Friday, February 22, 2013

Dont let IMF dictate policy, we have ourselves to blame for not leading

IMF’s Christine Lagarde was in the country last week, in what I call a moral support mission. Her trip has also taken her to some African countries. In all her travels, she has commended countries that have taken liberal economic reforms such devaluation and removal of subsidies. In the country, the media has been awash with various commentaries, mostly demonising the IMF for the current mess. Similar sentiments have been echoed in the social media, particularly twitter and facebook. Malawians are quite engaged it appears. But we cannot always blame the IMF for the mess we have found ourselves in. While we are a member of the IMF, we must also remember, that this institution is more concerned with its “bigger” members, the US and Europe, than poverty stricken countries like Malawi, undiplomatic as it appears. That is why its CEO is always European, and its sister agency, the World Bank is always headed by an American. We were not there when they created these institutions at Bretton Woods in New Hampshire, half a century ago. The issue at hand however, is whenever we have an economic crisis, IMF is not always to blame. It is easy to point a finger at the IMF, but in the process we ignore fundamental issues that have led us into an economic abyss. We have to grow and man up and accept responsibility and hold our leaders to account for their actions. In 1992, most of our developing partners withdrew financial support citing human rights violations. The kwacha could not hold for very long, and a huge devaluation followed in 1994. Similarly, in August 1998, another devaluation of around 68% happened. Factors were a mix but human rights violations and misuse of donor funds motivated withdraw of financial support. Remember the story of the Danish and their Danida? Then the rants by President Muluzi at the opening of the Japanese funded Mangochi bridge. The recent devaluation has hallmarks of bad governance effects under the DPP regime. July 20killings, arrests of journalists, procurement of a presidential jet without parliament approval, oppressive laws and the general intolerance of dissent are classic examples. When development partners withdraw such support, devaluation is always a matter of time, no matter how long you fix a currency. Bad governance is not acceptable and in our case, it has historically led to massive devaluations of the currency, given our reliance on foreign aid. The weak export base complicates the problem. We learnt that you can chase tobacco buyers or suspend tobacco sales, but cannot influence the price. So how does IMF come in? I don’t think the IMF has ever had a hand in advising the government of Malawi to enact laws to limit the rights of its citizens. Neither has it ever recommended suppression of free speech. Most of our foreign resources come from bilateral donors who have their own ambassadors in Lilongwe and make their own assessments on matters of good governance, cardinal to the aid they give. We should remind ourselves that all donor inflows are basically foreign tax payers’ money. Specifically, not all foreign tax payers are filthy rich, but folks that simply work hard and value accountability in which public resources are used. It does not require IMF to tell us MPs do not need an allowance for simply sitting in parliament, yet they have a salary and a subsistence allowance while away from their homes. Such resources can be channelled to developing new energy sources or equipping empty pharmacies in public health facilities. What does this lead us to? While the IMF is often an easy target, we usually forget that it never participates in elections. Neither does it involve itself in electing leaders that run this country. Malawians elect leaders to govern, and are ideally expected to lead this country to some level of prosperity. Instead of turning our anger on the IMF, I reckon it is important that we focus our attention on elected political leaders or those that aspire for public office. Malawi’s rank on ease of doing business index is 129 out of 144 countries. If we are to have a readily available supply of forex, instead of blaming the IMF, we need to work our way up to become a major destination for doing business. The onus is on our political leadership to not only think, but act strategically beyond their political life span. We cannot point our fingers at the IMF for hourly power cuts that scare away potential investors capable of producing for the export market. Neither can we point a finger at the IMF for shady mining deals that are costing us much needed foreign exchange. Similarly we cannot point a finger at the IMF for a financial system that is not easy for tourists to easily transact and eventually keeps them away. It is not the mandate of the IMF to ensure that all Malawian kids have a good education irrespective of the financial status of their parents. It will not require the IMF to reform our public service to effectively deliver and reduce costs of doing business. Consider some of the most incompetent public institutions, the Road Traffic Department. It takes over 5 months to get a registration to run a car hire business unless you corrupt a few guys. Similarly, it will take many months to renew a driver’s license unless you pay a bribe. Consider the case of another world class incompetent institution, ESCOM. It takes over a year, unless you pay a bribe, to have a property connected to electricity even when the electric pole is a few meters away. The level of corruption remains appalling. Such are simple examples but if you factor in productivity losses by businesses, it makes Malawi a costly destination to do business, unattractive to be precise. Consequently, we are losing out on all potential foreign capital inflows needed to drive exports from non-traditional sources. And blame IMF? IMF is not responsible for the mess we are in, but I still don’t believe their textbook experiments. While it is fashionable to make them an easy target, it is important that leadership of the country is responsible for governing . Like we discussed a week ago, our issues revolve around strong political will to take brave decisions. IMF should follow our agenda, we are a sovereign member state.

Malawians are not lazy as portlayed

In a Johannesburg suburb, some years ago I tumbled on a community newspaper. Curiously I checked the classified adverts section and found something interesting, mind breaking for a less travelled freak like me then. Prospective employers were looking for gardeners, security guards as well cooks or child minders and something like that. More interesting was the fact Malawians were being greatly sought in such jobs yet branded lazy recently in their own turf. Maybe prophets have no honor amongst their peers, I doubt though. Greeks and Macedonians still fight over the origins of Alexander The Great. I suspect he remains a Molele myth of Thyolo highlands like the Kahuna. Naturally an employer looks for a hard working, honest and those that abide by the rules. It’s that that simple. I was amazed, but not surprised, even though if I put aside any element of nationalistic bias of any citizen. Some bluff as you would call it anyway. Some few days ago, based on some media reports, a well politically schooled dinosaur raised some laziness issues based on so called undeserved perennial French leave questions. The tirade goes like most of us are lazy; hence bear unquestionable responsibility about the state of this God loving country, despite manifestos of all forty six kangaroo policy political parties. Malawi has hallmarks of poverty ridden country despite its corruptly few, but unexplained riches of its aristocracy. That we farm for three months or thereabouts reminds me of winter crop estimates that the farming ministry goes to town about, when, and if suits them. Funny enough, a walk or a drive along M1, despite the state of your car, Mercedes or better than walking tin on public rubber, I often see fruits of some hard work, not laziness, and abuse of a social contract. Put it simple, I often see women with babies and their partners, on their backs at Jenda, Lizulu, Dedza and other places along the M1 road all year around for 24hours selling fruits of their hard work and expecting more from their elected leaders that doesn’t come. Well rounded Malawians will take some recourse in any form of local adages like the “mudya nyemba and mtaya makoko” stuff to ignore, apparently at their own peril, the arrogance that publically elected leaders bring to define laziness. All I know is that the economy of this country is agriculture based, precisely run by the so called lazy citizens that continue to pay taxes to finance corrupt behaviours of privileged cats that drain our health system of its limited resources for their demise at some mzansi expensive clinic for their cool cat funerals, an obsession of some bat brained Kenyan legislators. It is quite easy to think that most Malawians are lazy, but soberly difficult to collaborate a diaspora line of our citizens being jealously sought after, in this narrate. It is not surprising that most of our folks, unskilled, but full of determination are being sought after to work in some of the countries around us. What work do they do there any way? Some basic stuff that they can do here but apparently our systems have grown at the pace of some hard steel. Our national censuses have shown that rural-urban migration is increasing at a very fast rate yet key decision markets thins a census is a mere NSO decade undertaking. Our quota wars in the University bear enough testimony for education cravings, yet we fund special undefined activities to some astronomical figures in the budget. Some anecdotal evidence points to the fact Malawi is one of the most urbanizing countries in the world. Such a story is collaborated by most of our people leaving rural areas for the cities in search of opportunities. While it is not the job of government to employ, Capital Hill bears a lot of responsibility in creating such an enabling environment such as infrastructure. If takes a decade to construct a 101 Karonga-Chitipa road, yet Admarc trucks can move tones of maize year in and out from Chitipa, grown by a lazy farmer at the expense of the tax payer, lazy on the same line. Arrogance is a simple concept I think but you know why. While primary schools had some lessons in handicrafts such as making hoes or axes, I don’t think it condemns Malawians to four month farming. Irrigation farming is not new. The folks at Likangala, Limphasa, Hara and Lufira with the golden Taiwan, the legacy that lives on, are prime cases of perennial rural hard-workers existing in this country and taking care of their lives while politicians preach some rhetoric, glorifying undue old fashioned successes. The spirit of entrepreneurism is vivid and well sunk in the average person that is not abusing the privilege of being in control of tax payers money. I don’t think anyone should preach success simply because they have had a privileged position of allocating themselves undue wealth at the expense of public trust. Unless we stop, doubtful in contemporary circumstances, elected public figures and their surrogates from stealing public funds, all talk about raising living standards is nothing but old colonial school colonial talk under the skin of the guy next door. We are not lazy but deserve more. Now if we are to make our labour force productive, a few basics. Being agrarian economy, I think it is important we position ourselves to encourage investment in value adding activities. But this can only work, partly if cheap finance is accessible to able entrepreneurs and not political sophomores aligned with a powerful dude whose obsession is with a next election. If roads to rural Malawi remain cheap budget talk, our citizens are tired of the fertilizer subsidy even though the school curriculum defines agriculture as crop growing for food and enjoyment. If you can cant access markets because Admarc resources have been allocated to some secret non-agricultural vote, the arrogance of calling each one of use lazy becomes a concocted norm, unfortunately not the reality of common sense.

The Malawi Diaspora prefers informal channels, banks are just too uncompetitive

Over the years various governments and international institutions have recognised the role diaspora citizens play in developing their home countries. Put it simply, nationals working overseas do regularly remit funds to their families back home. Malawi is no exception. Philippines is well renowned for its diaspora community to the extent remittances constitute over half of GDP. A proliferation of the money transfer businesses across the country, particularly Western Union and Money Gram is a great sign funds are coming in the country. Government recently established a diaspora desk in its Foreign Affairs Ministry, though the venture remains unfunded to-date. Nonetheless, it is a candid recognition that Malawian citizens beyond the border, irrespective of their jobs, are a critical aspect, particularly in addressing foreign exchange shortages. With tobacco revenues, fast a thing of the past, the Malawian diaspora is infact our export of labour. Bankers have also recognised the diaspora as a key player in their business. Former Reserve Bank Governor made some visits to some countries abroad and met Malawians. The gist of Ligoya’s meetings were to encourage Malawians living abroad to open foreign currency denominated accounts in Malawian banks. To make issues attractive, RBM relaxed some controls to the extent holders of foreign currency accounts can withdraw their money in a currency of their account and not necessary the kwacha equivalent. Standard Bank Malawi bankers too joined the fray and went abroad to market foreign currency accounts to citizens living overseas. One is not sure the impact of such efforts with respect to a surge in foreign currency denominated accounts. There are a number of issues our diaspora community struggles with. Nonetheless there is a lot of money coming into the country, but outside the banking system. It remains crude reasoning that people will open foreign accounts simply because they are Malawians or better citizens. Other factors are considered such as interest rates on offer and the expected return on their money. Usually, the people we are encouraging to open foreign currency our accounts in our banks have alternative banks wherever they are. Rationally, their funds will be put in a bank or a country where it earns more interest, and easily accessible. Nationalism is not a factor and therefore foolhardily to use it as a tool to woo potential clients to transact in uncompetitive foreign currency products. The world has become so global and everyone is looking for a bargain somewhere, not necessarily their country of origin. Currently no bank offers more that 2% on foreign currency accounts in this country. Now consider the way banks transact their international business. All banks have various foreign currency accounts with their correspondent banks all over the world. Usually the foreign currency expected from diaspora citizens is held in such accounts where our banks earn more with respect to interest rates. Rationally it makes sense for a Malawian diaspora in Australia to keep their money in Sydney where some Malawian bank has an account, and both earn a higher rate. It doesn’t make sense to let a local finance institution bank on your behalf in a competitive market and pay you peanuts in return. In the same way banks behave, individual persons act similarly, rationally to be precise. Sometimes we need not be surprised that despite calls to encourage our diaspora to open accounts, responses remain lukewarm given the uncompetitive nature of foreign currency banking in our institutions and the tedious processes of opening such accounts to existing customers. Informal channels of money transfer have increased as a result of the way the banking system operates. It is an open secret that people make arrangements to procure goods and services overseas using their diaspora networks and simply transfer cash to family member or friends. For instance a Malawian in London might simply purchase equipment on behalf of a friend in Lilongwe at their own agreed exchange rate. The person in Lilongwe simply gives kwachas to a family member or relation within town. Goods arrive from the UK and duty is paid at Mwanza, and the deal is done. The Malawi banking system consequently looses out on forex simple. It is norm of transacting to avoid the uncompetitive rates currently on offer. And recently, Minister of Information went all over town schooling us on the importance of information technology in national development. Now I find such talk very cheap particularly with respect to issues of the diaspora as potential sources of foreign exchange. No government business is transacted online at this stage, a loss of foreign exchange to the guy on the street. Just a few examples. For instance, if diaspora citizens can pay for certain services online such as driving licenses, utility connections among others through various credit cards linked to Malawian banks, forex would find its way into our official system, not informal channels as the example I narrate above. Otherwise public offices are more than happy for someone to travel from London and queue to pay some kwacha. Banks are also part of the equation in the way they deliver some of their services. All Malawian banks up to this day do not have a facility where an existing customer can open an account online. I am talking about clients that have accounts and have been identified through all the screening that comes with opening a first account. Such clients are known by the bank and some even use their internet banking facilities. If they are in the diaspora, and intend to open foreign currency accounts, our banks expect them to print some PDF forms, ink filled, scanned and emailed to some manager that will take days before attending to them and weeks before an account is opened. It’s a long process but can be made efficient if technology is properly embraced and old habits of paperwork are thrown into the bin. Potential clients of such accounts have no reason to open the not only uncompetitive foreign currency accounts, but also avoid a tedious archaic application process. Otherwise the Malawian diaspora is remitting money in this country on a daily basis, unfortunately outside the banking system.