Govt best buy Malawian

With the devaluation of the kwacha in 2023, policymakers should take pragmatic decisions and steps to generate more foreign currency and buy from locals to avoid draining the foreign currency reserves.

However, this is not the case lately.

Over half a decade has passed since August 2017 when the Ministry of Finance gazetted a law that entitles locals to no less than 60 percent of public procurement contracts.

However, the country continues to spend forex needlessly as the enforcement of the legally binding 60-40 ratio by the Public Procurement and Disposal of Assets Authority remains low and tricky.

As a matter of priority, the Public Procurement and Disposal of Assets Act requires every procuring entity to “give a preference of 60 percent of indigenous Malawians and 40 percent for national competitive bidding.

This is one of the deliberate policy incentives deliberately to improve Malawi’s economy and its citizenry.

The said indigenous businesses mostly comprise small and medium enterprises (SME’s), the backbone of the country’s private sector.

The SMEs generate revenue, pay taxes and create jobs, reducing the country’s massive youth unemployment.

Due to this, the sector should be given a high preference in public procurement of works, services and goods.

This is not asking too much, but in line with the existing law and the government’s strategic interests, including saving forex and tackling unemployment, poverty and inequality.

Adhering to the 60-40 law will not only promote businesses owned by Malawians, but also a shift from economic dependence to a competitive entrepreneurial system.

The government, being the largest buyer of goods and services, should honour its 60 percent requirement to nurture the growth of these SMEs often overrun by bigger players, go-betweens and multinationals in the formal sector.

The 60 percent cut for indigenous Malawians is a preferential economic tool to boost the growth of our ailing economy.

The 2.6 percent growth rate projected in the national budget is based on suppressed production amid the rising risk of forex dry outs and other disruptions in the global economy.

Some describe an indigenous business as an entity where at least half of its shares or capital is owned by people with Malawian ancestry.

In the turbulent economic landscape, financing becomes a challenge.

There are several reasons why SMEs are crippled by shortages of finances. These include delayed payments from government institutions and restrictive requirements from money-lending institutions.

This forces some indigenous businesses to be arm-twisted into illegal arrangements such as being fronted by bigger businesses not owned by indigenous Malawians.

Fronting is not only an offence but also a common setback in the full operation of the 60-40 law.

Experts have described fronting as deliberate or attempted circumvention of the law by non-indigenous Malawians and their willing accomplices.

The opportunistic intermediary is the common type of fronting in Malawi.

The cases involve indigenous enterprises that make agreements with other enterprises not owned by indigenous Malawians to leverage their capital.

Section 57 of the public procurement law is a  call to integrity.

It requires all players in public procurement to “not commit or abet any corrupt or fraudulent practice, including solicitation or acceptance of improper inducement.”

The rising forms of fronting or camouflaging impair the economy and government efforts for indigenous citizens to also directly contribute to and benefit from the country’s economic transformation.

The country cannot overcome inequalities that imperil indigenous Malawian entrepreneurs if this continues.

There is an urgent need to make the law and associated regulations work by summoning and prosecuting those involved in opportunistic crimes such as fronting.

Indigenous businesses found guilty by competent courts should even be barred from future contract bidding to end this malpractice.