Don’t bark up the wrong tree on road to recovery

Britain’s wartime Prime Minister Winston Churchill is credited with the quotation “you will never reach your destination if you stop and throw stones at every dog that barks”.

The above quotation emphasises the importance of focus and ignoring distractions in every endeavour. In football they say “keep your eyes on the ball” although my colleague Madalitso Musa will tell you “midre sayang’ana mpira”, implying that a good midfielder doesn’t get eyes glued to the ball, but checks on who to feed while his feet ‘watch’ the ball.

The Churchill quote crossed my mind in the wake of some proposals made to Minister of Finance and Economic Affairs Sosten Gwengwe and his budget team who are this week on the road seeking input from stakeholders on what should be considered in the 2023/24 National Budget.

During the Blantyre session on Monday, stakeholders such as Malawi Confederation of Chambers of Commerce and Industry (MCCCI), Institute of Chartered Accountants in Malawi, Information and Communications Technology Association of Malawi, Consumers Association of Malawi and Employers Consultative Association of Malawi (Ecam) lobbied for a review of various taxes. Ecam further lobbied for an expansion of the zero-rated tax bracket from the present K100 000 to K150 000 and a 30 percent increase in the minimum wage from K50 000 to K65 000 to cushion low-income earners hard hit by the ever-rising cost of living that is making their life unbearable. Pertinent proposals I must say.

The other proposed tax reviews were equally good and largely geared at resuscitating an economy on life support through revival of the local industry and boosting specific sectors such as the textile and garments.

On the other hand, MCCCI through chief executive officer Chancellor Kaferapanjira also made several contributions, but my curiosity was aroused by the proposal that government should consider banning importation of motor vehicles that are beyond 10 years from year of make as they are a drain to the foreign exchange reserves, especially in terms of spare parts. He also said secondhand clothes, commonly known as kaunjika, are another forex drainer in the top 10.

Well, numbers do not lie, but I find the MCCCI’s proposal to ban importation of old cars and kaunjika as a solution to forex woes to be simplistic and at the same time elitist. Malawi has no car manufacturing industry and less than one percent of the population, mostly corporate, can afford brand new vehicles sold by dealers at as much as $150 000 (about K155 million) each. The majority can only afford secondhand cars from Japan at an average $4 000 (about K4.1 million) each. Even kaunjika is not by choice, the local textile and garments industry is almost non-existent to dress the people.

Figures from the Reserve Bank of Malawi (RBM) tell a story as they show that the country requires $3 billion per year to comfortably foot its import bills. The question we should be asking is how much of the $3 billion does Malawi generate. It is just $1 billion, meaning there is a $2 billion deficit. Even revenue from tobacco, at an annual average of $200 million in recent years, is not enough to cover one month’s import bill.

Malawi is a predominantly importing and consuming economy where foreign exchange generation should be at the centre of economic recovery. One just needs to check the impact the 25 percent devaluation of the kwacha in May 2022 has had on the cost of living.

To have adequate forex and reduce budget deficits, it is critical for the Minister of Finance and Economic Affairs to put in place measures to improve tax collection and tax compliance while at the same time reducing government over-expenditure. The austerity measures President Lazarus Chakwera cited in June should be followed to the letter.

Blaming forex woes on kaunjika or ‘Be Forward’ imports is like barking up the wrong tree. The system should be tightened to ensure that proceeds from exports are tracked and seen to be remitted into the local financial system, not what is happening now.

Focus, focus and more focus coupled with more action is what is needed.