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Thinking Development

By Christopher Guta, PhD

I had a ‘I thought so’ moment this week with respect to Malawi’s development performance. It came through an article by Orama Chiphwanya in The Nation of 11 September which reported that Malawi’s GDP per capita has been stagnant since 1980.

Hats off to Chiphwanya for obtaining from three knowledgeable sources information that made the article tasty to read. First was Mbane Ngwira, Reserve Bank of Malawi’s spokesperson who attributed the stagnation to poor performance of agriculture on account of weather. Mbane is said to have attributed volatility of exchange rates, interest rates, reduction in private sector credit and increase in public debt to dormancy of the agriculture sector.

The second source was Professor Ben Kalua of Chancellor College who, in short, attributed stagnation to failure by leaders to generate, articulate and disseminate knowledge that would help the country ‘jump out of the box’ regarding drivers of economic performance.

Kalua reminded me of the definition of madness when he is quoted as having said: “We have heavily depended on the same resources and kind of thinking to bring change.”

The third source was the African Development Bank who attributed stagnation to low levels of public investment. To this end, the African Development Bank recommends that Malawi should double public investment in the next five years in order to “generate an average real GDP growth rate of 6.8 percent in the short to medium term”.

The assertion that Malawi’s stagnation dates back to 1980 resonates with the analysis by Professor Emeritus Chipeta and Mjedo Mkandawire. These sons of the land decomposed Malawi’s growth accounting and demonstrated that Malawi’s economy had a boom phase between 1960 and 1979. This was followed by a bust phase from 1980 onwards. My thinking on development today is premised on three of the four factors accounting for the boom and bust which embed the recommendation from African Development Bank for Malawi to increase public investment.

The first factor was GDP per worker. Compared with GDP per capita, GDP per worker focuses on productivity by indicating output from those in employment. Growth in this indicator peaked at 5.1 percent in the period 1965 – 1969. It declined thereafter to register negative rates from 1980 onwards, at least up to 1997 when the seven-year average was minus 1.8 percent. The bad news is that World Bank data shows that, in 2018, Malawi’s GDP per worker, at $2,701 was the lowest in Sadc. Mauritius’ was highest a $47,244. It is, thus, not surprising that Mauritius GDP per capital has grown rapidly during the period 1980 – 2019 while that of Malawi has stagnated. Malawi is performing poorly in Sadc region from a productivity perspective.

The second factor in physical capital per worker which is a measure of physical artefacts such as machinery, buildings and computers that are at the disposal of workers. In other words, the resources available for production of goods and services. True to type, growth in this measure peaked in the period 1975-1979 and, by the period 1990-1997, it was minus 0.6 percent. I recently compared China and Africa on a related measure – gross fixed capital formation. My finding was that while China’s per capita investment grew in the period 2007 to 2017, Africa’s performance was stagnant. I would be pleased to find out that Malawi did better than the rest of Africa on this score.

The last factor I will address is education per worker. The pattern is the same. Malawi’s growth performance peaked at 0.3 percent in the period 1970-1979. There was no spectacular change in the growth patterns up to 1997. My suspicion is that performance on this factor to-date has not been any better.

What these indicators are saying is that, after independence, Malawi did its best regarding investment in critical resources for development until 1979. Thereafter, performance has been lukewarm. That our GDP has been stagnant since 1980 is, therefore, not surprising.

There is, as Ngwira said, a silver lining in the horizon. I would like to hope so, especially following the budget that was presented by the Minister of Finance in Parliament on Monday in which education got the lion’s share of the national budget. Kudos to the minister for prioritising education and allocating significant amounts to transport and energy. I hope that the details in the budget will reflect an ambition to improve physical capital not only in education but also in agriculture and health – the other winners. The extent to which the budget takes us away for the same thinking regarding agriculture as the driver of development can only be judged by looking at what the allocation for agriculture really means. I hope that it will have a focus on irrigation in order to reduce rapidly our dependence on weather, thereby mitigate the factors that Ngwira used to explain our poor performance regarding GDP per capita in the past 39 years.

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