On December 14, 2015, the Reserve Bank of Malawi (RBM) released the ‘Financial and Economic Report for Third Quarter 2015’. What caught my attention were the statistics for the trade balance. In the first quarter of 2015, Malawi imported goods and services worth $388.4 million out of which $42.3 million (10 percent) was for fuel importation and $24 million (6 percent) was for fertilisers. What constitutes the remaining $322 million? Take a look at the imported items in our shops you will be amazed with what you will find. The most ridiculous of these imported items include manhood enhancers, bum tightening lotions, aphrodisiacs, packaged firewood, charcoal, wooden doors, toothpicks, tomatoes/ tomato paste and even bananas!
Seriously, every year in Malawi, bananas and tonnes of tomatoes grown in the country go to waste because of lack of local patronage and secondary processing. What is even more ridiculous is the fact that these items are not only brought into the country by local businesses, but also foreign investors who often get tax exemptions and preferential treatment.
What I expect from the policymakers in Malawi is not an insatiable appetite to globe-trot in the name of bringing the investors who at the end of the day simply import mediocre stuff some of which are products that are abundant in Malawi, but a deliberate policy of supporting the Malawian potential industrialists to compete with the rest of the continent. Malawians are able to produce enough of these items to service the economy. Even those items not being produced locally are not essential products that Malawi cannot do without. There are a lot of trees and bamboos all over Malawi that can be used to produce toothpicks if they are so important to Malawians.
The total exports recorded in the quarterly report were a mere $153 million which is quarter of the value of imports. This means that Malawi’s balance of trade is negative. A negative balance of trade is when a country imports more than it exports. This trade balance influences the Malawi kwacha’s exchange rates through its effect on the supply and demand for foreign exchange. Malawi, by importing more than it exports, induces a relatively less demand for its currency, leading to the Malawi kwacha to depreciate. These unnecessary imports are adding enormous pressure on the currency.
The pressure on the kwacha at the foreign exchange market will increase and its value will continue to depreciate if the authorities do not take the bull by the horns and apply practical measures not textbook and ‘Sunday Coaches’ type of economic advice. The kwacha is already exchanging at K974.84 to the pound and K646.50 to the dollar. At these current exchange rates, no local industry will survive and the economy will worsen because the Malawian economy is not export-driven due to the prohibitive interest rates and RBM’s religious devotion to tight monetary policy.
You see, the loss of value of a local currency is only beneficial to an export-driven economy. Unfortunately, this country is not. It is an import-obsessed society. The only way to turn this economy into an export-driven economy is to have leaders who will make it a choice to make Malawi productive and that will happen by decisive action by leaders who will change the economy’s structure, resuscitate local manufacturing and expand job creation for the local Malawian.
Why should Malawi keep allocating scarce foreign exchange to gondolosi and tomato importers when huge amounts of tomatoes of comparable quality produced by poor hardworking local farmers are wasted, and farmers are falling deeper into poverty while policymakers export their jobs and income to foreign economies?
In addition, most of these investors are actually tax avoiders and even tax evaders who collude with revenue officials and exploit their political power to muscle their way into waivers and concessions, thereby denying this country the much-needed revenue for development. What we need in Malawi are not importers of everything but entrepreneurs who can create local industries and politicians who can to protect the jobs and incomes of local farmers and boost local production.
Let us stop this nonsense of believing that Malawi will grow economically by importing anything and everything.
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