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Thinking Development

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By Christopher Guta, PhD:

Today’s episode is on technical change, one of the seven issues at the centre of thoughts on development which I flagged in the episode that appeared on May 25 2019. In the last two episodes, I shared thoughts on the need for a long term vision and the centrality of entrepreneurship to development. The next episode will attend to social change.

In 2004, Professor Emeritus Chinyamata Chipeta and Mjedo Mkandawire co-authored a report commissioned by the African Economic Research Consortium. In the report, the two senior citizens made a great effort on explaining Malawi’s economic growth performance between 1965 and 1997. Two factors they found to have explanatory power with respect to Malawi’s pattern of economic growth in that period were the amount of physical capital per worker and what Chipeta and Mkandawire, as many economists before them did, referred to as the ‘residual’.

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It was the American economist named Robert Solow who, finding no explanation for economic growth that occurred in America in the period after World War 2 beyond capital and labour, coined the term ‘residual’. Solow noted that the actual economic growth in America, and the development that often accompanies growth, could not have come only from the contribution of capital and labour, the traditional factors of growth. Economists now share the understanding that the unexplained growth was not a case of ‘manna from heaven’. It, in fact, was coming from technical change.

In business, investors always seek entrepreneurial opportunities that have a positive return to investment. In a national economy, a positive economic growth rate represents a positive return to national productive efforts. Economic activities that have the characteristic of increasing returns as opposed to decreasing returns propel the economy forward. Technical change is at the heart of economic activities that benefit from increasing returns because, when technical change is in play, it is possible to increase the level of output from the same amount of inputs.

It is surprising that Chipeta and Mkandawire found that economic growth in Malawi, measured as output per worker, ‘rose rapidly between 1965 and1969, decreased but remained high between 1970 and 1979, was negative between 1980 and 1989 and became progressively negative from 1990 to 1997’. Why? Because that was also the pattern for technical change.

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That is how important technical change is for Malawi’s development. The question then is, what propositions in the Democratic Progressive Party (DPP) manifesto give confidence that Malawi will, in the next five years, have a sizeable deposit of technical change with respect to economic activities in agriculture, industry and services – the three pivotal sectors of the economy? I will be partisan by isolating what the manifesto says regarding biofuels as a sub-sector in which Malawi has capabilities.

Just as the Malawi Congress Party under the first Ngwazi, the DPP recognises that Malawi’s ‘over-dependency on imported petroleum products which is [sic] prone to geo-political conditions and drains forex’ is a challenge to the country’s energy security. While the overarching propositions propelling actions going forward focus on generating more energy from diversified sources, the DPP has also committed itself to ‘promote production and use of bio-ethanol and biodiesel for blending and stand-alone use in vehicles’. Tenacious implementation of this proposition can benefit from the transformational advantages of biofuels. I expand on two of these advantages below.

First, biofuels link agriculture to industrial manufacturing. Believe me, if a country’s agriculture is not purposefully linked to industrial manufacturing, its economy can hardly benefit from increasing returns to resources. Promoting production and use of bioethanol will incentivise production of sugarcane, thereby creating jobs in the rural areas of Malawi. Come to Mwitha Village at Dyeratu in Chikwawa District and see Chisanja Farm, where 100 hectares of land that was lying idle for most of the year is now producing sugarcane which is used for commercial purposes.

Second, production of biofuels, especially biodiesel, will enable alternative uses of more idle land and that can be truly transformational. The late Professor Mathews Chikaonda and I visited a bio-refinery in Italy in 2015. The bio-refinery produces biodiesel from any plant material using ‘catalytic cracking’ technology. This technology separates the carbon, hydrogen and oxygen in the plant material and recombines the atoms to produce synthetic biodiesel. The biodiesel so produced is in high demand by shipping liner companies that are increasingly required to use renewable fuels as they ship goods across the world. A niche market currently exploited by a few countries. Fortune does not only favour a prepared firm or company, it also favours a prepared country!

I will end with the thought that it is not Malawi that is poor. Rather, it is the people of Malawi that are poor. Professor Emeritus Peter Mwanza and I put this thought in the Foreword to Malawi’s second Science and Technology Policy published in 2002. I think it remains true today.

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