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For SDGs, Malawi should stem capital flight, abuse

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In 2008, Tereza Gwaza returned to primary school where she had dropped out six years earlier because of pregnancy.

Out of school, she went on to bear two children.

At the time this reporter first found her in her village in Zomba, Tereza, then 21 years old, had just enrolled back in Standard 6 at Namiwawa Primary School.

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Among her schoolmates was her first born daughter, the very reason she dropped out of school in 2002.

The child was in Standard One.

In 2011, when we followed her up, Tereza was in Form One at Namisonga Community Day Secondary School which is located not too far away from her home in Misuku II village in Traditional Authority Mwambo’s area.

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She admitted it had been tough going especially because of the ultra-poverty in her home which was being headed by her widowed and jobless mother.

“It’s hard to look after my two children on my own,” she told this reporter.

But she was undaunted in her desire to continue with school.

“It’s about the future now, especially that of my children. They will suffer if I don’t get proper education,” she said.

In returning to school, Tereza had actualised one of the targets set in the Millennium Development Goals (MDGs) to ensure that women are adequately empowered and have tools to fight poverty.

But one thing which the MDGs, launched two years before Tereza dropped out of school, did not do is to address the wracking poverty in her home.

Tereza’s life back in school and that of her two daughters depended so much on their being able to find food, clothes and other needs at home.

It was not surprising therefore that she dropped out of the secondary school also.

Unable to look after her children, she went into marriage and with that, the MDG goal to make her an independent and empowered woman came crashing down.

This is the challenge the MDGs have come to face. They have targeted some issues but they have, in certain respects, failed to decisively deal with why some of those issues happen.

Apparently, the post-2015 Sustainable Development Goals (SDGs) are fashioned to deal with the fundamentals also through increased funding, among others.

Which is why the Third International Conference on Financing for Development will inspire hope among the least developed countries.

Opening the conference on Monday in Addis Ababa, Ethiopia, United Nations Secretary General Ban Ki-moon called for “a reboot” of development finance for the 17 SDGs to be launched in September.

“You have recognised that in a world in which both the global population and resource constraints are growing, development finance needs a reboot,” Ban told the conference.

“…Without resources, commitments will amount to little more than promises on paper,” he is quoted by the UN News Centre as saying.

Out of the conference will come an “ambitious financing framework”.

According to the UN News Centre, among others, the document includes a financing package for least developed countries and a commitment for wealthy nations to increase official development assistance.

It also calls “for greater international cooperation in tax matters to stem the tide of illicit financial flows” and a great sense of responsibility by power holders.

That is, Malawi and other countries have every reason to look up to this conference for their stronger muscles to achieve desired development levels as set in the highly ambitious SDGs.

But it has to be said that Malawi’s failure to get the Tereza Gwazas, their mothers and their children out of poverty is not entirely down to lack of money. It is also significantly down to abuse of it and the country’s failure to curb the malpractices.

Latest estimates by the US-based Global Financial Integrity (GIF) show that Malawi, one of the poorest in the world and perpetually struggling to finance its public services, lost up to US$5.8 billion (about K2.5 trillion) between 2003 and 2012 through illicit financial flows (IFFs).

The estimates show that Malawi was bled larger sums between 2008 and 2012 with figures ranging between US$552 million and US$1 billion.

A study on Malawi’s health sector financing which was published in Malawi Medical Journal of September 2014 says the country spends about US$170 million on health each year and donors contribute around US$250 million for the sector.

According to the study, this funding, combined, falls short of the US$ 530 million which Malawi requires to provide minimum heath package.

At the same time, the analysis shows that each year US$275 million of government revenue is lost in the form of potential taxes on flows of capital out of the country.

And an additional US$117 million is also foregone due to tax lost through tax incentives.

“If these flows could be curtailed and tax incentives reduced, the country could pay for the minimal health package with domestically-mobilised resources,” says the study titled ‘Health spending, illicit financial flows and tax incentives in Malawi’.

The analysis says this would have the advantage of decreasing Malawi’s reliance “on unpredictable donor pledges and would help with health systems planning”.

And, as if capital flight and too generous tax measures are not bleeding the country enough, even the little that remains in public coffers is stolen by officers whose task is essentially to ensure that the money is spent in taking Malawians out of their many troubles.

Speaking to Malawi News last month, spokesperson for the Financial Intelligence Unit (FIU) Masautso Ebere admitted that the problem of illicit financial flows is rampant and it is affecting the country’s development.

“The problem is that this is done by persons who are selfish-minded and destructive…. Malawi, like all other countries, has failed to achieve some developmental milestones because of IFFs [illict financial flows],” he said.

Ebere said while Malawi has policies and institutions in place to curb illicit financial flows, the policies may have loopholes.

Asked whether FIU is up to the challenge then of stopping these illegal dealings, he said the unit has well-trained staff and good coordination with law enforcement agencies and other international FIUs.

But he added there is more that has to be done to curb malpractices such as money laundering which are haemorrhaging the country of the resources it so badly needs to fund its development.

Thus, alongside weak measures in generating resources domestically, the challenge of abuse of public money and illicit financial flows stare Malawi’s drive to meet the SDGs straight in the face.

If the country is ambitious to deliver on the equally ambitious SDGs, then it will also have to have an even higher ambition and take uncompromising action to rein in on wastage of money from donors and from within.

In his address, Ban urged:

“Let us put aside what divides us and overcome narrow self-interest in favour of working together for the common well-being of humanity.

“Let us build on our shared vision of a sustainable world free from poverty and deliver a transformative outcome here in Addis.”

It is either that or, years after the SDGs have expired in 2030, Malawi will look back with rancour for failing to offer millions of its Tereza Gwazas, their mothers and their children a better life.

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