Tag: money transfer

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

by Sang N., posted in Initiatives, Lazarus Chakwera, Malawi, saulos chilima, Thoughts

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

Why the Malawi Postal Corporation should enter the business of International Money Transfer

by Sang N., posted in Africa, Initiatives, Inspiration, Opinion

money-card

A few weeks ago, I watched a Christmas party video in which the speaker talked about remittances by migrants living in the UK, and immediately I got an idea.

Why doesn’t the Malawi Postal Corporation (MPC) enter the business of International Money Transfers? Not only in Malawi, but across the region…

In that video, the London mayoral candidate George Galloway said that if he is elected mayor of London in 2016, he will move to make City Hall enter into the business of International Money Transfers, except it will be done on a non-profit basis. It made me think about how Malawians particularly in the UK and the US spend so much on charges and fees to send money to their loved ones.

The choice of the MPC may seem like a random or even odd one, but it is not. The Malawi Postal services has a wide network of 180 Post Offices across Malawi and 154 postal agencies in the country. Surely with such a wide network, they must have the capacity to add an additional service of money transfer ontop of the other services which MPC already offers? The only difference would be that this service will not depend on Money Transfer Operators (MTO’s) such as Western Union, Moneygram or other services, thereby more of the benefit of the transfers will remain on African soil.

In any case, remittances to East and Southern African countries have been steadily increasing. In 2013, US$28.7million was sent to Malawi from abroad (up from US$14.5million in 2006, see Index Mundi here) and US$72.8 million was sent to Zambia  (Source: Examining the Relationship Between Received Remittances and Education in Malawi, Kasvi Malik, Claremont McKenna College, 2015). Zimbabwe received US$1.8 billion in 2013 (Source: Zimbabwe: Diaspora remittances in decline, The Africa Report), Tanzania received US$75.34million in 2012 and Mozambique received US$117million in 2010(data-World Bank)

In total the Overseas Development Institute estimates the total cost of fees charged by the Dallas based MoneyGram (whose 2014 revenues were US$1.45billion with $456.4million Gross Profit) and the Colorado based Western Union (whose 2014 revenue were US$5.6billion with $2.31billion Gross profit) to be US$1.8 billion (see Watkins, Kevin & Quattri, Maria. “Lost in intermediation: how excessive charges undermine the benefits of remittances for Africa.” Overseas Development Institute, April, 2014.Web. 20 March, 2015).

Surely this is money which should be utilised within Africa?

But why is this issue important?

Our Countries in Africa need money. Poverty lingers, our education systems are in tatters, we have high youth unemployment, healthcare crises, and in the face of illicit financial outflows, receding or suspended aid budgets, relatively small FDI’s and the corruption problem (which is far from going away), every penny counts.

Every penny must count.

The African Diaspora is a burdened community. The majority usually accept low-paying jobs, spend more money relatively than indigenous populations to establish themselves, are milked dry by extortionate immigration fees, have less social capital in the countries they dwell (therefore less access to informal or supplementary sources of funds), and fewer fallback protections than indigenous populations. In some countries, migrants have to pay more for healthcare, and for services which are free to the locals. They find it harder to access capital (with which to start businesses – which could help them financially), and on top of taxes, Social security / council tax, etc.. they have many mouths and responsibilities from family members back in their home countries, dependants who are often expecting dollars, pounds or Euros for their livelihood each month; to pay for rent, food, school fees, medical care and other expenses.

So how would the MPC Money Transfer scheme work?

On a very basic level, a non-profit organisation would be incorporated in the UK, the US, Malawi, Zambia, Zimbabwe, Tanzania, Kenya, South Africa and Mozambique, with bank accounts opened in all those branches.

The organisation would have one or two staff members based at the Malawian embassies in each of these countries. The Malawian government would deposit US$100,000 in each of the bank accounts, and when a remittance has been made, the organisation would level a 5-10% fee on the value of the remittance, as a cost for sending the money. A mobile app would be developed to make the job of transfering money easier, and contracts with banks and money gateways would be utilised to allow payments to other bank accounts or services in the participating countries on favourable terms. Any profits made at the end of the financial year after all the costs have been deducted would be donated to a fund to be used for job creation for youths, healthcare initiatives and other such purposes across Africa.

Obviously it’s not going to be as simple as that, and current market players are unlikely to want a new serious entrant with Social ambitions, but you get what I’m saying.

A few years ago, some people suggested that Diasporas Bonds (Read Economist article here) was the way for African migrants to help invests in their countries, but the scheme still depended on the likes of Western Union.

I acknowledge that the rise of mobile money has had a positive impact on empowering rural communities across Africa, but I’m not convinced that the benefit of such has been significant or evenly distributed among the people who use it. Indeed, it seems to me that a handful of entrepreneurs, and a few corporations (for example Orange SA who own Telkom Kenya, the part-owner of Safaricom, which owns Mpesa. Safaricom is also partly owned by Vodafone Group) have reaped the majority benefits of the mobile money revolution, meaning what mobile money has done, is made companies and corporations who are owners of the various platforms richer.

What I’m calling for is a scheme whereby our governments in Africa, as opposed to MTOs or private companies control a greater chunk of the pie, with a hope that such would lead to greater investment in services for the greater good of our people.