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

Malawians have huge expectations of the new government in Malawi.

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

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

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

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

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

  1. Revamp Public Institutions & Parastatals to become productive Again

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

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

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

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

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

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

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

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

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

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

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

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

4. Lower the cost of phone calls and Internet data

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Links

Who is interfering with MACRA’s mandate?

It’s a sad state of African politics that sometimes influential people attempt to hijack the institutional and democratic processes of doing things, for personal gain. Often money, lots of it, must have changed hands, and you end up with bigwigs attempting to influence or hijack decision-making in matters such as awarding of contracts, in legal or constitutional affairs, when the law is clear about how such things should be handled. This is bad for our countries across Africa, and is singularly the most common reason why our institutions fail to function properly. Leading to abuse that deprives the continent of billions. Because some people are willing to sacrifice the common good. In Malawi, a few days ago a story broke out on Nyasa Times alleging that one Ben Phiri is apparently pulling the strings behind the scenes to influence the Malawi Communications Regulatory Authority (MACRA) to award a licence to Lacell Private Limited. Now Lacell has an interesting history in Malawi. In 2008, they failed in its bid for a mobile license because they did not meet the criteria.  Lacell came 5th in the tender process after the other participants were either disqualified or pulled-out. It seems that after months of lobbying politicians (see another link here) they threatened to sue the Malawi government, claiming that they had been led to believe that they would be awarded a license. That they had participated in pre-contractual negotiations and had invested in Malawi, therefore deserved a license. But the ‘license’ they claimed, for which they received some media coverage, never got authorised, let alone gazetted. The Malawi Communications Act 1998 stipulates that a license is not awarded unless it has been gazetted. You can engage in negotiations or receive political promises but unless a tender has been advertised, bids received and reviewed, the bidders vetted and the preferred bidder selected, the succesful bidders are then passed to the president through the relevant ministry…and after some obscure governmental protocols at the highest level, a winner selected. The resulting licence is gazetted, and only then is the licence said to have been awarded under the laws of Malawi. Any contract award that does not follow this set out procedure as laid out in law is in contravention of the law. Thus, for renegotiation with Lacell to begin out of the legally accepted procedure stipulated by the law, outside the tender process, is not in line with the laws of Malawi.

But this resumption of talks is not entirely surprising. In appointing boards of MACRA, the Department of Statutory Corporations [which is part of Office of President and Cabinet (OPC)] issues lists of competent persons which are recommended as members for nomination to parastatals. The President then approves such appointments. But for the current board of MACRA, which was appointed in November 2014, rumour has it that the recommendation list was largely ignored, or the legal process was not entirely observed. Whether this was politically motivated or not is anybody’s guess. What is clear is that when selecting a new board for a regulatory authority, it is required that the composition of the board have people who possess the skills, knowledge and expertise relevant to the functions and mandate for that institution. For MACRA, the Communications Act states that certain numbers from the outgoing board should be retained for continuity. This makes sense because a new board unversed in the operations, intricacies and current affairs need time to adjust. To examine all the issues which the board has been wrestling with, and come up to speed. But when more than half, or all of the previous board have been replaced, what’s to stop a noisy, disgruntled and desperate former bidder who for years has been claiming the moon, to take advantage of the situation and try to bulldoze its claims, perhaps helpfully assisted by some monetary gifts to important people within a newly elected government. This it appears, is where Lacell comes in. Because  the last board of MACRA was replaced in its entirety, and surprise surprise, Lacell, who popped up during Bingu’s regime causing many headaches, who showed up again and again during Joyce Banda’s tenure, has once again showed up.

According to the OPC website: The Department of Statutory Corporations mandate is to ensure parastatal sectors optimal utilization and management of resources, in compliance with Government regulations, thereby contributing to national development. The Department provides financial, administrative and managerial oversight to the parastatal sector. Doesn’t the in compliance with government regulation mentioned in this mission statement mean that MACRA must operate by the law? Why then is Kondwani Nankhumwa, the minister of Information, Tourism and Culture, talking as if a deal with Lacell could be hashed outside the law? Disregarding the lawful processes. And the institutions that have been mandated to police and protect the processes?

Something fishy is going on. President Peter Mutharika would be best advised to put a firm stop to this fishy business, because it is not going to help Malawi in the long run. Our public institutions must be allowed to operate independently, without duress, and in line with the law.