thousands of jobs were lost, and at least one international airline suspended flights. In a comical twist, hundreds of motorists began leaving their cars parked in queues at gas stations for days on end, walking home instead, to wait for when petrol would arrive. Even the police force, having been unpaid for months, was allegedly charged to fend for itself, with disastrous consequences.

Since then, a lot has changed. Malawi has a new president, Her Excellency Joyce Banda, who is Malawi’s first female president and only second female president in the history of Africa. The local currency, the kwacha has been devalued by around 40%, donors have returned and emergency funds pumped into the economy. But numerous problems remain; The economy has not responded as expected and the cost of living has risen sharply. Many commodities are now twice as expensive as they were a year ago, and nobody can say for sure whether given similar circumstances in the future such a scenario would not repeat itself, causing further suffering.

With sudden changes has come an increasing number of Malawians who are justifiably unhappy with what is being viewed as unreasonable, insensitive, intrusive and somewhat tyrannical carrot and stick demands. In social media and online articles, there have been references to “economic slavery”, “neo-colonialism”, “donor dictatorship”, “and predatory aid” and the new president has been called a “donor puppet”.

Others have taken a more pragmatic view, seeing the government’s acceptance of donor funding conditions as a choice between a rock and a hard place and not necessarily a punishment to poor Malawians. But one couldn’t help sense a grudging acquiescence, fuelled perhaps by desperation.

child-labour-South Carolina 1908
Child Labour, South Carolina, 1908

It has been correctly pointed out that most countries from which the donors originate have had their own uncertain histories where extreme violence and repressive policies/conditions (like fiefdoms, child / orphan labour, forced annexation of land, ban on alcohol, slavery, etc.) by monarchies, land owners, industrialists and other leaders, were implemented, adversely affecting minorities and millions others; that it has taken a painstakingly slow process and hundreds of years of activism and mistakes for desirable change to happen. That in some donor countries, age old problems (racism, social inequality and sexism) are still widespread. Yet certain donors appeared to be putting excessive pressure on countries such as Malawi to effect similar types of changes overnight, in a country that was barely fifty years old.

Some of those enraged also correctly point out that most donors do not fully appreciate Malawian culture and most will never be adversely affected (in some cases – they would in fact benefit) by the negative effects their demands have (or are likely to have) on the Malawian economy.

Naturally, one conclusion to draw from this is that Malawi could probably be governed much more effectively if it was neither influenced by donors nor their financial support; if it generated its own income and acted in the interests of Malawians. In any case, how does one justify implementing unpopular policies when it is the people who elect you to office (not the donors) who will suffer disproportionately as a result?

This view is not unique to Malawi alone; others far afield have expressed similar concerns against some of the institutions that make up the donor bloc citing examples of countries like Botswana, that have made admirable progress in economic development by ignoring the very same Machiavellian advice they were prescribed.

But putting aside this causative and divisive rhetoric for a moment, the elephant in the room has always been what policies should the Malawian government urgently implement to generate its own money, which it can spend according to the needs of its population, since tax revenue isn’t currently raising enough income?

In my view, the difficult in answering such a question is partly because there are many forms developmental policies could take, making the job of policy maker slightly difficult, so much so that the question then becomes, which policies within the ‘pool of viable policies’, can be implemented in a relatively short space of time, at a reasonable cost, and to achieve a significant economic return? A return that will see hundreds of jobs created, that will perpetually generate sufficient foreign currency for the government and private enterprise, which will ensure the longevity of the policies and sustainability / environmental preservation

Answering such a question is the first step towards finding an answer to the donor aid dependency problem. A further problem is the constraints current donors have placed on the Malawian government. But surely, if such constraints are disproportionately negatively affecting people’s lives, and have been known to have produced negative or undesirable results elsewhere; surely their effectiveness must be questioned?

So, taking a simplistic view, in terms of job creation, obviously in a nutshell you will require a skilled or unskilled workforce performing certain functions that will ultimately lead to the development of a product (such as Chilli Sauce, Blankets or Electric Scooter), or provision of a service (such as a Call Centre, Security or Carpet Cleaning) which can be marketed. Both types of organisations will depend on how much capital investment is available, availability of raw materials, the skillset on the ground and the size of the target market itself. But generally, the bigger your investment budget and the available skills pool, the more likely you will be able to employ large numbers of people to fulfil your function.

However, classical capitalist theory dictates that for an investment opportunity (other than one for purely charitable purposes) to be beneficial, the profit, or potential profit must be attractive enough to justify the initial investment (which for big projects can run into millions of dollars). So even though you may want to employ hundreds of people, you are constrained in that essentially, there must be a return on investment(ROI), otherwise there’s little point in investing if you will only be losing money.

But how much profit is enough profit?

For a developing economy which currently relies heavily on donor support to function, I’m inclined to apply and translate this hypothesis such that when the government awards contracts to foreign investors, the underlying assumptions as to the opportunity (at least from the government’s point of view) is that it is

…attractive enough to provide a reasonable profit and incentive to the investor, while ensuring that the investor’s ethical obligations to the country in terms of paying adequate amounts of tax, creating employment amongst the local population and development of infrastructure, are proportional to the actual (not perceived /anticipated) profit they generate from their investment

But such a viewpoint may not be shared by investors, and in any case what is the definition of a proportional corporate social responsibility? Spending $1 million annually on the local population in developmental initiatives? $10 million annually? Or $100 million?

Furthermore, it is a common practice for many international companies to pursue tax efficiency schemes, declaring losses where perhaps a profit could have been made, or offsetting a loss in one region with a profit in another, and if you inquire from any accountant worth their salt, you will be surprised to learn how creatively a profit can be ‘converted’ into a loss.

Admittedly, it’s a tricky balance since when attracting investment, a government also has to take note of what its neighbours (in this case Zambia, Zimbabwe, Tanzania and Mozambique) are offering in comparison to its own offering, because if an offer is not as competitive, an investor may end up basking in the neighbour’s back garden, instead of yours.

This state of play concentrates the bargaining power squarely in the hands of investors, and has been known to lead to the signing of grossly unfair contracts which disproportionately and exponentially favour the investor far more than it benefits the local population.

But as you will see below, this is an artificial problem that can be rectified, especially when the attractant bringing the investor to your country happens to be a natural resource. But only if personal agendas are set aside and officials begin to act in the country’s best interests.

In terms of Forex and the closely related issue of raising venture capital, there are no easy answers because for a country such as Malawi, there’s not much money floating around and you have to give others a good reason to want to invest in your country. But some things are more obvious than others.

So, in an industry such as oil extraction or mining, and considering that Malawi has comparatively fewer resources than other larger African countries, and few Malawian industrialists have the capital to invest in large projects, then instead of granting a tender to a foreign based company to establish mining operations (which may well be the easy way out), a wiser decision (at least in the long term) would be for the Malawian government itself to enter the business of mining/ oil extraction. In the information age in which we live in where one can easily recruit skilled professionals from all around the world, in industries as diverse as nuclear physics and aeronautics to marine science and nanotechnology, Malawi wouldn’t be universally refused assistance/ technical support in creating and running its own heavy industry. Assistance sought from the Arab Countries, South America and Asia would not be refused.

Therefore, in my view, the government would be best advised to create a planned economy firstly, before ushering in measures that work only in a market economy. By forming and co-own an organisation they would be doing just that. The state would hold between 48 – 51% equity, and offer the remaining stock to the public through a venture capitalist funding round. It is important to stress that this organisation will differ from “parastatals” in that it will not be governed, managed nor influenced by government/ ministries in any way. To have a greater chance of success it will need to be run like a private company, with enough checks and balances to prevent abuse.

Suppose it did this, issuing 4,900,000 (four million nine hundred thousand) shares at say between US$10US$17 per share, in respect of 49% of the shares; that alone would have a potential to raise between US$49 million to US$83 million three hundred thousand for the undertaking, a decent amount of capital.

Depending on the subscription levels to the stock and in order to achieve some kind of spread on ownership, no single person /family or undertaking (other than Malawian registered cooperatives) would be allowed to own more than 15% of the stock. In addition, nine of the biggest shareholders would be invited to become members of the board of directors, together with eleven other non-political appointments, appointed by government as its representatives, from across the country.

Once the stock goes live, the public would be given a 2 – 3 weeks advantage window to purchase shares before corporate entities were invited to buy. In order to expand the reach of such a scheme, publicity could be generated using various methods including online, local and foreign radio and TV advertising. There would be fund raising events at all Malawian Consulates across the world; using Malawian Associations in the diaspora; in Malawian faith gatherings (for example Churches) and celebratory gatherings in the diaspora, events at which the virtues of the scheme would be triumphed, and details of the opportunity, growth plans, brokers would be communicated; Mining companies (in particular VALE), African Development organisations (i.e. African Development Bank, or pro African organisations such as the Mo Ibrahim Foundation) and others would all be invited to invest. So would Sovereign Wealth or Pensions Funds respectively such as the Fundo Soberano do Brasil, Investment Corporation of Dubai, Abu Dhabi Investment Authority, Hassanna Investment Company of Saudi Arabia, South Africa’s Public Investment Corporation (PIC), Norwegian Government Pension Fund, China’s Africa Development Fund, Russian National Wealth Fund, Korea Investment Corporation, National Development Fund of Iran, Khazanah Nasional Berhad, Kuwait Investment Authority, State Capital Investment Corporation of Vietnam, Government of Singapore Investment Corporation Private Limited, Qatar Investment Authority  and several such investment houses. Alternatively, or additionally, the organisation could issue a standard IPO, although the 15% stock rule would still have to be enforced.

Admittedly, setting up such an organisation would be a daunting task, requiring an experienced, dedicated, progressive, well-informed and energetic team that has had exposure to fresh ideas that have worked elsewhere around the world. However, as you will see below, the net benefit of such an organisation to Malawi (or indeed any African country struggling with the development aid problem) would far outweigh initial headaches (and costs), and would have a much higher chance of ending dependency on donor aid than most endeavours that are currently taking place.

There would be many concerns and hurdles, and setting up would not be easy. But by far the largest concern would probably be that of accountability, in that strict money controls would need to be implemented to ensure that the capital raised, and revenue generated would be used for growth of the organisation and social purposes such as revamping hospitals, buying essential medicines, building infrastructure developmental, and not for personal gain. To this effect, it would be mandatory for all senior officials, including those with access to the organisation’s finances to declare all their assets before taking up office, and to be independently audited bi-annually by external and independent auditors. No executive would be allowed to sign for transfer of funds of more than $15,000, as decisions on transfer of funds over $15,000 would be made collectively by the senior management team. Further, the government would need to issue a guarantee to secure against each investment in the event of fraud.

In addition, from the onset, an organisational culture of nurture (complete with an Environmental Preservation Programme and a Corporate Social Responsibility programme which would include volunteering to charities, schools, hospitals and suchlike) would need to be established to nail this message that employees of the organisation are hired to serve.

To safeguard the longevity of the organisation, it would also be essential that the company be run as a meritocracy, independently of the government or any other political institutions. This would call for a military style discipline in that while the organisation would be answerable only to its management board, it would also be answerable to a non-executive board of directors made up of officers from nine of the largest shareholders and eleven non-ministerial, non-political state representatives from across the country. Members of the non-executive board would have a fixed, non-extensible tenure of 2 years, and its management board would be contracted to a thrice renewable 4 year contract. Specialist advice would be sought from members of management boards of companies in other parts of the world, such as in Brazil for example, where their state run enterprises some of whom have now been nationalised, have proved to be commercially successful.

Addressing Red Tape

Ask any entrepreneur who has worked in Malawi and they’ll tell you that the bureaucracy is ridiculous. There are delays and lengthy procedures over everything. Delays in incorporation, delays in getting consent or a signature over one aspect or another, delays in getting import licenses, delays unless you pay a bribe, delays! In buying land and getting the purchase officiated, delays imbedded deep in the system.

The effect of red tape is that it tarnishes the country’s reputation, hampers business operations, repels investment and causes frustrations to investors who would otherwise help fix our economy.

So the government would be best advised to introduce a sui generis instrument that transformed the way businesses incorporate in Malawi by allowing an accelerated incorporation of a business within a week. Everything regarding incorporation, taxation and issues such as exemptions on capital equipment would be dealt with by a dedicated team occupying a central computerised system, firstly located in each of the major cities, and subsequently gradually rolled out across the country. The system would allow an entrepreneur to make an appointment, pay a fee, show all the required documents, get the incorporation documents and exemption certificates printed that same day, and if he needs land, show proof of purchase and get a bill of rights to the land by the end of the week. By the next week he can open a bank account, collect his machinery from customs and begin employing locals and commence operations for the building of his factory, having secured everything he required within a week.

The effect of such speedy processing times would be phenomenal and would greatly stimulate Malawi’s industry. In any case, if we look at the small country of Singapore (whose size is just larger than the size of Lilongwe), it’s no surprise that it is ranked as being the easiest place to do business in the world because according to a Report by the accountants Grant Thornton, it also has the least red-tape. In fact Singapore is so successful in this regard, it has been voted as the easiest country to do business in 7 times

To cement a culture of nurture, the organisation’s chief executive would be answerable to Parliament, and would be under an obligation to appear before a Parliamentary committee, once a year, to present an annual report on the organisations progress, direction, challenges and dealings.

Since the organisation’s aim would be primarily to develop Malawi’s economy, its structure, aims, functions, operations and investments and such like would need to be clearly articulated from the outset. It would have to maintain total impartiality in politics and there would be a need for strict checks and balances, and stringent hiring procedures, to safeguard for example against political influence, tribalism, regionalism, nepotism, ageism, or any other cancerous bias common in African countries.

A long–term management plan (at least > 10 years) that would include growth forecasts and a diversification plan to spread financial risk would be implemented, mapping the organisations goals and ambitions and providing a back-up plan. Fraud, mismanagement and corruption would be dealt with swiftly, uncompromisingly and decisively, and without political interference. In the event of a particularly acute crisis, or mismanagement, the CEO can be summoned and questioned before parliament, although he can only be forced to resign, if his position becomes untenable, by a two thirds majority vote of both its management board and Non-executive board of directors.

Such an approach would be crucial in terms of efficiency, transparency and would help establish investor confidence. It would also avoid some of the mistakes and problems documented elsewhere, for example those that have plagued Malawian parastatals or South African state owned enterprises [see here and here]

Further, if such an organisation does not lay a clean, responsible and credible example, and does not pre-emptively act against known inefficiencies common in parastatals, prospective investors are unlikely to purchase shares in any subsequent offerings under any similar state co-owned corporations. Already there are credible reports that suggest that the performance of State owned enterprises can be significantly improved, leading to profitable organisations [See Arief Budiman, Diaan-Yi Lin, and Seelan Singham , 2009, Mckinsey Quarterly here] In any case, with the benefit of hindsight, such organisations can be managed with the knowledge and expertise that will ensure that they steer clear of the ‘plagues‘ that thwarted State run companies of the 1970’s to 1990’s.

tractor

Thus, if Malawi had established four or five such corporations, then once the companies were on course to declare a profit, and while adopting a strict cost control strategy, the funds would be sufficient to purchase capital equipment (oil drilling equipment, mining equipment, agricultural equipment [ploughers, combine harvesters, planters, trucks, pumps, generators] , pharmaceutical equipment, manufacturing equipment [for industries including fertiliser making, cement making,  steel refinery, juice extraction, sugar processing, motor vehicle / railway carriage assembly, petroleum refinery] and any other necessary raw materials or equipment for industries the organisation was considering to diversify into.

The funds would be sufficient for the development and upgrade of infrastructure such as flats, houses, shops, a hospital, a police station, schools, a post office, banks, an airfield, libraries, markets, sporting and health facilities and roads to cater for the new workforce that would be required to work in the new mines / factories, all of which would create massive employment and would stimulate the Malawian economy like never before.

greenway_poultry

underwater

It would be sufficient to cover investment in alternative sources of energy such as wind, solar, tidal wave and novel hydro/ underwater turbines (here and here) power generation, to ensure that the new extraction / manufacturing facilities (and subsequently the new towns or settlements) are as environmentally friendly as possible, generating as much of their own energy as possible. It would be sufficient to cover employment costs for the organisation, including hundreds of miners and salaries of specialists from around the world to provide training and assistance in construction of the mines/ factories, conducting geological scans, using, servicing and maintenance of equipment, etc.

To aid in understanding the workings of such an organisation, say one focussed on mining/ oil extraction, a hypothetical picture of its staff and annual financial commitment may be most helpful. Thus, I’m inclined to include this rough, sketchy and extremely simplified draft of what the financial commitment at its very bare bones would look like. Obviously, the figures although lower in comparison to the levels in the developed world, can be adjusted accordingly in view of national salary levels / trends, performance targets, generated revenue, market forces (food / fuel prices and inflation, etc.) and to attract some of the best talent to the organisation [Click here: Annual Costs]

Note that in the subsequent years after the first, the capital equipment or buildings budget will be significantly lower, since funds for infrastructure will already have been allocated and costs such as heavy machinery or motor vehicles maintenance will be minimal in comparison. Thus, while the figures in the annual costs may at first sight appear indulgent for a small African economy, its structure would be designed with hindsight regarding diversification and future growth into other industries in national and international markets.

If the company generated US$300 million in sales of its ore in its first year of full operation (let’s assume this occurs after total sales at the end of the 2nd year from commencement), then deducting the operational costs [US$26,903,000(1st year); $8.9 million (2nd year: this is estimated by deducting first fiscal year costs minus the sum of contingency, infrastructure & capital equipment costs – giving $35.8 million) leaves US$264 million operating profit.  [Note that these calculations do not take into account any “losses” carried forward from the previous year(s) before full operation, nor does it fully consider that employees would not be hired all at once]. For the purposes of this article, for simplicity and assuming there are no tax incentives, if we levy a flat Corporation Tax rate of 30% (US$79.26 million), the net profit becomes be US$184.74million.

Thus, at 51% government ownership, and subject to other considerations/ deductions, the government % share of the profit would be a not insubstantial US$94.2 million, roughly about 7% of the 2012 Malawi National budget.

But even if the management board decided that only two thirds of this $184.74 million (~ $123.16 million) would be paid out to investors in dividends in the third year, while one third would be kept as reserves (a part of which would be re-invested into developmental programmes, acquisitions, growth / expansion, operating capital, shares buy-back programmes and other purposes), 51% of $123.15 million is still a substantial US$62.8 million, which would be a considerable contribution to the Malawian government over and above the US$79.26 million already paid in corporation tax.  There is then income tax paid by the employees, which would further generate tax revenue for the government.

And Investors would make a fortune. Since 4.9 million shares for 49% means that 1% stake in the business is equivalent to 100,000 shares, then at US$17 per share, it means that 1% stake is worth $1.7 million in investment. Thus, if $123.16 million of the profit will be paid in dividends, then 49% would be worth $60.34 million, valuing each percentage (1%) at $1.231million.  Theoretically, this means that if the company maintains or improves its performance for the next few years, then within 3 – 6 years of making an investment, an investor would have recouped or even doubled all of their initial investment in dividends.

But suppose instead of US$300 million in its first year of full operation, only half, or even a quarter is generated in sales. Even then, taking a similar approach, the organisation could still be managed to remain profitable.

And what if instead of the 4.9 million shares, only 2 million shares are issued at $17 – $19 per share in the funding round, raising between $34 million – $38 million. I believe with some creative adjustments and a lean approach (for example, ‘thirding’ / halving the salaries of the top quartile, reducing size of middle management, and salaries of middle management by say $4k -$7k; reducing the expenditure on capital goods & buildings), the venture would arguably still be commercially viable, more so because after the first year, the capital expenditure (buildings, infrastructure, Plant) would be much less.

Obviously, in practice there would be far many more considerations, and the figures would probably not look as optimistic, but the above provides a plausible and realistic picture of the financial commitment and nature of such an organisation. With such a framework, and depending on the amount of ore deposits, the miner workforce can be increased, short-term internships provided to hundreds or even thousands of low income earners from across the country, know-how sought from international experts and the company could still generate a profit, meet its tax obligations, and issue an attractive dividend.

Contrast this to the common arrangement where the government only owns few or no shares in its country’s largest heavy industry, what you will find is that corporation tax revenues or dividends are often miniscule in comparison; disproportionate by any scale, and the government loses out on hundreds of millions of dollars, just another repetition, dare I say, of the age old adage that everybody except Africans themselves benefit from Africa’s mineral wealth.

And you see it everywhere; recently a Fortune Global 500 Italian oil company, ENI (which is the largest industrial company in Italy with 30% government ownership) has acquired a 70% shareholding for Natural Gas reserves off the coast of Mozambique, one of the biggest finds of its kind with potential for over $15 billion. 

Think about it, with the expertise Mozambique and Southern Africa currently has, was it necessary to give away such a large stake to a rich European company when your own country is littered with massive problems caused by poverty? Doesn’t this clearly add to the imbalance of trade between Africa and Europe? And even if the companies that will develop the reserves are to invest $1 billion.  Yet if $10 billion (which is 70% of $15 billion) is the net benefit to the Italian company, say over 15 years, clearly Mozambique will not have gained proportionally?

Or would it have done so? How?

In any case, when was the last time you heard an African based mining company had been awarded a 70% interest /contract in North America or off the coast of Italy?

In my view such decision making from African leaders showed incompetence and left much to be desired. When European legislators had used every trick in the book to protect their markets, it was wasteful, short-sighted and negligent and couldn’t possibly represent the true position of the majority of Mozambicans. Mozambique, which faces similar problems as Malawi needed the benefit of such resources a lot more than ENI, whose 2012 3rd quarter profits (4th Quarter to be announced in February 2013) stood at €14.80 billion, a 13.9% increase from 2011.[See source here]

The Younger generation ought to take note of such crippling anomalies and rectify them when their turn in public office arrives because this trend where the net movement of resources is only from South to North, or South to West, is precisely what got Africa into a mess in the first place. In particular, according to British historian Dr. Hakim Adi,

 “From the middle of the 15th century, Africa entered into a unique relationship with Europe that led to the devastation and depopulation of Africa, but contributed to the wealth and development of Europe…..”

He follows to state that:-

“The forced removal of up to 25 million people from the continent obviously had a major effect on the growth of the population in Africa. It is now estimated that in the period from 1500 to 1900, the population of Africa remained stagnant or declined. Africa was the only continent to be affected in this way….was a major factor leading to its economic underdevelopment.”

[See here]

So, if things have indeed changed since the exploitative days of slavery, wouldn’t you think that the economic imbalances that currently exist would be squarely addressed, decisively? That not only would African leaders  be alert in negotiations and minimally demand a proportional shares of their resources, but western business leaders would have policies in place to ensure that a larger, or atleast equal benefit of natural resources go to the country that owns them?

This is probably one of the drivers which influenced South Africa to finally open its first state owned mine. The implications of such must never be understated. For a start, how much potential revenue in taxes and dividends has the South Africa’s government lost in income from diamonds and gold since the end of apartheid as a result of lack of ownership of a proportional share of the country’s mining industry?  Funds which because of private ownership were wired out of the country, or concentrated in the control of a small rich minority, instead of being used for developmental purposes within the country, lifting millions of ordinary South Africans out of poverty, building quality hospitals, developing medicines and raising the standard of the poorest and such like.

By owning a majority stake in most of its country’s major industry, and having an informed management strategy, the net benefit from the proceeds of its natural resources can be significantly increased.

This is what Park Chung-hee (the South Korean general who is credited with the industrialisation and rapid economic growth of South Korea) practiced [see Export-oriented Industrialization here]. While he had a darker side to him, and while there were other contributory factors at play (for example American money – Chung-hee’s support of the US in the Vietnam war is said to have attracted substantial financial rewards to the tune of $3 billion, between 1964 to 1972, in exchange for sending 300,000 Korean soldiers to Vietnam), his policies including creation of economic agencies, ownership of banks, soliciting technology and investment from Japan, encouraging the creation of efficient but cheap products and expanding Korean exports helped create and strengthen the industry that now defines South Korea.

It’s what Botswana has done, whereby Debswana, their sole mining company is 50% owned by Botswana and 50% by DeBeers. [See recent Debswana revenues here]

These types of policies are especially important where private individuals struggle to tap into capital markets, and while there has been criticisms against them, even countries such as the US, and the UK developed partly on the back of such policies.

In discussions with scores of western trained colleagues (most of whom are African – many now working in Africa, including Malawi), there were many different views exchanged. Among them were concerns that certain donor officials (not only in Malawi) were discouraging African governments from ownership of industry (in one instance advising the Malawian government not to buy tractors for agriculture “because it was bad for the soil”). Such thinking was unhelpful, as highlighted by one Rick Rowden on Foreign Policy.com where he states that:

Today many African countries need to use industrial policies, such as temporary trade protection, subsidized credit, and publically supported R&D with technology and innovation policies, if they are ever to get their manufacturing sectors off the ground. This is true for all the same reasons that it was true for the U.K. and other nations that have industrialized successfully. According to today’s ideology of free trade and free markets, however, many of these key policies are condemned as “bad government intervention.” Bilateral and multilateral aid donors advise against them (and structure loan conditions accordingly). WTO agreements and new regional free trade agreements (FTAs), as well as bilateral investment treaties (BITs) between rich and poor countries, frequently outlaw them.

[See here]

When most western countries (from whom the donors originate) had phases of Planned Economies before adopting Market Economies, how honest was advice against a planned economy? In any case which industrialised country still uses hoes or cattle ploughers for agriculture? If private industry is generally unable to raise sufficient capital for purchasing of equipment which would provide benefits and efficiencies in farming, how can farming methods improve and the quality and quantity of the yield increase?

This point is worth exploring in a bit more detail. If it is the case that such advice was provided, how honest was it when it was clearly the case that raising capital for large projects which would involve outsourcing technical functions, buying expensive machinery or consulting a considerable number of foreign specialists, was beyond even the wealthiest entrepreneur in Malawi? And when no entrepreneur was willing to risk putting their own money into such a venture, without an assurance from the government that they would be awarded at least a contract that would ensure that they recouped their money back?

Further, in terms of credibility and securing against an investment, the government can create credibility with relative ease and would be able to secure against an investment, whereas private entities can sometimes be viewed more circumspectly, and wouldn’t always be able to secure against an investment.

So, it was again left to foreign investors to develop heavy industries, marginalising local entrepreneurs, who must settle for employee. And as most people already know, many corporations are masters at “legal” tax avoidance, using tax incentives, off shore companies, tax-free zones and other sophisticated schemes to deprive their government coffers of millions or even billions of dollars. It happens everywhere, even in the UK [see here and here]

But unlike the UK, where there are hundreds upon hundreds of multimillion pound revenue generating companies, such that even in the presence of widespread tax avoidance schemes, Her Majesty’s Revenue and Customs (HMRC) is still able to collect hundreds of billions of pounds in Tax every year [see this source, in particular page 7] that lists 2010 -2011 collections to be £468.9 billion, most poor countries such as Malawi had no such luxuries. With few multinationals, advice against government co-owned industry was unhelpful, discriminatory and suppressive to say the least.

And if you look at the US, similar patterns emerge in that the state collects huge chunks of incomes from big business -simply because there is a lot of large industry!

Image source: Washington Post
Image source: Washington Post

Therefore, if the Malawian government was reluctant or under duress not to own industry, yet Malawian businessmen were unable to overcome financial barriers to entry, and foreign owned corporations paid miniscule taxes, what hope of creating sustainable economies was there? Wouldn’t this create or perpetuate the rather familiar situation in which resources of very poor countries were developed predominantly by foreign corporations most of whom paid very little taxes, and did very little towards lifting the standards of life of the locals? Doesn’t that fact in itself perpetuate a donor aid dependency?

In my view, the Malawian government, and other Africans states would be best advised to ignore such misleading advice and begin to invest into heavy industry that will create an export economy, as other countries have done in the past because a planned economy would greatly benefit Malawi.

Sustainability

Malawi, like many African countries, gets plenty of sunlight, more so by virtue of its equatorial proximity. So, imagine if every roof, whether iron sheets, tiled or thatched had a solar panel on it.  Would there be power cuts or shortages every other week? Further, how much fuel would that save? And how many trees would be saved as a result? And on a similar theme, what if every household planted one tree a year, for example in the fashion of say the Youth Week programme of the Hastings Banda days, and following lightly in the footsteps of the Nobel Peace Prize laureate Wangari Maathai’s greenbelt movement. Having the benefit of a fresh water lake, if Malawi can strive to become the greenest country in Africa, literally and in terms of greenhouse gases emissions, that factor in itself would inevitably stimulate biodiversity within our wildlife ecosystems and would most certainly improve our tourist industry, bringing in much more Forex into the country [See lessons from Costa Rica here]. It would also carve unity and create a sense of togetherness towards a common purpose.

In my view, a government owned corporation such as suggested here would be the perfect opportunity to implement environmentally friendly projects that have worked elsewhere [one example here], including an extensive national tree planting programme, creation of additional forests and wildlife reserves, importing additional species of animals from other countries(e.g. the Congo basin and Madagascar) to increase our biodiversity and such like. In building infrastructure, and pending cost-benefit analyses, the organisation would adopt measures, practices and technology adopted by “green cities” in other parts of the world such as in Brazil, Sweden, Canada and Qatar. [See Turning Deserts into Forests here]. In any case, doing so would likely help combat the challenges brought about by climate change. In fact according to a World Bank Report tackling climate change is linked to ending global poverty.

A further point worth mentioning and that is somewhat linked to the dependency problem is the role of Education. There are many educated people in Malawi, loads! Every single day, whether in the newspaper, on the radio, or amongst friends, you will hear a reference to some Dr. or Professor, or somebody who has a Masters degree in some field. Many of them are foreign educated but if you investigate further, you quickly find that very few of these “intellectuals” have been given a real challenge that will stretch them mentally and utilise their many skills. Many settle within the boisterous frustrations of working as university lecturers, going months on end without pay; Or receiving breadcrumbs in one NGO or another, undertaking dead roles, and led by unresponsive, short-sighted, fat-cat bosses. If not they are in regressive government departments doing clerical jobs for which they are overqualified; or they are working as consultants, underutilised. Else, they are in farming or in some other function, but because of lack of sufficient capital, still heavily underutilised. In contrast, and as if a mockery, the old guard (or neopatrimonials known respectfully as Achikulire) despite having little formal education, and who achieved notoriety in business or politics under the one party system or as a result of their affiliation/relation to a minister or president, are still doing relatively better, and dominate some industries. Yet the Malawian government appears powerless to help these educated individuals, and in the words of a friend, “they are left to slowly rot away and become irrelevant”. What then was the purpose of all the highly advanced training, the PhD’s and Masters? Is this not waste? How will Malawi develop if those who have the skills are not utilised and supported to practice their vocations? Most of these people have years of experience, and their activities and contacts both on the ground in Malawi and abroad have given them a unique depth of understanding as to why countries develop and the root problems plaguing Malawi’s economy. Yet the furthest they vent their knowledge is at parties, amongst friends, or at the bottle store, amongst strangers.

In my vision for Malawi, foreign educational institutions such as Universities will play a pivotal role in assisting to end aid dependency. So, if 100 Universities across the world were “compelled” to loan to 200 of the entrepreneurial of these professionals $35,000 each in Venture Capital funding, I find it extremely difficult to accept that, with the knowledge, exposure to progressive ideas, with their experience and contacts (be it other Africans in Ghana, Kenya, etc., or with former classmates in Europe, the US, Asia or Australasia, etc.) that such capital wouldn’t enable a majority of the recipients to create sustainable business models on the ground.

It wouldn’t be a free lunch. There would be a need to comply with Financial Services regulations regarding lending by Educational Institutions. For each applicant, a business plan would need to be submitted for vetting and fraud checks including credit checks to ensure that only the genuine applicants were assisted. There would be a need for training and business management support to ensure that the entrepreneurs are constantly being equipped with skills that could be of use in their businesses. Minimally, it would allow those ideas which had the best potential, low entry barriers, possibly a successful pilot run, and a big enough market for a viable sustainable model to be created, to be funded.

To make things a bit more interesting, suppose those universities included a clause in its loan agreements that stipulated that if the initial investment is doubled, excluding costs, then as soon as the initial loan is repaid, say within a space of 3-5 years, the borrower would be entitled to another loan, this time twice the amount ($70,000) and so on.  In my view, such a scheme would be a huge incentive to innovation that would challenge Malawi’s underutilised entrepreneurs and would have a tangible and measurable impact within a short period of time because the entrepreneurs would have access to essential capital and Forex, which most currently struggle to find. Such resources which would enable them to buy equipment and employ a couple of people to assist them roll-out their business ideas.

The Universities would also benefit in other non-obvious ways, for example, Business School students would have an opportunity to be seconded on short term internships (a couple of weeks to several months) in these ventures to gain experience, transfer additional skills and arguably contribute to these companies.  And those that prove to be commercial successes could even offer these students full-time employment.

Could wind turbines be an alternative source of power?
Could wind turbines be an alternative source of power?

Diversification

Because of the resources at its disposal, a national corporation can seamlessly diversify into other industries and branch out to create other companies. For example it could invest in Tourism, partnering with local tourism providers to establish high quality standards and / or cooperatives; it could invest in Commercial Farming (everything from Soya beans, Poultry, Bee keeping to fish, cattle / pig farming, all on a large scale); It could dive into Telecommunications; Information Technology outsourcing(from graphic design and call centres to cloud networks + unified systems); Manufacturing (foodstuffs, alcohol, furniture, fertilizer, cement, glass, plastics products, cosmetics and such like.); Assembly (computers & electronics, bus & rail carriages, motorcycles and such like.); Pharmaceuticals; Education (creation of new learning institutions/ universities with research specialisations in medicine, engineering, agricultural technology, business, etc.); Recycling (metal, plastics, wood,  paper, carbon-composites, etc.); Shipping – an International Import and Export / Logistics business; Banking & Insurance; or even investing in the development of Real Estate (flats and houses, hotels and world class business centres).

Much of the systems and machinery would already be in place, as would be staff and a management. In essence the first corporations would act as a training ground to equip employees with transferrable skills that are essential in the subsequent corporations. Once issues such as demand, market/ viability analyses, type of crop / animal, vets and vaccinations, pesticides, nature and cost of new machinery, logistics, profit margins, import / export tariffs, procedures and legal compliance, specialists, etc. in each of the identified opportunities had been determined, “satellite” management boards would be hired to independently run the spin-offs as independent national corporations in their own right. This also means that shares would be issued in a similar manner as above and the whole cycle repeated all over again.

So as an example, Blueberries cultivated on a commercial scale in South America (notably Argentina + Chile) find their way to England, and are subsequently used in everything from fruit and desserts to juices and pet food. In the UK alone combined retail sales value for strawberries, raspberries, blueberries and blackberries are close to £700 million [see here]

Similarly, the US imports Meat and poultry from New Zealand. According to this source ( Office of the US Trade Representative):

The five largest import categories in 2011 were: Meat (frozen beef) ($906 million), Albumins, Modified Starch and Glue (mostly caseins) ($312 million), Dairy, Eggs, and Honey (milk protein concentrate) ($286 million), Beverages (wine) ($224 million), and Machinery ($182 million)…”

According to a ACDI/VOCA report (source: Value Chain Assessment: Indonesia Cocoa , by Henry Panlibuton & Maggie Meyer, June 2004), Cocoa Beans exports from Indonesia are currently valued at approximately $600-700 million per year, however there have been concerns regarding the quality of the beans and a much documented fall in production in recent years which could mean an opportunity for a savvy new entrant??

Similarly, the US imports raw materials, foodstuff, fish and food grains from Thailand, and in 2011 they included Prepared Meat, Fish (shrimp and tuna) (worth $1.4 billion), … Agricultural products from Thailand to the US totalled $2.6 billion in 2011, the 8th largest supplier of Agricultural imports, and included: rubber and allied products ($1.0 billion), processed fruit and vegetables ($468 million), and rice ($419 million) [See here]

According to 2009 statistics from Economy Watch, the Netherlands imported a total volume of $358.9 billion worth of goods. This may be a market worth exploring, in terms of what do they need, where are they currently buying it and why, what can we supply them, what are they short of which we can grow, what are we already supplying, etc. In any case, South Africa exported over $700 million worth of goods to the Netherlands [Source Mail & Guardian] and in 2009 the Netherlands imported $290 million worth of Cocoa from Nigeria [See The Observatory of Economic Complexity] all of which may be indicative of opportunities worth exploring in greater detail?

According to this source, the US imported over $1.4 billion worth of fruit and vegetable juices from the world in 2010. The global market for fruit and vegetable juices is forecast to reach 64.46 billion litres by the year 2015 [See here].

With all the fruit trees (notably mango trees) in Malawi, and considering that Zimbabwe is no longer a big producer of fruit that it were in the eighties and nineties, Malawi should be churning out hundreds of millions of litres of fruit juice each year.

In addition, Sugar exports from Australia are worth between $1.5 billion to $2.5 billion [See here]

Think, Dwangwa Sugar Corporation, which is only 8% government owned. An investment into two or three large government co-owned Sugar plantations in which the government held a majority stake was the most obvious thing to do. If availability of land were a problem, the corporation could “rent” unused land south of the border and develop such large plantations in Mozambique, Angola, Botswana, Zimbabwe, or even across the Mozambique Channel in Madagascar, and negotiate fee sharing arrangements with the governments of those countries.

Further, it could do a lot more; the Dangote Group for example was built partly on sugar products, which probably shows that there is still a large market for processed sugar products across Africa. As a sugar producer, Malawi shouldn’t have to import processed sugar, coffee or tea products from abroad, let alone have shortages in times of crisis. These must be processed in Malawi, marketed extensively and exported. And in austere times such as is currently the case, the buyer is more likely to buy on price.

According to the Bureau of International Recycling, the global recycling industry is worth at least $200 billion. In 2010 alone, the US generated $30 billion from export of commodity grade scrap products. [see here] Surely, this has got to be a market worth exploring in more detail?

According to Vinexpo Chairman Xavier de Eizaguirre, the global Wine industry is worth at least $170 billion. And is growing rapidly, largely driven by consumption in China [See here] Such is the growth that not only have South American countries like Chile and Argentina become prominent grape growers, even the South of England which previously wasn’t considered to have the ideal climate is becoming a vineyard region. [For more information see here].

According to this link, in 2008, footwear industry exports from Vietnam were worth $3.16 billion.

With a government co-owned corporation, it will be possible to bid for projects internationally, and possibly even acquire other potentially profitable opportunities elsewhere. You see it with Vale which began as government owned and has grown from a national mining company into a behemoth which is now the second largest mining company in the world, with acquisitions in Canada, Japan and other parts of the world. Surely, there are some practical lessons Malawian industry can learn from such companies?

A further point is that Malawians must learn to reject deals or proposals that are bad for Malawi in the long run. In the case of mining, this is metal ore we are dealing with so if someone doesn’t want to buy it or if the price they are offering is too little (or insulting) – you can always refuse to sell it to them. And store the ore. Tomorrow another customer will show up, and in the case of Uranium, there are many customers: Iran, India, Brazil, China, the US, and many others, all with huge energy needs. So, as an example, if Iran wanted to buy our uranium in exchange for petroleum, you couldn’t get a better deal. In any case, many countries including the EU are still trading with Iran, despite trade sanctions, with EU imports from Iran in 2011 amounting to ~€15.8 billion.

In conclusion, the above presents only a tiny picture of the global opportunities such an organisation could target.  However, I believe that with a considered vision, fresh thinking, extremely careful planning, a deliberate and calculated risk, a progressive and sacrificial team, and with a stringent management strategy, and an organisational culture focussing on integrity, service and nurture, and by referencing to what has borne positive fruits elsewhere, it is possible to create and harness three or four such home grown brands into remarkable and profitable multi-billion dollar conglomerates.

If run responsibly, such national corporations would be the pride of Malawi, and would most definitely propel our country’s economy into the 21st Century, helping Malawians enjoy the sort of financial freedom enjoyed by countries such as Botswana, Mexico, Brazil, Kenya, Ghana, Malaysia, South Korea, Venezuela, Thailand and China respectively, some of whose industry began as state owned, and many of whom still have state owned industry. It would help bridge income disparities and would raise the standards of living of hundreds of thousands of low income families, equipping workers with transferrable skills in the process. Its environmental credentials would be attractive to foreign investors and its social policies would help with healthcare initiatives, tertiary training and be a model for responsible corporate governance.  Most importantly, it would provide ordinary Malawians with a means of realising a proportional benefit in their resources.

For Malawi and several other African countries facing this aid dilemma, the resources, expertise and answers are arguably already available; the only ingredient yet to be added to this equation is the exercise of a determined, concerted, well-informed and independent political will. But in the event that such highly desirable political will was not forthcoming, for whatsoever reason, individuals and Malawian businesses must act quickly to organise themselves and pool resources together to form ‘cooperatives’, for example as was the case with the group that in 2012 bought biodiesel equipment from the US.

The collective pooling together of resources would arguably allow the cooperatives to begin targeting national and international opportunities such as those outlined above, because unless the Malawian economy can become self-sufficient and industrialised, we will forever struggle to maintain true independence on the global arena.

And it’s not about embarking on some heroic stunt. It’s the things that matter: – where our medicines and consumables come from and whether we can save money by manufacturing a few ourselves? Whether we can create savings on the source of our electricity? The quality of healthcare(access to a clean hospital bed + medicines; family planning being standard); if every child has an access to a good level of education, if the homeless and hungry can be housed and fed, and the jobless provided with training and a job(even if it meant part time job, so long as they can be resourceful), if our lakes, national parks and game reserves are protected and enhanced; corruption thwarted mercilessly, if our industry is developed so that (i) it caters for most of our basic needs (ii) generates sufficient Forex (for fuel and more sustainable + eco-friendly industry, etc.) to enable us to tap into the global economy, if Malawi can strive to construct world class facilities to attract international business, reduce crime and increase security (to say 1970’s levels) across the country for international visitors to feel safe; if civil society  is resourced to educate against deforestation and offer alternative and sustainable sources of energy, if the priorities of a majority of our politicians’ can shift from being archetypically self-centred, to being servants of the state, paid similar salaries as doctors, if our mentality can change from what J F Kennedy referred to as what my country will do for me, to what I will do for my country, the pillars of economic development will have been laid.

Chinese propaganda poster, April 1965, it reads: “Fully engage in the movement to increase production and to practice economy to set off a new upsurge in industrial production” via http://chineseposters.net
Chinese propaganda poster, April 1965, it reads: “Fully engage in the movement to increase production and to practice economy to set off a new upsurge in industrial production” via chineseposters.net

In any case, if countries like China, Brazil or South Korea stuck to inefficient and archaic agricultural methods or core industries by which they were defined 60 years ago, do you think they would have developed at the pace they have? Taking the example of China, despite the controversy with an artificially maintained currency, cheap labour and poor working conditions [which is not unique to China as even industrialised countries had a phase of poor working conditions], has their sacrificial spirit and hard work not paid off, benefitting millions of Chinese?

I urge every Malawian who reads this to carefully consider these observations and other inspirational works ( for exa ple Henry Kachaje’s Imagine an economically Independent Malawi). Each one of us needs to play a part in terminating this toxic debt cycle that has enslaved our country for decades.

                                  “You cannot pick up a pebble with one finger.” – Malawian proverb

Let us graft together and transform Malawi for the better. We may not be able to do it as individuals, it will not be easy, some people will be against it, but together, united, irrespective of tribe, religion, customs, colour of skin, irrespective of language, irrespective of social status, it is possible to make real progress; Malawians shouldn’t accept mediocrity, hand-outs and unending hardship as standard.

Not every problem can be solved overnight, and while mistakes WILL be made, yet in seeking to develop Malawi (in substance, not rhetoric), if we collectively, sacrificially and selflessly begin structured meaningful projects, hand in hand with willing trade partners, we can achieve progress that has never been seen previously. Progress mapped not by foreign aid organisations or vested interests that have neither sympathy for nor responsibility towards the poorest Malawians; instead, progress which terminates aid dependency once and for all.

[In the next and final part, I will outline examples as to how other countries and businesses have specifically implemented planned and strategic Economic policies, and lived to reap the benefits]

(C) 2012 -2013 Sangwani Nkhwazi