By Christopher Guta, PhD:
I took time in the week to read the Budget Statement presented by Honourable Joseph Mwanamvekha, MP and Minister of Finance, Economic Planning and Development, in Parliament on September 9 2019. My immediate interest was to find out what the budget meant with respect to the five sectors that are the clear winners in terms of their share of the national cake. As a reminder, the winners were education, agriculture, health, transport and energy in that order.
While the actual ball pack allocations were interesting, the more noteworthy observations I made were the dynamics represented by the different rates of growth in the allocations. As we all know, education has the biggest share of the national budget. However, it is not the sector with the highest growth rate. The winning sector with respect to growth is energy and mining where the allocation has grown by 84.3 percent. The allocation to education, which has grown by 21.5 percent, is second winner in this regard. Health, agriculture and transport – whose shares have grown by 12.6, 11.3 and 6.6 percent respectively – are third, fourth and fifth winners. I will discuss the top three winners from an allocation growth perspective, namely energy, education and agriculture.
A starting point in my understanding of the dynamics in the budget is that in totality, the allocations are consistent with the Malawi Growth and Development Strategy III which designated the five winning sectors in the 2019/2020 budget as the key priority areas. From policy coherence perspective, the budget passes my acid test. That energy and mining has the highest growth rate indicates realisation of the urgency with which Malawi needs to address the power shortage problem that is contributing to low productivity in all sectors of the economy. Energy underpins the provision of clean water by our water utility companies and pumping of riverine and groundwater for irrigation. It also facilitates provision of health services by enabling preservation of vaccines, sterilisation of medical equipment and use of X-ray machines in our hospitals.
The communication networks provided by TNM and Airtel are forced by persistent power cuts to use expensive own generated power from diesel to maintain connectivity, thereby contributing to making the service costly to consumers who bear the effects of these inefficiencies. I, thus, subscribe to the lamentations over the budget expressed by the Malawi Confederation of Chambers of Commerce and Industry who note with respect to telecommunications that ‘the cost, relatively to quality, is not commensurate’.
Among the issues delaying exploitation of Malawi’s bauxite resources at Mulanje Mountain, a sleeping potential for new sources of growth, is our short supply of energy. The budget statement gives an indication that government is acutely aware of the need for diversity of energy sources as a basis for energy security. This emerges from the promise that efforts will be made to diversify the sources of energy ‘away from hydro to others such as coal, solar and wind’. That said, however, there was little attention, if any, paid to liquid fuels as a source of energy. My concern in this regard is the complete neglect of fuel ethanol as Malawi’s alternative and renewable source of energy.
The allocation to education, the second winner regarding growth of the allocations, appears to be responding to the need for Malawi to improve physical capital per worker as it relates to the construction of required infrastructure at all levels of the education system. Of note from a science, technology and innovation perspective is the promise to construct science laboratories and the undertaking to improve the quality of science and mathematics instruction in community day secondary schools. I wished the minister made a statement on the resource efficiency in the education sector. For all I know, the nation is concerned about the very restrictive nature of the education system arising from low enrolment ratios at all levels. On the positive side, however, is the increasing allocation for student loans at tertiary level which should contribute to addressing the elitist nature of Malawi’s education system.
The allocation to agriculture indicates a willingness to support diversification of exportable commodities away from tobacco, sugar and tea given the significant allocations for the Shire Valley Transformation Project and Agriculture Commercialisation Project of K18.9 billion and K13.1 billion respectively. The Agriculture Commercialization Project represents an exciting proposition which can contribute to reducing the volatility in national economic growth which the Minister of Finance, like Mbane Ngwira who I featured on this column last week, attributes to variability of weather. However, there is a fundamental explanation beyond weather variability for volatility of Malawi’s economic growth which I will attend to in next week’s entry. It will be related to my other point of concern regarding the budget statement: the low focus on manufacturing.