Must we subsidise cement and iron sheets?

By now those who are politically connected to the ‘new’ Democratic Progressive Party (DPP) must be busy dashing in and out of the Registrar General’s office in Blantyre and that of the Director of Public Procurement (DPP) in Lilongwe trying to register companies. They do not want to miss the cement and iron sheets supply gravy train.

Those already in the cement and iron sheets businesses, especially our brothers and sisters of Asian origin who dominate the construction materials industry, must be jostling to position themselves—by hook or crook—for the cement and iron sheets deals that will soon be falling like manna from the heavenly doors of the Peter Mutharika administration.

And, of course, there are those clever chaps claiming direct access to the President and top DPP dogs who are fattening their wallets by milking amwenye, promising a presidential or ministerial ear that could land them the new public finance pilfering tool in town: cement and iron sheets subsidies.

Civil servants in ministries, departments and agencies that will be facilitating the new subsidies—also angling for a bite of the new goodies on the latest gravy train—are already aligning themselves to the right suppliers and may even be setting up ghost companies of their own. With Cashgate harder to pull off these days after exposure, cement and iron sheets are welcome new entrants.

Then there are enterprising well-to-do folks who know that their uncles, aunts and grandmothers in the villages cannot afford even the subsdidised cement and iron sheets. They have already been in touch or will soon be with their poor relatives to whom they will be sending money so that they can be buying the cheaper materials on their behalf at government expense.

And, oh, some chaps will just be waiting for this poor fellow to access these subsdised building materials then buy them off at a price that is a little higher than the redemption price but maybe three times the market value. It’s a good deal.

So make no mistake: The folks described above will be the major beneficiaries of the DPP administration’s cement and iron sheets subsidy, not the poorest of the poor that Vice-President Saulos Chilima said are the targets.

If these folks cannot afford to raise K400 per day, can they find money for subsidised cement and iron sheets? Or will government start another cash-transfer programme such as Public Works? But where will even such money come from? These building materials subsidies won’t just work for the dirt poor.

We have all seen it happen with the Farm Input Subsidy Programme (Fisp). A recent World Bank study found that the majority of Fisp’s intended beneficiaries do not benefit from the initiative.

The study, which assessed the system used in choosing Fisp beneficiaries, revealed that up to 57 percent of people who receive fertiliser coupons are not eligible to benefit because they are not poor, but are connected to authorities.

This translates into around 900 000 fake beneficiaries of the total 1.6 million that government has targeted to reach this year.

The study explained that Fisp is not achieving its intended objective of helping the poor move out of poverty because most coupons are not distributed based on poverty levels, but other factors that come into play, including relationships with community leaders.

“Our analysis shows that Fisp is not poverty-targeted in that it does not exclusively target the poor or the rich at any level of the programme administration. The programme reaches all socio-economic strata of rural Malawi. If there is any targeting, it is in the middle of the welfare distribution. As such the share of the non-eligible population receiving Fisp benefits ranges from 52 to 57 percent depending on the eligibility indicator used,” said the World Bank report.

Yet, Fisp grabs 16 percent of the national budget, which is higher or competing with the 12 percent that has been allocated to health over the last three years.

There are also other studies that clearly show that Fisp has significantly contributed to higher budget deficits over the years. The coming in of iron sheets and cement subsidies will worsen the deficits too. This means that government will have to borrow money not to invest but to give away and in the process bring crowding out effects on the very private sector they hope to collect taxes to finance the subsidies!

There is now consensus coalescing around the fact that subsidies have not helped Malawi.

If anything they have been a huge burden on the perennially looted and broke Capital Hill.

Respected political scientist Dr. Boniface Dulani of University of Malawi’s Chancellor College says the subsidies are a waste.

Just this week, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) dubbed Fisp a “burden”.

And the fact that every year we have millions of Malawians starving clearly demonstrates Fisp’s impotence. Yet, the Peter administration is piling more subsidies.

As a country, we must cure our obsession with subsidies as a way of alleviating poverty because it is not.

Instead, we must invest our energies in developing programmes that create jobs, which will enable people to make enough money to buy cement, iron sheets and farm inputs. Otherwise, chaining ourselves to the subsidy curse is imprisonment we cannot survive.