Business Columns

Any gains from fertiliser subsidies?

The money poured into the Farm Input Subsidy Programme (Fisp) are actually subsiding jobs of fertiliser manufacturing companies outside Malawi. In case you wonder, why unemployment remains high. This is one of the explanations.

Every time we import fertiliser using taxpayer funds, we kill a job in our country or stop one being created and support jobs growth in countries that export fertiliser to Malawi. Because we pay these countries and the fertiliser companies pay taxes to their government, the Malawian taxpayer is, to some extent, albeit indirectly, paying tax to foreign countries.

These countries in turn invest in key development infrastructure, resulting in strong exports like fertiliser whose market is guaranteed by the Malawian taxpayer. So, we are trapped in a cycle of high unemployment, low incomes. Sounds correct? At least it makes sense.

Ahead of the 2019 Tripartite Elections, all major political parties agree on the fertiliser subsidy with slight differences on targets. The question we ask is whether the billions that have been spent on it have pushed us out of poverty. Facts remain the same. Graduation from a less developed country has not happened. Most households remain food insecure and rely on some kind of food aid. Is this a case of an approach that is sub-optimal?

Over the years, we have invested so much into Fisp and the calls for its abandonment cannot get any better than now.  That some beneficiaries sell their coupons for a fee higher than the face value for a profit is common knowledge. I guess, the average folk out there seems to have mastered the art of the discount window, synonymous with financial markets.

After all human beings are rational. Hold a leverage with your vote, sell your coupon and you will still get free maize. Who wouldn’t do that anyway? Not surprising that even opposition parties walk a tight rope on this one and often do have ice cubes dangling over their heads.

That’s the cost of free lunch. You can get free things and as long as you are assured, why bother going an extra mile to wean yourself over it? The key questions we all  ought to ask is how many millions of  dollars have we spent on Fisp? The alternative question is: how many jobs have we created in those countries where we import these fertilisers that we give out for free and then go back to the same countries to buy maize to give to the same people we  gave free fertilisers? Or one can still ask, what is the opportunity cost of Fisp?

Would things change if we abandon this Fisp and focus on one approach? The approach could be to have a reserve fund for food emergencies instead of free fertilisers and then provide free food in  times of crop failure. This could be complemented by irrigation and after all, all purchases done domestically somehow will find their way into our tax revenues. Malawi Revenue Authority would even stand on a much higher anti-hill to blow their “beating the target” trumpet. It has a very good sound after all.

The taxpayer is paying for all this. The beneficiaries playing this game straight on reckon it’s a free lunch. But in earnest, think of billions that could have actually gone to health centres in villages that lack essential medicine.

Maybe it is in the human nature to enjoy free things. While such nature sounds rational, it has its own limits. I tend to be overly critical, like many other commentators on the banking industry, especially the high cost of borrowing. I honestly do not like the huge disparity between lending and savings rates. For example, lending rates are above inflation while savings are below it.

The reality is that the culture for free things has become so entrenched, if not a norm. Maybe it requires its own enquiry, but I wonder who will institute it. It is for this reason that despite high bank interest rates, commercial banks are always ruthless when it comes to demanding sound collateral before they let you take their money.

Private microfinance companies are also known for being so ruthless in how  repayments are made despite the disguised softness to access their money. Could it be that banks and other lenders are covering their lending strategies with our appetite for free meals.

Just imagine a former politician advocating for a 100 percent taxpayer-funded pension? How many of them are there? How many lunches will the taxpayer fund? What is quite surprising is that the legislature passed a pension law that compels employers to contribute to employees pensions. The law also expects each one of us to contribute to our individual pensions.

In other words, making each one of us responsible for their pension.  The law tactfully excludes those that make this law to contribute to their own future.  This is all nothing, but our obsession with everything free. Why should someone get a 100 percent pension from their employer while also accessing public health services for free? At the same time, we are all reluctant to pay taxes and expect the other person to pay for it?

So, do not get surprised as the level of innovation is rising to pay for our free lunch galore. Someone even thought of that useless traffic register card to get as much kwacha to simply pay for our free meals.

As long as we love these free things, well the ride will always be bumpy. Countries grow up just like kids do. n

Related Articles

Check Also
Back to top button