Barely hours after implementation of increased fuel pump prices and electricity tariffs, Malawians have started feeling the impact as service providers, mostl notably passenger transport operators have raised fares.
The average 41 percent increase in pump prices of petrol and diesel as well as the 12 percent electricity tariff adjustment comes at a time the Malawi Government has rolled out a value-added tax (VAT) increase from 16.5 to 17.5 percent and introduced a new threshold on pay as you earn (Paye), which have eaten into salaries for low-income earners, wiping out their disposable income.
Habson Simwaka travelled from Blantyre to Mzuzu at a cost of K70 000 en-route to Chitipa for a funeral, but when he returned to Mzuzu yesterday to connect back to his base in Blantyre, he was told to pay K100 000. Fortunately, he negotiated and paid K90 000, but at a cost.
“I am in debt already because I needed to find money to mark up the rise in transportation,” he said.
At Engalaweni in Mzimba District, a hawker, Yamikani Chimdzakazi, said transport cost to Mzuzu where he orders merchandise from wholesales has jumped to K32 000 from an average of K20 000. He said this adds to the rise in commodity prices from the adjustment in VAT.
“I used to sell soya pieces at K950, but that changed to K1 000 after VAT. Now with transport, that has changed to K1 100,” he said, adding that transport was a major concern.
In Mzuzu Main Market, three leaves of rape are now fetching K500, down from six leaves previously.
Vegetables vendor Catherine Manjolo, 40, a resident of Masasa Township in Mzuzu attributed the revised quantity to the increase in transport cost due to the fuel pump price hike.
“I have six children, but cannot stop doing this, it is my survival,” she said.
In Lilongwe, transport fares from Area 25 to Old Town have doubled from K2 500 to K5 000 while the Nsanje-Blantyre route is now costing K25 000 per passenger from K150 00 and in Blantyre, the fare from Mbayani to Limbe has jumped from K1 500 to K2 500.
Christopher Kumwembe, a barber at Safalawo in Ndirande Township in Blantyre, said with the 12 percent electricity tariff increase he has no option but to adjust upwards service prices.
“We need electricity to operate and when Escom power goes off, we use petrol-powered gensets. So we have nowhere to run; hence, raising the price. So, the minimum price for a haircut has moved from K1 500 to K2 500,” he said.
What does this mean?
Centre for Social Concern (CfSC) economic governance officer Agnes Nyirongo says for low-income earners, the current situation is distressing.
She said low-income households spend a large proportion of their income on essentials such as food, transport, rent and energy.
Nyirongo warned that as fuel prices, taxes and input costs rise simultaneously, their budgets are stretched beyond breaking point.
Mzuzu-based sales and marketing officer Mphatso Kalikwemba said almost every expense has risen, starting with rent.
She said: “Before the fuel hike, transport from town to Luwinga, my work place was K1 500 per trip, and now it’s K2500, meaning K5000 a day. We have to think of walking to work!
“Look at the cost of groceries with VAT, and now electricity? Bank charges, mobile money! We can’t breathe. Salaries have failed to keep pace with the cost of living.”
Economist Chris Mbukwa said key outcomes of these adjustments are erosion of purchasing power, especially for low income earners, which is likely to lead to loss of welfare.
“This will result in reduced welfare as most people are likely to find prices of commodities unaffordable. Low income earners are likely to cut on food and nutrition in the process,” he said.
What next?
Nyirongo urged targeted social protection measures such as expanding social cash transfers, food support programmes or transport subsidies for low-income workers to cushion the most vulnerable households.
In a separate interview, Economics Association of Malawi president Bertha Bangara-Chikadza said while Malawi adopted market liberalisation, the government should assess the magnitude of what is passed on to the masses.
“The price adjustments must be aligned with the country’s income levels, productivity, and social conditions,” she said.
During pre-budget consultations in Mzuzu, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha ruled out the possibility of reducing taxes.
Additional reporting
by JONATHAN PASUNGWI and ALLAN NYASULU, Staff Writers
