Lipenga is right on subsidies

In his budget speech in Parliament two weeks ago, Finance Minister Ken Lipenga touched on a topic that probably most of his immediate audience in the august House, the members of Parliament, would never discuss with their constituents. Lipenga passionately spoke against government handouts, otherwise sweetened as subsidies.

The Finance Minister said: “I have no doubt that this House will agree with me that the people of Malawi have no wish to turn into a nation of subsidies. We need to face the fact that almost every service that the government is providing is heavily subsidised.

“Mr Speaker, Sir, as everyone knows we subsidise agriculture by almost 75 percent, education by close to 90 percent, health by almost 100 percent. Until last year, we were subsidising fuel and electricity. We still heavily subsidise water.”

Indeed, Lipenga was 100 percent right. There is an entrenched culture in Malawi of expecting government to do literally everything for us, like a mother breastfeeding a baby. But this culture is unsustainable in the long term. The population is booming and several other parameters also do not remain the same.

Unfortunately, an average Malawian dreams of free medical treatment at a government hospital, free primary education, subsidised secondary and university education and of course a free fertiliser coupon every planting season.

Government handouts or you may call them subsidies, are evil in a number of ways. First, they punish the wrong people. A good example is that when the government subsidises fuel, it virtually subsidises the well-to-do in society who have the financial muscle to fend for themselves, at the expense of the poor whose means of transport is walking.

Another example is the virtually free public university education in Malawi when one is selected on scholarship. It is heavily subsidised by the taxpayer, yet those people who benefit from it are a negligible minority of the population.

Recently, The Polytechnic and Chancellor colleges had been boycotting classes, demanding a raise in monthly upkeep allowance from K40 000 (about $100) to K60 000 (about $150). Ironically, a university graduate working in the civil service, most likely supporting a spouse, children and relatives, earns a net pay of less than K60 000 (about $150).

Honestly, government would have to justify why it should subsidise a student at K60 000 (about $150) a month, yet it cannot pay a net salary of that amount to some of its graduate teachers, engineers and doctors who are on the civil service payroll, and who pay taxes

Water, according to Lipenga, is also heavily subsidised. Treated piped water in Malawi is available mostly to urban dwellers, yet the majority of Malawians living in rural areas, who also contribute to taxes through various forms, drink from shallow wells and boreholes. Is there any fairness here?

In agriculture, the subsidy has distorted the prices of food on the market such that it is no longer attractive to grow maize on commercial basis when some farmers are buy a bag of fertiliser worth K13 000 (about $32) at a mere K500 (about $1.25), courtesy of the Farm Input Subsidy Programme (Fisp).

It is so pathetic too that Malawians expect the government to foot all their medical bills, yet they are more than willing to pay a traditional doctor a chicken or a goat for his services if they do not have money. That is why I entirely agree with those who are advocating for some paying services in government hospitals.

All in all, I think we Malawians should start asking ourselves the tough questions whether the culture of handouts or subsidies will help the country in the long run.

There is need to restrict, if not, completely scrap subsidies in a number of sectors for the government to sustainably fund the national budget. We should be ashamed that after close to 50 years of independence from our colonial masters, Britain, 40 percent of the 2013/14 national budget should be financed by donors.

It is high time we embraced a culture of economic independence, fending for ourselves; otherwise, as Lipenga rightly fears, we risk turning Malawi into a nation of subsidies.

The author is a freelance journalist

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