Aid and economic independence for Malawi

In developed countries there are occasional grumbles about much of their money going down rat-holes into the hands of corrupt leaders in developing countries. A popular phrase is donor-fatigue.

In developing countries there are occasional grumbles about economic-dependence compromising both political-independence and national-sovereignty. The popular phrases are tied-aid and neo-imperialism.

Others claim that foreign-aid encourages laziness, strengthens the dependence-syndrome and fuels corruption.

They call for shock-therapy to have no aid, even if people are dying from famine.

These misconceptions come from stereotyping, generalising, trivialising and superficiality. Africa certainly has had outstanding kleptocrats like Mobutu and Abacha and outstanding mis-rulers like Idi Amin and Bokasa but we must not ignore much that is good about aid.

The question of who is a donor shows that there are several types of donors. The question of what is aid shows that there are several forms of aid.

Bilateral-donors give aid on the basis of bilateral relations. The IMF and the World Bank, as multi-lateral institutions, give soft-loans or grants on terms and conditions they apply to all. UN agencies such as UNDP or Unicef also give some forms of aid. So do international NGOs like Oxfam or World Vision.

–forced to accept aid–

In all these instances no developing country is forced to accept aid. Often, the developing country applies for aid because she needs it. In modern international relations, especially after the Cold War, any glib talk that all foreign-aid is bad becomes antediluvian thinking.

Actually, aid is not a monopoly of developing countries. The International Monetary Fund (IMF) gives aid to both developing and developed countries. Recently, several European countries, like Greece, drank from the austerity-cup of the IMF and are still smarting from its bitterness. The International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) comprise the World Bank. The IDA gives aid to developing countries while the IBRD gives aid to developed countries.

Foreign-aid is a term which covers the whole gamut of grants, loans, technical assistance, down to humanitarian-aid for disaster-relief. Looked at from this broad viewpoint, it is imprudent to say all foreign- aid is bad. It is equally imprudent to say all foreign- aid is good. We must discriminate. Bilateral-aid forms a symbiotic relationship which benefits both parties differently. A donation of free food or drugs saves lives in the developing country but also helps the donor-country to earn the gratitude, goodwill and diplomatic friendship of the developing country. The agricultural and pharmaceutical industries of the donor-country get export sales.

Clearly, the problem is not aid as such. It is the terms and conditions of some forms of aid. A large donation of cooking-oil, for example, is harmful to local manufacturers of cooking-oil. The same is true of free shoes or free second-hand clothes. Local industry loses sales, jobs get lost, people develop a taste for the foreign product and the donor-country promotes its exports. Even a cash loan becomes investment-income the same way banks or Katapila make money from lending. Sir Alec Douglas-Home candidly described foreign-aid as enlightened self-interest.

While some developing countries want aid without strings, others realise that the only free-meal is that piece of cheese on the mouse-trap. We need to understand economic issues before we react. Otherwise we may over-react. In the recent past, our conception of devaluation has cost us dearly. About three years ago, a conspiracy of events started to unfold inexorably. Our president had acquired a jet-plane and loved flying around to give speeches and receive praises. His use of subsidised-fertiliser coupons, against IMF advice who said it was not financially sustainable, had produced a bumper-harvest. The world was falling over itself to honour him.

–corruption and bad governance–

The press exposed some irregularities in the purchase of the plane. It had not even been budgeted for. Other shenanigans in government finances were also exposed. Donors were appalled and suspended budgetary-aid. Thereafter, Malawi could not pay for all her imports, particularly of fuel and drugs. The economy slumped to its knees. Public discontent simmered. Government sought help from the IMF. The IMF agreed to help provided the kwacha was devalued first. Government wanted no devaluation. The IMF said call us again when you are serious.

This simple, technical matter gave us untold anxieties, agonies and grief. We used our clouded-judgments to indulge in heated-debates and theatrical posturing.

Government felt besieged and became allergic to criticism. A reverend was handcuffed for his sermon at a funeral. A Bishop had a finger wagged at him, also for his sermon. A university student was found dead on campus, allegedly for a critical pamphlet. A commission was set-up to define academic-freedom, all because the President wanted a reason to fire four turbulent academics. Houses and offices of critics were mysteriously fire-bombed. Cadres of the President’s party promised mayhem as they eagerly brandished and sharpened pangas on tarmac downtown Blantyre.

Donors were told to go to hell, literally. A Zero-Deficit Budget was presented in Parliament. The Malawi Revenue Authority (MRA) raised a loan but deceived parliament that it was additional tax-revenues. Parliament quickly passed six unconstitutional law-amendments to, among other things, gag the press, facilitate police-searches and change the flag to reflect Malawi as a developed country. Four Tobacco Industry Executives, the major foreign- exchange earner, were deported for low prices at the auction. The British High Commissioner was deported, for reporting the events home. Relations with Britain deteriorated. Government blamed fuel-shortages on Tete-Bridge and Nacala-Port but Mozambique denied the claim. After Government had spent MK4 billion constructing Nsanje-Port, Mozambique disclosed that Zambezi River is too shallow for ocean-shipping. Relations with Mozambique deteriorated.

A Zambian opposition leader Malawi had deported became President in Zambia. Relations with Zambia deteriorated. Chiefs strutted on television, preached against devaluation and prophesied Armageddon over consumer-prices. Donors were castigated for their onslaught on our national sovereignty. The IMF was even accused of championing gay-rights. The campaign started to bear results. Some Malawians started to beat chests and demand immediate economic-independence.

At State House, the President organised a public lecture on the evils of devaluation. He invited all and sundry to go and drink from his fountain of wisdom. Instead, tens of thousands of Malawians poured out into the streets of Blantyre, Zomba, Lilongwe and Mzuzu to demonstrate against the deteriorating economic situation. The police promptly shot down 58 of them, with 20 dead.

Judiciary staff went on strike for more pay. On March 15 2012 a meeting of opposition, faith and civil-society leaders gave the President 60 days to resign. Twenty-one days later, he quit. He just dropped dead in his office on 5th April. This drama did not end there. His ministers concealed his death, labelled his body Daniel Phiri and flown it to South Africa. They did not want the Vice-President to become President. Constitutionalism finally prevailed. The Vice-President became President and promptly devalued the kwacha. Donors promptly resumed aid.

–foreign exchange management–

There was no Armageddon but we started to sleep in our beds. Fuel was more expensive but plentiful. It was a long, tortuous road to devaluation. All is well that ends well. If this tragic-comedy was drama, it could have come only from geniuses like William Shakespeare. It was much ado about nothing. What exactly did devaluation mean? Market-forces had made the kwacha lose value in international trade. The dollar was worth K150 in the banks but worth K350 in the back-streets. Consequently, the banks had no dollars while the back-streets had all the dollars. The IMF said the only way dollars could stay in the banks was to give them the back-street value. That was what devaluation meant but we would have none of it. We wanted IMF-dollars without addressing the market-forces that had driven dollars out of the banks. The IMF said we were not serious and left. The economy went belly-up.

We experienced all these aggravations because our understanding of devaluation was more political than economic. The demand for economic-independence is loud

and clear, but is also political. What is economic-independence and who will grant it to us? Economic- independence is never demanded, granted or declared. It is achieved. It is up to Malawi to achieve economic-independence. It is a process that requires cutting down on waste as well as growing and developing the economy.

–conclusion–

It is a crying-shame that fifty years after independence, Malawi Government still depends on donors for 40 percent of its recurrent expenditure and 80 percent of its capital expenditure while Mauritius and Singapore, also former British possessions, are small, sea-locked states with no natural or human resources comparable to those of Malawi but achieved economic-independence decades ago. They do not need donor-aid for national budgets. The bonds they float on the international market get over-subscribed within hours. Malawi is poor because Malawians are poor, not vice versa. Over-taxed Malawians do not pay sufficient taxes to their government for all its expenditure-needs.

Consequently, the government is also poor and goes begging for aid. In short, Malawi has a tax-base that is too small to give her economic-independence. Malawi will achieve economic-independence when the reverse becomes true. That is, when Malawians will be rich enough to pay sufficient tax-revenues. Their government will not need aid anymore. Is it possible, let alone probable? Yes, it is. If poorer countries like Mauritius or Singapore did it, Malawi can certainly do it, even in less time. All Malawi needs is quality, political leadership that knows what it should be doing. No amount of bad-mouthing donors or zero-deficit or zero-aid budgets will bring about economic-independence.

It is not about taking plane-loads of chiefs on trips abroad. It is about taking plane-loads of businesspersons, at own expense, to drum-up export, tourism and investment opportunities abroad. It is not about closing embassies. It is about using embassies as economic assets to promote tourism, exports and investment. It is not about extorting bribes from businesspeople. It is about using monetary, fiscal and regulatory instruments for the economic empowerment of Malawians. It is not about the size of the Cabinet. It is about the quality of the Cabinet.n

—SAM MPASU is a Malawian politician who between 1999 and 2003 served as Speaker of Parliament. Previously, Mpasu served in the diplomatic service and Cabinet. He also worked in the private sector in various capacities.