Soon there will be nothing to steal!
At the rate Malawians entrusted with the public finances are stealing those resources, soon there will be nothing to steal. While those who can steal are busy stealing, our economy is shrinking. The logic is simple, if we continue to steal increasingly every year from an ever-decreasing national purse, soon there will be nothing to steal. An analysis of the figures released by the Reserve Bank of Malawi on January13 2017 shows that Malawi’s economy as measured by gross domestic product (GDP) growth rate has been decreasing over in recent years from 6.2 percent in 2014 to 3.3 percent in 2015 to 2.9 percent in 2016. The growth rate of the economy does not seem to match the rate of reduction in corruption and pilferage in government entities.
The figures on Malawi external trade performance do not give confidence as well. This country has continuously imported more than it has exported. In simple terms, this is the same as a family spending more every year than their income. Malawi’s current account deteriorated by 30 percent from negative K782 million in 2015 to negative K1,022 million in 2016. This is a symptom of a national economic health problem. This is because a nation’s current account is the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers. Imports are not necessarily bad but Malawi is in the magnitude of the deficits and the fact that these imports are mostly financed by borrowing on the domestic markets and hence crowding out private sector players.
In fact, Malawi’s performance is deteriorating not only in agriculture but in manufacturing as well. In the last five years, the contribution of agriculture to the nation’s GDP has been the largest at an average of 29 percent between 2012 and 2016. Despite all the talk about diversification in the economy between 2010 and 2016, the contribution of agriculture to the economy has only decreased by two percentage points. A measure of the economy’s performance in this case can also be determined by the rates of growth in its most important sectors. Unfortunately for Malawi, the growth rates in the agricultural sector have not been encouraging at all. In fact, there has been no growth, the sector has shrunk. The figures by the Reserve Bank of Malawi show that the agricultural sector in Malawi shrunk massively between 2014 and 2016. From a growth rate of 6.3 percent in 2014 to -1.0 percent in 2015 and another -0.10 percent in 2016.
The tough economic environment of the past years, manifesting itself in high inflation rates, high interest rates and the loss of value of the Malawi kwacha has meant that the manufacturing sectors have also suffered. Agriculture and manufacturing have on average contributed close to 40 percent to Malawi’s GDP. The growth rates in Malawi’s manufacturing sectors have also taken a beating in the last three years; manufacturing sector grew by 6.3 percent in 2014 and by only 3.8 percent in 2015 and a miserly two percent in 2016. These figures are not conducive to poverty reduction in any sense. Those in charge of policies and running this currently need to start thinking creatively. Overreliance on rain-fed agriculture and erratic power generation and inconsistent water supply that have characterised Malawi in the last two years will get this country nowhere.
A fall in export growth rates could be a sign of a fall in competitiveness of Malawi’s products. Malawi can only be a serious exporter when it stops exporting on raw and bulky primary products and start adding value to those primary products. This will require Malawian companies to be able to supply at a lower price and outcompete other countries’ manufacturers. This will not happen if corruption is left unchecked since it adds to the costs of production. This will not materialise if Electricity Supply Corporation of Malawi and the water boards continue to treat water as some scarce commodity that needs to be rationed.
It is not only how many trips the Minister of Trade and Industry Joseph Mwanamvekha makes to foreign capitals to attract foreign investors or the number of investment forums that President Peter Mutharika will open in Malawi or indeed the compendium of bankable projects that will move Malawi forward in its industrialisation journey. No! In addition, Malawi needs to interrogate and understand why it is failing to compete with foreign suppliers. An understanding of why products made in Malawi are more expensive than those made in other countries could be the missing ingredient in the recipe. What are we doing about the quality of infrastructure, institutions and production technology in Malawi?
Electricity blackouts and water rationing contribute to higher wages because workers will still be paid for the time that they are not producing anything due to lack of electricity or water. The costs of waste caused by the disruption will be added to the cost of the product and hence pushing the prices up. The additional effect of these disruptions is that labour productivity goes down and the economy will shrink. If we do not decisively deal with these ills including corruption in high places, this economy will deteriorate more! Soon, there will be nothing to steal!
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