New levy! How well will it be used?

During the 50th Congregation of the University of Malawi, on Wednesday this week, President Peter Mutharika announced that government will introduce a levy to fund higher education to support learning, research and infrastructure development for tertiary education in the country.

We all know that government has various ways of raising revenue. Some of the most common ones are Pay As You Earn (PAYE), corporate tax, value added tax (Vat), non-tax revenue and levies.

Talking about levies, Malawians have been paying various levies. Again the most common ones are on fuel and electricity. On fuel, there is the Road Levy, Malawi Bureau of Standards levy, Rural Electrification levy and Fuel Stabilisation levy.

Until 2012, there was also the Drought Levy. The Drought Levy was removed following an improvement in the maize supply then.

Fuel is probably the commodity with the most levies. The danger is that these levies can be inflationary. On electricity, one of the levies is for the Malawi Energy Regulatory (Mera).

When Mutharika announced that government intends to introduce a levy to fund the tertiary education sector, he may have been expecting the audience in the Great Hall in Zomba to jeer him. But it is reported that they clapped hands much to his surprise.

The problem with most revenues is transparency and accountability. There is a serious problem with the way government manages its finances. One of the most common ways this has shown its ugly head is what has commonly come to be known as Cashgate revealed in 2013 after a forensic audit covering April September 2013 found that K24 billion could not be accounted for in government’s accounts.

Then there is the data analysis report compiled by audit and business advisory firm, PricewaterhouseCoopers (PwC). This showed that K577 billion could not be accounted for in the government’s bank statements between 2009 and December 2014. People may be comforted that PwC, with funding from various development partners, is conducting a forensic audit on this report. So the truth will come out one day.

Malawians may be reminded, however, that as early as 2002, then Director of Public Prosecutions, Fahad Assani, declared that a third of the national resources go down the drain unaccounted for.

It is for the same reasons that over the years, government has been on and off track the International Monetary Fund extended credit facility (ECF) programme. It’s all to do with government failing to manage finances according to the conditionalities the Breton Woods institution sets for the country to continue receiving assistance from the multilateral financial institution.

The problem, as I have alluded to above, is that government is not accountable and transparent with finances.

Take the Drought Levy, for example, introduced in 2004. Government continued collecting funds for the levy long after maize production had improved in the country. This means government collected billions of kwacha from the levy. But last week, Finance Minister Goodall Gondwe, who has been the country’s exchequer longer than any other person in the multiparty era, pleaded ignorance about how these funds were used.

On 24 February, the Mera board resolved to divert K2.9 billion from the fuel Price Stabilisation Fund (PSF) to the Agricultural Development and Marketing Corporation (Admarc) for the purchase of maize. The PSF is an account that accumulates funds from fuel sales meant to cushion any rises in fuel products that would raise inflation.

How did the Mera board arrive at this decision? Was it told to do so? Should Mera not have been more worried about whether it has enough funds in its kitty to cushion fuel price rises than buying maize? And was this money really used for the purchase of maize after Parliament had already approved a jaw-dropping K4.7 billion to buy maize?

Already government is failing to collect funds it lent to ‘needy’ students in public universities. These funds are in billions of Kwacha. Wouldn’t such money ably finance learning, research and infrastructure in our public universities with good management? Government is also failing to collect huge amounts of money from well-known entities that borrowed from MSB Bank—the toxic funds!

Now the proposed levy to finance tertiary education! We all appreciate that government is mandated to introduce levies for various uses. The question is not really whether it will be on fuel—the easy cash cow for government—but how accountable and transparent will government be in administering the funds.