AnalysisBusinessin Southern AfricaJust InMalawiOpinion

Malawi: Democracy battle won, but real war is the Economy

LILONGWE July 28 (The Southern African Times) – Malawi swore in new president Lazarus Chakwera on the 28th of June 2020 after a gruelling re-run of a hotly disputed election to unseat former leader Peter Mutharika. Hundreds of people gathered at the Bingu International Convention Centre, in Lilongwe to witness Chakwera take the oath of office.

He made a lot of sweeping promises, as any incoming president is wont to, but what stuck with me was his pledge to develop the country beyond the expectations of Malawians. He implored Malawians to “wake up from their dream to live the dream.” Now, as much a battle of attrition the political victory was, it’s in the economic war where the incoming president will meet his biggest challenge, and will ultimately be judged against.

Located in southern Africa, Malawi is landlocked, sharing its borders with Mozambique, Zambia and Tanzania. According to the 2018 Census, the country has an estimated population of 17.5 million, which is expected to double by 2038. The country ranks among the world’s least developed countries. Its economic performance has historically been constrained by policy inconsistency, macroeconomic instability, poor infrastructure, rampant corruption and poor health and education outcomes that limit labour productivity.

The economy is predominately based on rain-fed agriculture with about 80% of the population living in rural areas and more than half of the population living below the poverty line, dependent primarily on subsistence dwelling. The agriculture segment accounts for about a third of GDP and 80% of export revenues. Tobacco’s performance is indispensable in the sector for short-term growth as it accounts for more than 50% of exports. Malawi seriously needs to diversify away from tobacco to other cash crops and indeed beyond agriculture itself because, in the mean time, this leaves the entire economy susceptible to weather shocks as irrigation is not extensive.

So dire are the Malawi macro-economic fundamentals that the 2018/19 national approved budget of a mere 1.997 billion United States dollars (USD) had to be revised downwards to 1.962 billion dollars as authorities realised revenue targets were going to be missed.

Unfathomable as it sounds, even this sub 2 billion USD national budget is donor funded through grants by western headquartered agencies to the tune of consistently above 50% each preceding year.

Substantial inflows of this economic assistance are from the International Monetary Fund (IMF), the World Bank, and individual donor nations. Donors actually halted direct budget support from 2013 to 2016 because of concerns about corruption and fiscal carelessness causing untold economic damage which culminated in the political unrest and ultimate ousting of former president Mutharika, despite the World Bank resuming budget support in May 2017.

This means the landlocked nation contributes less than half towards fiscal revenue to fund its own needs and at one point the grants were as high as three quarters of the budget! An unsustainable situation for any entity let alone a country.This is the rose garden the newly minted incoming president Chakwera walks into and dares all Malawians to “wake up from their dream to live the dream.”

Barely 24-hours after taking his oath of office, the president rolled out the first batch of ministerial appointments. These were uninspiring to say the least. Key among these nominations was vice president Saulos Chilima being handed the Economic Planning and Development and Public Sector Reforms portfolio. At the risk of passing judgement too early, the appointment of the University of Malawi, Chancellor College, 1994 social science degree graduate does not inspire confidence. It is not his qualifications but that he has held the very same position previously under the administration of former president Peter Mutharika without making any meaningful impact. Old wine in new skin. In any case he has a full vice presidency office to contend with and economic emancipation of Malawi surely does not need split allegiances to politics and to economics at the present moment.

Equally dour are the other cabinet appointments by president Chakwera. The new president announced a 31-member cabinet that included six figures who are related to each other, although not to the president. The new labour and health ministers are brother and sister, while the incoming information minister is the sister-in-law of the new deputy agriculture minister. Chakwera’s former running mate in the 2019 elections, Sidik Mia, will serve as the transport minister while his wife will be the deputy minister for lands. This has brought “widespread concerns” (The Human Rights Defenders Coalition).

The apprehension we all have is not for nepotism’s sake. If related parties are competent at what they do then, by all means, they surely deserve to hold the offices. The fear here is that the president dispensed with meritocracy throwing away expediency for the crass need to politically reward those who contributed, blowing wind into his boat sail and helped him anchor at Malawi Presidency shores.

What the country has going for them is a semblance of strength of local institutions with independence of the judiciary leading the way as they repelled illegal overtures by the losing president Mutharika to illegally keep him in power along with the army which refused to open fire on protestors . On the same ticket is the overwhelming local and international goodwill for the nation to succeed. It also boards well that Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. Although recent increases in domestic borrowing by the last administration (particularly under the portfolio held then by the current vice president) mean that debt servicing from 2016 exceeded the levels prior to HIPC debt relief.

Despite these purple patches, general indications seem not to auger well for the new administration. The lack of budgetary space means the major role for president Chakwera’s cabinet is to please the donors more than it is to improve macro-economic national ratios and fundamentals. This may be the same thing as generally, international donors demand these anyway. But it means the thrust is more on winning outside trust than it is on making local impacts.

Even on this, the first few weeks have shown an administration more focused on rewarding foot soldiers who were in the battle trenches and forgetting the war is nigh not won. The dream may as yet turn out to be an unmitigated nightmare after all if indications on the ground are anything to go by.

ADMIRE MAPARADZA DUBE is a Financial Analyst currently engaged in the United  Kingdom. He has over 17 years experience in this sector covering FMCGS, Agribusiness, Banks and a Tax Authority in four countries spread over three continents.He is a CFA (CHARTERED FINANCIAL ANALYST) Charter holder, Banking degree, MSc Development Finance among other certificates and is a PhD student with London South Bank University (LSBU). He writes analysis pieces on financial matters and the subsequent social impact.

Show More

Related Articles

Back to top button
Close