Devaluation of the Malawi Kwacha - what is the way forward?

The Reserve Bank of Malawi today, 7 May 2012, announced a 48% devaluation of the Malawi Kwacha (MK) against major trading currencies such as the US Dollar. The US Dollar is now trading at MK252.00. A devaluation will, not on its own, improve the current economic situation, but it is a necessary first step to mop foreign currency from the informal to the formal currency market. Furthermore, a devaluation generally stimulates demand for export oriented production. It not only helps to increase the competitiveness of our exportable products and services but also helps to minimise the demand for imports thereby saving the country the much needed foreign currency.

What is required, therefore, is for the Malawi Government to urgently introduce further measures to promote exports, that is to increase production and value addition to exportable products. In the interim, we can look at further incentives in the tobacco sector, cotton, sugar, tea, coffee and other exportable agricultural products. We can also look at other important agricultural products such as maize, pulses, groundnuts, spices (such paprika) etc. As people are harvesting their crops now, what incentives can we provide in order to turn them into exportable products? For example, I would recommend provision of support to groups of farmers or interested firms for processing and value addition in various agricultural products, through removal of certain duties and taxes on importation of processing and packaging equipment and machinery (all these applying only for export oriented value addition).

We also have a uranium mine in Malawi, which is an export oriented venture - we need to look at what further incentives we can provide to Paladin, the mining company, in order to increase production of the uranium ore to boost our exports. We should discuss with the company to increase its production in order to take advantage of the devaluation that will make Malawi's uranium ore more competitive. A comprehensive assessment of our export potential is urgently needed right now to make use of the 48% currency devaluation.

Malawi has over 50% of its population living below the poverty line equivalent of $1 a day. In this case, the poor will be greatly affected by the current policy decision - they will be more vulnerable to the shock. They need urgent social protection support and so too do the small to medium scale entrepreneurs. To ameliorate the current desperate economic situation in Malawi, the Government ought to provide a mix of interventions. The Government of Malawi is planning to introduce public works programmes, where the people will have an opportunity to work for at least 12 days per month in order to earn a monthly wage. The public works programmes are a very good social protection or safety net measure meant to cushion the poor against the shocks of a devaluation. The devaluation is a shock to the economy in that in the interim it will cause some inflationary pressure on the economy (the prices of goods are generally going to rise due in part to the subsequent increases in interest rates). The social safety nets are therefore a short term mechanisms to help the poor survive the shock. In the long run, Government has to bring in other policy interventions, some of which have been suggested above - and this ought to be treated as a matter of urgency.

As a matter of background, it is important to note that social protection mechanisms are not new in Malawi - they have been there mostly from the 1980s upon adoption of IMF/World Bank structural adjustment programmes (SAPs) to perform the exact function that Government is intending now - to cushion the poor against the structural adjustment shocks. Furthermore, the current devaluation is one of the SAP measures. Historically, Malawi used to rigidly control the value of the MK during the one-party rule of Dr. H. Kamuzu Banda's time until it was floated at the advent of a prulalist democratic system of government in 1994. The Malawi Social Action Fund (World Bank sponsored) was a pinnacle of social protection, which I do not know how successful it is now. But during Bakili Muluzi's tenure as president of the Republic of Malawi (1994-2004), MASAF was a great real success story that was replicated in a number of African countries including Tanzania (TASAF), Zambia (ZAMSIF), Nigeria and other countries. MASAF, designed with assistance from the World Bank, got its lessons from Sri Lanka and Pakistan. By the way, I worked for MASAF then. If it weren't for MASAF, the SAPs which were implemented in full during Muluzi's era, such as privatisation of state assets, some parastatal institutions and businesses; floatation of the Malawi Kwacha; liberalisation of interest rate system; re-organisation of the public service among others, the negative effects of SAPs on the poor would have been worse. President Bingu wa Mutharika the third president of the Republic of Malawi ruled from 2004 to 2012. President Mutharika did not show any keen support of MASAF and therefore re-organised the institution into a decentralisation support mechanism, rendering its impact rather luke-warm and weak. My own view is this that: had Mutharika's government maintained MASAF and complemented it with the successful agriculture subsidy programme, Malawi would have reduced poverty to around 30% and be on track to achieve all the Millennium Development Goals (MDGs), which are due for evaluation in 2015.

By re-introducing the public works programme (which I would suggest, should just mean revival of MASAF in its old form) and continue with the agriculture subsidy programme the current Government will succeed in the shortest period of time where the Mutharika government failed.

With the right mix of interventions, both interim and long term, we will have embarked on the necessary rather painful steps to long term sustainable economic recovery. There is no short-cut to healing a failing economy. The devaluation is a positive first step, but much more needs to be done for the whole economy to be vibrant.

Kennedy Lweya, PhD
Nairobi

Malawi –Tanzania: Lots in Common, Lots to Explore!

Exploring Inter-country Development Opportunities

I am fully in support of the Shire-Zambezi Waterway. I would also like to suggest that Malawi should increase its connectivity or access to the seas by exploring other routes as well. We currently access the Port of Dar Es Salaam via road through the Northern Corridor.

I want to point out that Tanzania is a very good alternative on many issues including our need for access to the sea. Here are a few things that we can consider:

(1) The Tazara (Tanzania-Zambia Railway)
This railway line links Lusaka in Zambia to the port of Dar Es Salaam via Tunduma district in the South of Tanzania.

Tunduma borders Nakonde District in Zambia and Chitipa District in Malawi - it is about 60km from Chitipa and therefore 161km from Karonga (Distance between Chitipa-Karonga is 101km).

We can build a railway line from Karonga to Tundama to connect to the TAZARA railway line (length = 161km). The key benefit of this is that we will have linked ourselves to the Port of Dar Es Salaam. From Karonga to the South of Malawi we will use barges on Lake Malawi.

(2) The Tazama (Tanzania-Zambia Mafuta) Oil pipeline.
The Tazama is a 1,710 kilometre (1,060 miles) long crude oil pipeline from the Single Point Mooring terminal at the outer anchorage of in Dar-es-Salaam, Tanzania, to the TIPER refinery in Dar-es-Salaam and the Indeni refinery in Ndola, Zambia. This pipeline also passes through Tunduma District.

Running alongside or parallel to the proposed railway line from Tunduma to Karonga we can have the oil pipeline.

(3) Electricty Supply
Tanzania and Zambia have an agreement for interconnectivity of electricity between the two countries. The majority of towns in the Southern part of Tanzania are supplied by electricity generated in Zambia - all towns along the Songwe River on the Tanzanian side have access to this power supply. They include: Tunduma, Itumba, Mbozi, Msiya, Ileje and many others. Sister towns on the Malawi side of the Songwe River do not have electricity, yet most of these towns (Kameme, Titi, Ipenza, Mwamkumbwa, Nkhangwa, Ngoya, Kapenda, Ichinga, Ifumbo and many others) do not have electricity. Most of these towns are within 10km from their Tanzanian neighbours only separated by the Songwe River.

(4) Water Supply
I believe that the two countries (Tanzania and Malawi) can also look at prospects for a joint rural water supply programme for their neighbouring towns mentioned above. The Songwe River constitutes an international boundary between the two friendly nations. We can explore the possibility of constructing a dam on the Songwe River to supply portable water to towns along the river.

In terms of socio-economic development, my assessment is that the Tanzanian border towns are growing faster, economically, owing largely to improved infrastructure - roads and electricity.

Culturally, people on both sides of the border are the same - they speak the same languages, Ndali, Lambya, Nyakyusa, Nyiha, Swahili, and Sukwa among others.
This sounds like a vision for Chitipa, but it has wider social, political and economic ramifications for the whole country - Malawi and also for Tanzania.

We need to be progressive!

Kennedy Lweya, PhD
Johannesburg – 10 November 2010

Malawians: Happiest People in Africa?

A recent 2010 Forbes Magazine study has revealed that Malawi tops the list of African countries with the happiest people or simply put, Malawians are the happiest people in Africa. Although Malawi ranks number 63rd on the list of happy countries on the global scale, this is no mean achievement for the landlocked African country located in Southern Africa bordering Mozambique, Zambia and Tanzania.

Furthermore, considering that there are a lot of heavyweights in Africa, such as South Africa, Nigeria, Egypt and Senegal, among others, Malawians can take pride in the fact that economic or geographic size of the country matters less in so far as quality of life is concerned. At the global scale, Denmark is ranked as the number one happy country, and it is followed by a host of other Scandinavian countries. According to Forbes, the five happiest countries in the world - Denmark, Finland, Norway, Sweden and the Netherlands - are all clustered in the same region, and all enjoy high levels of prosperity. The similarity here is that all these high ranked countries are much smaller economies in comparative terms but they continue to outshine the global heavyweights such as the United States of America, Germany, United Kingdom and Japan, among others.

The research on happiness was conducted by researchers at the Gallup World Poll who acknowledged that quantifying happiness isn't an easy task. They conducted the survey among thousands of respondents in 155 countries, between 2005 and 2009, in order to measure two types of well-being - life satisfaction and income. Among others, the researchers found a positive correlation between income and life satisfaction.

Explaining the reasons why Scandinavian countries are doing well, Jim Harter, a chief scientist at Gallup explains: "One theory why is that they have their basic needs taken care of to a higher degree than other countries. When we look at all the data, those basic needs explain the relationship between income and well-being."

What could be contributing to this unprecedented success for Malawi? Good governance; good macro-economic management; relative peace and security, and improved food security are among the key factors that have led to a better quality of life for the majority of Malawians.

First and foremost, Malawi has managed to reduce its level of poverty - people living on less than one US Dollar per day - by over 10 percentage points from over 65 per cent to around 55 per cent in the past 5 years.

Since 1994, after the removal of the one-party dictatorship, Malawi has adopted a new multi-party system of government and a new constitution that enshrines a bill of rights. The two parties that have ruled Government since 1994, the United Democratic Front (UDF) and the Democratic Progressive Party (DPP), have been kept in check from abuse of office by a strong civil society and opposition in Parliament.

The ushering in of a new DPP led government in 2004 has helped to strengthen constitutional democracy in the country. The new Government seems to have learnt some lessons and adopted some best practices from the previous two governments – the Malawi Congress Party (1964 to 1994) and the UDF (1994 to 2004) led governments. In short the new Government has been learning.

What is learning? Learning refers to rigorous activity that increases the capacity and willingness of individuals, groups, organizations and communities to acquire and productively apply new knowledge and skills, to grow and mature and to adapt successfully to changes and challenges.

For instance, ‘An organism is said to have learnt when it has increased its options for applying (to a specific set of circumstances), new or different behaviour which the organism believes will be to its benefit.’

What is a lesson? An experience acquired after a certain event; a learning process; a set of instructions to be put into practice; an event, process or activity that equips one with skills, or an intended product of learning.

For example, two key lessons learnt from the previous governments have been respect for human rights and the rule of law, and zero-tolerance on corruption. The new government has learnt that there are a lot of societal gains in adopting these principles.

What is best practice? A best practice is an idea that asserts that there is a technique, method, process of activity that is more effective. It is a good lesson; a replicable product of what has been learnt; an activity that leaves a lasting impact and the most efficient use of resources, and a model of learning.

Among the best practices, the new government has expanded the pro-poor economic policies started by its predecessor and strengthened macro-economic management policies. For the past five years the country has, inter alia, witnessed a drop in inflation, a steady reduction in lending (interest) rates and a reduction in the country’s debts.

Since independence from Britain, unlike other African countries, Malawi has enjoyed relative calm, peace and security. This has helped the country to spend its limited resources on social and economic services that have impacted positively on the peoples’ lives.

Since 2004, the Malawi Government embarked on a massive agricultural input subsidy programme to promote food security at national and household levels. Through concerted effort involving government systems and the market, the Malawi Government has been able to subsidise and provide wide access to inorganic fertilisers and improved seed varieties to small scale farmers. This has increased the production of maize, the countries staple food crop, to unprecedent levels thereby transforming the country from a food-aid dependent and net importer of food to an exporting country.

Can these strides be sustained? This is the most crucial question that needs to be answered as the country moves forward. At the centre of this success story is visionary leadership, a citizenry that is willing to improve their own well-being, and a government that put the people first in its priorities. Sustainability therefore depends on how the country prepares itself to build on the solid foundation that has been created. It may well be the case that Malawians could continue to lead the pack of the happiest nations in Africa and move up the ladder on the global scale. Only time will tell!

Kennedy Lweya, PhD
Training and Development Consultant
Lubumbashi

Towards Improved Maternal, Newborn and Child Health in Malawi: Community Participation

Establishment of Maternal, Newborn and Child Health Networks (MNCHNs) to enhance community involvement in monitoring and provision of services to improve MNCH.

Introduction
The idea of establishing MNCHNs to enhance community involvement in monitoring and provision of services to improve MNCH is driven by the enormous health needs faced by people of Malawi particularly women and children. Malawi is one of the least developed countries in the world. With a population of about 13 million, the country is faced with serious health challenges - high HIV prevalence (12%), high maternal mortality rate (984/100,000), high fertility rate (6), high infant mortality rate (76/1000) and high child mortality rate (133/1000) (USAID study).

Operationalisation
MNCH services in Malawi are largely provided by the Government followed by faith based organizations under the umbrella of the Christian Health Association of Malawi (CHAM), non-governmental organizations (NGOs) and the private sector. Due to high levels of poverty, budgetary constraints and poor infrastructure such as roads, MNCH services are not widely available and accessible particularly in rural areas. The USAID report also singles out the lack of manpower such as doctors, nurses and other health staff as one of the major constraints to the effective delivery of health services, including MNCH in Malawi. How can this human resource related capacity gap be filled to ensure increased access of MNCH services?

Training of adequately qualified health personnel is very costly and a poor country such as Malawi is likely to lose such personnel as they are attracted to seek better opportunities in industrialized countries. The MNCH services can still be provided with the limited number of health personnel currently working in Malawi only if they are supported by a local robust and functional network of trained traditional leaders and local volunteers. The establishment of MNCHNs is one of the key strategies that can help to address the capacity constraints being currently experienced by the health system in Malawi. Community involvement through MNCHNs would entail the participation of communities, through their community leaders and volunteers in the collection of data and information regarding MNCH. Simple notebooks can be provided to trained community leaders and volunteers to register pregnant mothers, births, sickness and deaths. This information alone, if kept up to date, would go a long way in creating awareness about the enormity of the MNCH needs and therefore direct scarce resources appropriately. The registers can be kept by traditional leaders and be regularly checked and collected by health personnel such as Health Surveillance Assistants (HSAs). In turn HSAs would lodge the data at district level which would then be collated and sent to the national tallying centre.

Similarly, traditional leaders and volunteers can be trained to provide basic immediate MNCH related support to women and children. This way, simple, inexpensive and community owned MNCH support networks would be created in all communities. These networks which would be built on the existing strengths of the extended family networks that already exist in Malawian communities.

Benefits
Through monitoring the MNCHNs would help planners from the Government, donor community, NGOs, private sector and others to have up-to-date statistics that are not only inexpensive to generate but also useful in allocating and prioritizing the scarce resources.

The MNCHNs would help to address the basic health needs of women and children such as provision of basic immediate support in form of advice to pregnant mothers on the need to attend ante-natal and post-natal clinics; support for arranging transportation (ambulance services) as and when needed; provision of health and nutrition advice, family planning, among others.

The MNCHNs would act as easy community entry points for any MNCH interventions that may be planned by the Government and its partners such as donors, NGOs, the private sector and others.

Apart from being cost-effective in the sense that they are easier and cheaper to establish and maintain than building a new hospital for example, the MNCHNs would also be sustainable in that they would be in a position to own the MNCH projects or programmes and ensure their functionality even long after specific NGO interventions or projects have phased out.

Conclusion
The enormity of MNCH challenges in Malawi calls for concerted effort – collaborative effort is required involving the Government, faith based organizations, NGOs, the donor community, the private sector and the community members themselves. By putting resources together to create MNCHNs, these stakeholders will not only create synergy but will also initiate a process that is community generated, driven and owned. At the end of the day, when the lives of mothers and children are saved, the communities will not only say to the various development partners and stakeholders, “thank you for your support” but they will also proudly say, “we did it ourselves” (Lao Tzu).

Kennedy Lweya, PhD
Goma – Eastern Democratic Republic of Congo