Don't Move Mzuni

In a recent news report the Vice Chancellor Professor Landson Mhango is reported as having said that Mzuzu University is not in a hurry to relocate to another campus. This is the right decision although it still begs the question: should the university relocate in the first place?. The model of universities as isolated, elite places that provided all the social facilities to students – accommodation, sports facilities, health and entertain facilities – is no longer valid if it ever was. This is particularly the case for a university like Mzuni which relies on fee paying students. It will serve considerable amounts of resources if it relies on the services that the city of Mzuzu as a whole provides to its citizenry. Students’ fees can then be concentrated on teaching facilities. It is also easier for students to find accommodation within the city and transport than in some isolated campus outisde the city limits. One has only to visit Makerere, Nairobi and Addis to see the advantages of locating the universities within the city and compare the difficulties that isolated Unima or Buanda have. . One can sustain a whole range of night classes and enrol much larger numbers of students in a city university as one is likely to be much less constrained by student housing requirements. What Mzuni ought to be doing now is demanding for more space from the city authorities or government around where it is located now.

Mozambicans and Chinese and Malawi

At recent reception we were pulled aside by a Mozambican journalist who had found out that we were from Malawi. The first quesion he asked was “What is wrong with you Malawians?” The journalist claimed Mozambicans were angry about the attack by Malawi police had attacked a Mozambican police station. He said that the President of Malawi had said nothing about the attack twenty four hours after the incident. We responded that our understanding on the Malawi side is that Malawi President was informed by Mozambican authorities of the incident and that Bingu had been taken by surprise. The time lapse could be explaned by the fact he  wanted to verify what exactly what had happened. Our Mozambican journalist hinted that Mozambicans believed that elements of the Malawi government had supportive of RENAMO had deliberately carried out this act. We suggested that this was unlikely and that this was a border incident involving two remote posts whose occupants probably socialised over the border.

On electricity, the understanding in Mozambique is that Malawi had rejected Mozambique’s offer because Malawi had found alternative sources of energy. We suggested that our understanding was that there were disagreements over tariffs. Our neighbour then suggested that Malawi had also not responded positively to the construction of the Tete link up to the border of Malawi. Again the view was that Malawi was rejecting this extension in preference for its own Shire-Zambezi project over which Mozambicans felt they had not been adequately consulted. We suggested that on Malawi side there have been concerns about delays in the repair of Nacala rail. He said that was partly true because the Nampula province had hitherto been controlled by RENAMO. The good news now was that a company closely allied with President of Mozambique was interested in the project.

A surprising question from our neighbour was why Bingu had returned to Malawi on a different plane from the one he had taken to Maputo. We had no response to that as we had never heard of  the changes in the transport arrangements. .

Our journalist also pointed out that Mozambique left COMESA when Bingu was its Executive Secretary and that there was something to that. This took us by surprise considering (a) that Mozambique left COMESA in 1997 after Bingu had left COMESA and (b) only recently Mozambique, Zambia and COMESA had signed a Memorandum on the Shire-Zambezi project. It is true that there was bad blood between the boss of SADC and Bingu at COMESA and that this had polarised the region, with Mozambique, Namibia and Angola leaning towards SADC.

In general Mozambicans seem to believe that Malawi harbours the same designs for Mozambique as Banda had. They resent Malawi’s designs on the Zambezi without adequate consultation.  We assured our neighbour that there is nothing in Malawi foreign policy towards the Southern African region today that draws on Dr. Banda’s legacy and that we have never heard anything from any Malawi politicians questioning the territorial integrity of Mozambique or seeking to interfere in the internal affairs of the country. Our neighbour suggested that this may be true at the top but that many people in the security services were still closely related to their RENAMO colleagues.  

Mozambicans have their own North/South divide and they seem to be the belief that there was ethnic affinity behind Dr. Banda’s support for RENAMO and that somehow Malawi still favours their “North”. We said we doubted that. There is no history of Malawi favouring any of our neighbour's regions because of ethnic affinity. For one,  the groups that cut across borders with Mozambique – Lomwes, Yaos, Ngonis, Sena - do not form one political block in Malawi that would push Malawi in that direction.

Our neighbour also suggested that Malawi was displaying the same nonchalant attitude towards Mozambique as “Anglophones always to towards Lusophones”.

Mozambicans have never forgiven Dr. Banda who they are convinced was involved in the assassination of their first President.  

Our advice is that Malawi should place Mozambique among the list of its most important countries in diplomatic and economic terms and treat it visibly as such.

Only last week we listened to the ranting and ravings of the Chinese ambassador on Zodiak Radio. The Ambassador was complaining about the ingratitude of Malawi which had allowed its national press to say unfriendly things towards China by its reporting on Chinese immigrants in Malawi in a prejudiced manner and by apparently supporting the Dalai Lama. The Ambassador laid down conditions of friendship that would effectively include muzzling the national press. However the important point here is that Chinese also have unpleasant memory of Malawi. It is doubtful that the ambassador would have spoken with the same tone if the countries involved were Zambia, Tanzania or Zimbabwe which are old friends.

Malawi was among the last of the African countries to abandon Taiwan. And at many international fora Malawi delegation spoke on behalf of the recognition of Taiwan often reading texts that were scripted by the Taiwanese. Malawi were often  followed around by their Taiwanese minders that paid Malawi diplomats lavishly. The Chinese were often heard saying “Malawians have no self-respect and sense of dignity”. It is doubtful that they have changed their attitudes about Malawi so soon. They probably believe our switch was purely mercenary and they thus feel free to respond so angrily and undiplomatically to any sign of ingratitude on our part.

Both stories above remind us how history and institutional memories play an important role in shaping the foreign policies of countries. And it is important that our diplomats bear in mind the histories thay may have shaped the attitudes of our partners  towards us. The impressions they have of us may not be based on facts on the ground today but they definitely shape the diplomatic climate within which Malawi relates to these foes of yesteryear that may not entirely have forgiven, let alone forgotten our sins.

The rare metals anxiety

There is a new battle raging over rare metals. Apparently China produces 95 percent of these metals. Recently China decided to ban export of these metalsThis has stimulated interest in alternative sources of such minerals. An article headlined “Interest in rare earths stimulated by concerns over possible Chinese export curbs” READ MORE..  mentions Malawi as one of the major sources of such metals.


Some years ago Lynas Corporation Ltd acquired rare earths deposit (Kangankunde Carbonatite Complex) located in Balaka. It made some investments but its activities came to a standstill because of legal problems READ MORE. . Now it turns out that China wants to buy Lynas International so as to further corner the rare metals market. The Western countries are not amused. And this is how small countries can easily be pawns in big powers’ games. For Malawi, the point is that we must think strategically if we are not to be simple pawns.

Kayelekera accident

Paladin reports contractor fatality at Malawi uranium mine

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No sooner had we commented on the access road to Kayelekera that we read the following report

JOHANNESBURG (miningweekly.com) – ASX- and TSX-listed uranium miner Paladin Energy on Tuesday reported that a fatality had occurred at the Kayelekera uranium mine, in Malawi, as a result of a motor vehicle incident.

A construction contractor’s work vehicle overturned on a site access road on Monday, killing the driver, who is a Malawi national.

Police and relevant government officials have been informed and investigations were continuing, it said in a statement.

The 3,3-million pounds a year Kayelekera uranium mine was commissioned in January 2009, with production ramp-up beginning late April 2009.

Let's getting moving on rare metals

China, which mines over 95pc of the world’s rare earth minerals, is drawing up plans to prohibit or restrict exports of rare earth metals that are produced only in China and play a vital role in cutting edge technology, from hybrid cars and catalytic converters, to superconductors, and precision-guided weapons. A draft report by China’s Ministry of Industry and Information Technology has called for a total ban on foreign shipments of terbium, dysprosium, yttrium, thulium, and lutetium. Other metals such as neodymium, europium, cerium, and lanthanum will be restricted to a combined export quota of 35,000 tonnes a year, far below global needs. READ MORE

Malawi is reputed to have quite a range of rare metals, especially in Kangalunde READ MORE. We ought to get into action. Only recently there were reports that mining n Kangalunde had been held up for three years over some legal disputes.

Getting ready for mining

By all accounts mining is likely to play an important role in the future of the Malawi economy. This month Malawi will export its first uranium. And only last week there were reports that a South African company is investing US$10 million in a bankable feasibility study that should see Malawi exporting Niobium by 2012 READ MORE.

Government unpreparedness for the Kayelekera was scandalous. A recent report indicates the area is still poorly served in terms of infrastructure: “The narrow, winding road to Kayelekera is mostly unsealed, crossing the North Rukuru and Sere Rivers as it makes its narrow, winding way past numerous scattered villages hugging its edges.” READ MORE. The population in the area has increased dramatically but there are no government social facilities. A doctor comes once a week from Chitipa. According to the Minister Mr. Malunga the government expects the mine to provide the social services.

Although we know that several major mining undertakings are in the pipeline we still have made no visible efforts to build local capacity in form of training local staff in mining engineering.

We have no excuse for being unprepared in the Kanyika and other cases in the pipeline. And we now have a competent man at the helm – Mr. Malunga. He should be able to argue for more resources to a Ministry which will be in charge of a major source of state revenues.

Mzuni freezes out students

One aspect of the ailment of the Malawi education system was revealed by the announcement by Mzuzu University o (MZUNI) that it would not be admitting students for its courses (optometry) generic and bachelor of science (information and communication technology):  READ HERE. The proximate cause for this decision was lack of teachers which in the case of optometry seems to be due to the fact that the only professor in the subject had been elected to the parliament. MZUNI can also  be blamed for initiating courses without much contingency planning.

There is, however, a deeper problem involving a gross misallocation of recourses. Malawi is among African countries with the highest unit cost per student in the tertiary education (See Table Below).  As things stand, we would be better off sending our students to some of neighboring countries. If we sent all our students to Zimbabwe or Nigeria, we would have thrice as many Malawian in tertiary education as we have today. This being a politically implausible solution, the comparison suggests we can do more to lower the costs. One immediate measure we can adopt is stop providing accomodation for third and fourth year students. They will have lived long enough in the town they go to school to find accomodation on their own and it will be a good entry point into the real life they are likely to confront after graduation.

 

Our system of education is inefficient  in the extreme and must be overhauled. We are simply spending too much for the little we are getting. It is unlikely that universities will reform themselves without external pressure from elected bodies.

 

 

Country	US$
Benin	864
Burkina Faso	3,192
Burundi	5,893
Cameroon	864
Central African Republic	864
Chad	1,584
Congo, Dem. Rep of	286
Congo, Rep. of	1,900
Côte d’Ivoire	957
Eritrea	860
Ethiopia	2,016
Gambia, The	1,102
Ghana	1,924
Guinea	615
Kenya	1,508
Lesotho	7,742
Madagascar	588
Malawi	2,533
Mali	836
Mauritania	666
Mozambique	2,244
Niger	1,482
Nigeria	704
Rwanda	1,975
Senegal	2,100
Sierra Leone	816
Sudan	891
Tanzania	1,855
Togo	455
Uganda	570
Zambia	1,827
Zimbabwe	782

The By-election

DPP lost two seats to independents. This must be cause for soul-searching on behalf of the party and its leadership. Immediately after the elections the party responses to the fact that quite a large number of independents had beaten DPP even in areas where the party’s presidential candidate had done well was that it would critically examine the factors behind that. Party officials hinted that they suspected the processes of primaries were flowed and too top down to capture local sensibilities and political realities. This again seems to be the situation in the recent primaries. Not much has happened at the level of national politics or economic performance to suggest a general swing away from Bingu and DPP.

The other striking thing about the result is the deafening silence of UDF. The party was simply nowhere to be seen or heard. Coming after the shocking defeat in the General elections it could be that the party is at a loss. Add on to that the fact that Bakili Muluzi did not provide the usual rallying buffoonery for the party.  The lgee over the results does not speak well of UDF’s future prospects.

Whatever factors lie behind this stunning result, the results raise serious questions about the ideologies, practices and structures of our political parties. Most still  tend          to function as personal fiefdoms or as the ruling party in a  one-party regime They seem to lack mechanisms for consulting with members and for gauging local opinion..

 

The results also clearly indicate that there is no room for complacency in Malawi politics. Malawi voters have demonstrated remarkable political maturity and will simply not vote for an individual because of the colour they carry even if the generally favour that particular party.

One should, of course, qualify the analysis by the fact that one of the constituencies involved is Ndirande – probably the country’s most sophisticated poltical constituency but also the most idosyncratic and unpredicatable. One needs to know more about what were the Ndirande issues during this campign before one can draw nation-wide implications from the results. Similarly for Malawa we need what were the local politics.  Right now our media and its “Gurus”,   fixated as they are with national politics,  are unlikely to shed much light.

For individual MPs, the by-elections must also be a reminder that their own fate  does not entirely depend on Bingu’s support. They must make their own mark in the eyes of their own local constituencies.  Sycomphany and just sitting Phwii in parliament wont help much.

The by-election speaks well of the health of our democratic institutions. Once again, our key institutions seem to have worked well. This is our fourth democratic elections. We have good cause to hope that democratic politics  is entrenched in Malawi.

 The by-election also points to the need to spped up  local government elections. In the absence of such local level democratic institutions, every local grievance will turn national because it also at that level people’s views are given democratic hearing , albeit once every five years.

 

 

Malawi Officials and mining companies

Now that we are entering into the mining Big League we are likely to encounter a whole range of things we may not be familiar with or not are really not ready for. One of these is poaching of expertise by the mining industry from the government. The other more delicate one is the placement of government officials into positions that are likely to be sources of conflict of interest. Take the case Lisungwe Mineral Resources Limited. Its webiste lists three Malawians among its senior management officials. Two of these seem to be still in government and one of them is now the Minister in charge of mining. The company provides the following information on the three:

 

• Wren Banda – Director, was for many years a senior officer in the Geological Survey Department of the Malawi government where he had extensive relevant field experience.
• Grain Malunga - Non-executive director -  graduated in mining geology from the University of Nancy (France) and has held posts as Director of Mines and Principal Secretary in The Ministry for Irrigation and Water Development in Malawi.
• John Nkhoma - Senior geologist - a qualified geologist with a degree from the University if Wales, Aberystwyth and post graduate diplomas and certificates form other universities, joined the team in January 2008. Since 1984 he has been employed by the Malawi government as a geologist, for the last two years as Deputy Commissioner for Mines and Minerals in the Ministry of Energy and Mines.

 

It could be that at the time of taking on these positions none of theese people  were still in government. However the possibility that they might have been suggests a need to look again at our regulations and guidelines. The mining industry can be an extremely corrupting industry and and always needs close regulation by the government. The regulators shoud not be part of the management teams of the mining companies. 

Mozambique: Ngauma Incident to Be Discussed by National Security Council

12 August 200

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Maputo — Malawian President of Malawi, Bingo wa Mutharika, said in Maputo this Tuesday that the recent incident of violence reported in the district of Ngauma, northern province of Niassa, involving Malawian border-guards inside the Mozambique territory would be discussed by his country Security Council. READ MORE

Border incident shortens Bingu's trip to Mozambique?

According to Mozambican papers, Bingu has had to cut short his trip to Mozambique because of the incident in which Malawi police attacked and destroyed a Mozambican police station in the province of Niassa. A headline in Mozambican paper suggested that the incident had overshadowed the visit of the President of Malawi. Bingu is reported to have been “forced ro rush home” to find out more about the about an alleged attack at a police barracks in Malawi,

Local journalists intepreted the absence of President Quebuza at the farewell ceremony as indication of Mozambiqcan displeasure. However the Minister of Foreigm Affairs who stood in for the Present said that the sudden change of schedule had made it imposible for Quebuza to be at the airport.

In an impromptu press conference a few meters from the presidential airplane, Bingo Wa Mutharika, said he decided to return "in a hurry" to consult with with his defense team and find out what happened. “I will return home early because I must also inform Guebuza my brother the results of the information I collect, "said Bingo Mutarika Wa. Bingu who declared the incident "a clear misunderstanding caused by individuals who acted on their own account." He hoped that for his next visit he would have more time to even go fishing. This was intepreted as an attempt to play down the incident and loosen the tension.
The Mozambican Minister of Foreign Affairs, Oldemiro Balo, who replaced the head of state in the farewell ceremony for the President of Malawi, acknowledged that the destruction of the barracks of the Border Guard Force had been the "main event" of the visit of Bingo Wa Mutarika.

"The moment the incident happened was bad, when  the President was here.. but we put it in its proper perspective. It was just an incident," stressed Oldemiro

(Free translation from Portuguese version)

What ever happened to the Caborra Bassa Bill?

As Malawi reels under the incessant power cuts, one of the most urgent investment project must surely be the connection of the Malawi national grid to the Caborra Bassa. The funds are all there . In 2007 the World Bank approved a US$93 million credit July 17 for construction of a transmission line between Mozambique and Malawi, allowing Mozambique's 2,040-MW Cahora Bassa to fulfill a power contract with Malawi. Mozambique's share of the credit was to be US$45 million and would involve installation of a 135-kilometer, 220-kilovolt power line from the Matambo substation to Phombeya in Malawi. On the Malawi side, about 75 kilometers of 220-kilovolt transmission line would be built and a new 220-kilovolt substation installed at Phombeya.

According to a Wendy Hughes, World Bank senior energy specialist and project leader

"The interconnection will allow Malawi to reap the full benefits of membership of the Southern African Power Pool, both to import electricity when necessary, particularly if there's a drought, and also to export any surplus electricity Malawi doesn't use at night-time," said .

And yet in the recent parliament sitting one of the Bills that was not passed was one authorising the government to accept the World Bank loan to finance the interconnection. It will be recalled that last year, the Bill was not passed because the parliament never got around to discussing it after the President suspended it. So what is the reason this time?

We checked around. It now seems that Malawi and Mozambique have yet to agree on terms of the interconnection. Apparently Mozambique still insists that Malawi pay for a fixed amount of power whether or not it actually uses it. Malawi, on the other hand wants (a) to pay only for what it actually uses and (b) to be allowed to also export energy back to Mozambique should she have a surplus. This apparently what agreements between Mozambique and other Southern African Power Pool members specify.

The negotiations go as far back as 2003 and 6 years on there apparently is no agreement. Whatever is holding up the agreement, this goes against the expressed needs for connecting all SADC countries. At present Malawi, Angola and Tanzania are outside the pool READ MORE. For Malawi the delay will further hold back significant investment in mining which depend on availability of electricity. Malawi ought to mobilise its best diplomats and technocrats to engage Mozambique on this crucial issue.

Thinking about Balaka

For some time now, Balaka has been on our minds. No town is slated for such a diverse range of investments as Balaka is in the near future. First and foremost there is US$220 million which is fast tracked by the French cement giant LaFrage so it can begin producing cement this year. . African Cotton Ginning and Textile Manufacturing Company plans to enhance the country’s integrated cotton industry through a US$12 million project that will employ 500 people. Another textile industry investment will come from the Chinese Textile Industry Company which plans to invest US$25 million and create expected to create 1,100 jobs and provide contract farming support to 100,000 cotton farmers in Balaka and parts of Ntcheu areas. And then there is Kangunkunde monazite mine, which is being held up by legal wrangling

Heavy Mineral Sands has earmarked US22 million for Malawi to employ 200 people. All in all we talking about 3000 new jobs. That is likely to change Balaka from what sometimes looks like a sleepy town that lost its direction into a vibrant crossroad town.

All these are private initiatives. What should government do? The recent response to private investment in Kayalekera does not speak well of governments prepapredness in dealing with large investments. The government failed to provide electricity to the mine, to complete road infrastructure in time, to provide rentable housing to the miners etc. In the case of Balaka the Basic infrastructure is there. Balaka is the meeting point of and near to all Malawi’s major transport means. And the first optic fibre ring linking Blantyre and Lilongwe will go via Balaka (and Zomba, Salima, Dedza ). In addition Balaka is connected to the national electricity grid. However, there is still a lot the government can do. Malawi Housing Corporation should consider providing additional housing. The Malawi government could encourage clusters around the textile industry by opening a textile school, encouraging small textile producers in textile manufacture etc attracting other textile related investors to Balaka. But this requires housing, schooling, adequate water and sanitary facilities etc.

NGOs and "sitting allowance" culture

In his blog Dr. Khumbo Kalua recounts a story that is so depressingly familiar. It is an account of the corrupting influences of the aid establishment on many aspects of society. One of the tasks of Dr. Kalua is training Health Surveillance Assistants (HSA’s) in health projects in Malawi. He seems to have vast experience in this kind of work. Apparently the norm in such training courses is to pay participants $7 to cover lunch expenses. Dr. Kalua was to conduct such training in Mangoche where things went awry and turned into what he calls a "disaster".

Everywhere in Africa the donors, especially the NGOs, have nourished the culture of “sitting allowance” paid to induce Africans to attend the endless “workshops” that have become the staple of NGOs. This is supposed to ensure “participation” by the locals. In Malawi people along the lake are more aware of this dark side of “participation” trumpeted by NGOs. So Dr. Kalua was shocked that after carefully explaining to the 20 or so HSAs in Mangochi the importance of training in eye care and after apparently convincing them of the importance of this training, he was confronted with the question: What would be the allowance? He said $7 and all hell broke loose. In his words: “... the whole workshop turned into chaos with the HSA’s threatening to boycott the training and forfeit the highly needed skills if they did not get all their monies .”

The savvy Mangochi HSAs claimed that in order to “ win their favours and loyalty some NGOs pay them an allowance of up to USD 50 per day despite the government lunch allowance being USD 7.” And so they wanted more than the $7 offered.

For most NGOs these lakeshore “Participatory” exercises are ritually included in their budgets and they simply must hold them and have the usual photograph opportunities for the fund-raising exercises.

This debilitating “sitting allowance” culture must be stopped either through self-regulation among NGOs themselves or by law.

A nation of importers and consumers or producers and exporters?

A recent headline in Malawi Times reads: Air Malawi joins S.A shopping festival
The paper reports that Air Malawi, has joined other national careers in the region to ferry their nationals to the Johannesburg Shopping Festival in South Africa at reduced prices. READ MORE

This is a weird role for a national career. Malawi now needs to reduce its importation of consumpion and expand and diversify its export. Air Malawi ought to be flying potentai Malawil exporters to trade fairs or plant and equipment exports or bring in traders to buy Malawian..

Bingu has called for the country to move from a nation of importers and consumers to one of producers and exporters. It is important that this message is understood by all our economic agents. Air Malawi simply doesn't get it.

Third terms

Imagine a country with rich Uranium reserves in the Northern part of the country. It’s growth during the last two decades has been around a remarkable 10 percent under a President who is now serving his second term. He also renegotiated the licence for the uranium mine in his country-s favour. The greater beneficiaries of his development strategy are the peasants among whom he enjoys enormous popularity. His country has enjoyed unparalleled political stability.

The President want to change the consitutional to allow for than two term. He declares a state of emerge, dissolves the constitutional court for ruling three times against his plan and also dissolves parliament, which also opposed him.. This should prepare the way for referendum to change the constitution to him a third a Third term.

The Country is “poverty stricken” and ranked the poorest in the world. Malawi Right? Wrong! Our leaders couldn’t sink to that level of stupidity. This is the sad story about Niger.

The President argues that the referendum is not about the third term but about the appropriateness of the constitution itself. He points out that there is something wrong that has allow him to constitutionally declare a state of emergency! Asked whether he is worried that the AU will be unhappy with his government’s decision, the Prime Minister responds that no one in the AU can teach Niger about democracy and definitely not Nigeria who President’s election was dubious.

Mr. Omar, the communications minister, said Tandja wants to "re-establish full democracy...the people must chose, thank their leaders and also keep in power for long a president of the republic that meets their aspirations."

Mr. Tandja himself has said that the constitutional project would allow him to ensure a three-year transition during which no elections would be held. At the end of the transition, he could seek as many mandates as he wanted.

Already the EU has suspended all aid to Niger.

The country’s fragile stability is threatened.

"The Secretary-General is deeply concerned about the ongoing political and constitutional crisis in Niger, which threatens to destabilize the country and undermine the progress made in recent years to consolidate democratic governance and the rule of law," a spokesman for Ban Ki-moon said in a statement.

The World Bank and this year's budget

One new feature of World Bank involvement in local affairs or what they themselves like to call “openness’s” or “transparency” is the running comments on government policy. A recent example of the this new approach are the comments on the budget. The World Bank country economist Khwima Nthara, while describing the budget as a “bold one”, informs us that the increase of duty on agricultural products may not augur well with principles of liberalisation. At a time when neoliberalism is being buried in the developed countries and at a time when many governments are nationalising banks and industries, subsidising national industries, insisting onthe  reservation of certain large scale projects to national institutions etc Mr. Nthara informs us “The era of protectionism is long gone” . He does not us tell whether the measure is good or bad or will serve the intended purposes of encouraging certain industrial activities but that it does not augur well for an ideology. He then adds that the budget has ignored the consumer: “I would rather buy cheap tea from outside the country than expensive local tea”. It does not occur to Mr. Nthara that most consumers in Malawi are also producers and that more productive farmers (due to subsidies) would rather work and buy the more expensive local tea than be unproductive and rely on crumbs of cheap imported tea. But even more depressing is that Mr. Nthara seems completely unaware that his masters in Washington DC have moved away from their dogmatic opposition to any industrial policy. In World Bank doublespeak one does not, of course, talk about “industrial policy” (that is still off limits) but, as John Page (of the World Bank) now calls it “policies for industrialisation”.

Mr. Nthara praises the budget for not adopting “populist” policies in light of the fact that DPP run a populist campaign. That is a weird observation. Were DPP inclined towards populist policies they would have pursued them BEFORE the election when they needed to woo voters. If any praise must go to DPP it is precisely that they did not go on a "populist" spending binge in the run up to the elections.

To devalue or not devalue: that is the question.

To devalue or not to devalue: that is the question. For years the World Bank and the IMF have simply pushed devaluation to solve balance of payment problems. That has often been too easy an one-size-fits all solution to a complex question. There are often two conflicting objectives around the exchange rate. On the one hand there is the concern for economic stability to encourage investment to ensure economic growth. Devaluations can inject an element of uncertainty in the economy that often discourages investors. This hurts the long term growth prospects of the economy. On the other hand there is the need for flexibility and competitiveness. A stable but overvalued currency will discourage exports while encouraging imports. This may lead to serious balance of payments problems that would, in turn, undermine confidence in the economy and eventually undermine investment.

The President has evoked the “economic stability/investment” argument and we believe he has his priorities right. Experience with the massive devaluations of the 1980s is that they did not lead to the expected export booms and instead simply contributed to great volatility. This undermined investment and destroyed export capacity. Competitiveness based on devaluations is not sustainable and too much focus on manipulating the exchange rate to promote exports may detract attention from the more useful path of gaining competitiveness through improved productivity.

In all this there is the unresolved question in the direction of causation. Is it investment that leads to greater export or is export that stimulates investment? If the former is the case, then Bingu’s point stands and if the latter is true than those arguing for devaluation have a point. Economists are not agreed on this. The best one can say is that the policy makers will have to decide on the basis of what they know to be the causal direction in their respective countries. There does seem, however, to be a strong case for the invest-growth-export sequence. In any case the many drivers of Malawi’s current growth – investment in mining, infrastructure and technology-driven telecoms are not desperately in need of devaluations.

Where Bingu is wrong is in his swearing that he will never devalue the Kwacha. That is a little disingenuous and not credible. He would be better advised to state that the government’s reading of the current situation is that the stability argument is the more appropriate one for the economy and that the government will make the necessary correction when needed. He could argue that the government is doing everything to promote exports by improving communication to reduce transaction costs and providing seeds and fertilisers that are making Malawi a bread basket.. He will however have to contend with the fact that the country’s reserve are dangerously low and that may discourage investors.

Ultimately the smart policy is one that ensures a stable but “realistic” and competitive exchange rate that assures investors and facilitates exports. In other words the government should strive to achieve and then maintain a stable real exchange rate that is sufficient to promote a high export growth rate and cushion the country’s reserve.

Finance Minister' s Challenges

Our new finance Minister takes a task with many challenges. The first of these is taking over from a Minister who rightly or wrongly accredited with extremely impressive economic performance. He will have to maintain that level of performance. Any slippage will be blamed on him, even it is caused by factors beyond his control..

The second challenge is establishing his own standing in the financial world. In today’s world Both the need to attract aid money and the need to “signal” international financial institutions have increased the role of economists certified by international organizations. One is supposed to be ~former IMF official”, “Harvard trained economists” etc. You ought to be able to throw around such expressions “sound macroeconomic policy”, “prudent fiscal policy” “good governance” with natural ease. It also helps to have the right label. The labelling of Africa politicians for Western consumption is fascinating. Bingu whose career was mainly in the UN and African regional organisation became the “former IMF or World Bank official” and of course Gondwe had the perfect credentials. Our finance Minister who for domestic consumption is labelled as the nephew of Dr. Banda, or as head of Blantyre Newspapers and Print and National Food Reserve Agency now appears as “a former UNICEF financial consultant” (Reuters). Presumably this enhances his status as finance minister although it is difficult to see the link. Until quite recently, UNICEF was a staunch critic of the folks from Washington. Our new Minister might find it wise to stress he is from the private sector. Although the current crisis has tarnished the image of auditors, he should also highlight the fact that he worked for the renowned international auditing firm KPMG. He should not worry too much about such questions as the relationship between auditing and macroeconomics.

The third challenge will be around the issue of devaluation. One fatal blunder Gondwe commited just before the elections was his statement that devaluation was then politically impossible, given the then forthcoming elections. The impression he gave was that devaluation would be seriously considered only after the election. It is likely that this indiscretion cost him the ministry and this may be the point Bingu was making when he talked about the importance of “secrecy” in government affairs. Gondwe-s indiscretion may have simply encouraged speculation against the Kwacha. Whatever is the case, the President has promptly dismissed the prospect of devaluation. We do not know where Kandodo stands on the issue. He has yet to visit the Hole for a chat. Malawi businessmen seem to favour devaluation and he will surely hear a lot of it in the financial circles he will now be moving in. Donors and NGOs love devaluation because it makes their money (including their personal incomes) go a long way. He will soon or later have to have a position.

The final challenge is reminding the President of the fiscal constraints within which the government is operating. This can be a hazardous task. It cost Aleke Banda 12 years in jail when told third. Banda the national coffers could no longer afford his profligacy and that Tembo then at the Reserve Bank told him so. Confronted by Kamuzu Banda, Tembo swore he had never told Aleke such a preposterous thing. Aleke ended up in jail, labelled as “wa bodza leni leni”. That also marked the beginning of the Malawi economy since to meet Dr. Banda’s increasingly bizarre demands (the New State House, costly entourages of Mbumbas etc) investments in crucial sectors – infrastructure, education --- had to be cut sharply.

On the positive side, our President understands the economic problems and the international environment. In addition mining will be adding US$30 million to the national coffers from next year and double as much a year after.