On CEOs and diversification

Among problems waiting for solutions in Malawi’s economics are appointment of chief executive officers (CEOs) for parastatals and diversification of the economy.

The success of any company or organisation depends first and foremost on the talent of its topmost employee, the CEO. A capable CEO can reserve the fate of a company that is collapsing. An incompetent CEO can ruin a healthy company or parastatal.

The received wisdom of the Washington Consensus is that government employees cannot manage efficiently a business firm.

It is good to privatise government entities operating like joint stock companies such as nationalised industries so that they are operated by CEOs who are answerable to shareholders.

While it has been easy to privatise some government companies, it has been found to be politically unwise to sell entities set up primarily to render social services rather than maximise profits.

These are the parastatals which often are not self-supporting and have to be kept afloat with taxpayers’ money.

Despite the received wisdom of the Washington Consensus, we notice that the Peoples Republic of China and the Four Tigers have parastatals which are contributing to the growth of their economies. So how are these parastatals structured?

How much freedom are the CEOs of parastatals in those countries given to operate so that their institutions become as profitable as private companies?

Political interference has often been cited as one of the reasons parastatals have performed poorly in African countries.

But how can we minimise political influence in the operations of parastatals?

The solution lies in identifying those industries or parastatals which are best run by technocrats who get their jobs on the competitive market.

Of course, they should be loyal, but to the State not just to a political party currently holding the reins of power. The tenure of office should entirely depend on their performance. A change of government should not necessarily mean their departure. Is this possible? You bet it is.

Dame Margaret Thatcher in her autobiography The Downing Street Years tells us that the British public service is worthy of emulation by other public services.

In Britain, public servants continue rendering their services regardless of whether it is the Conservatives or Labour that is in power.

Although this is so in the past 30 or 40 years, political parties in Britain seem to have adapted the American spoils system whereby some public service positions are filled by persons whose main qualification is political.

When the party that put them in power loses the next election, these people are replaced by the favourites of the incoming government.

As an economist, my memory takes me back to the days when Harold Wilson headed the Labour government and when Thatcher headed the Conservative government. At both occasions, there was a permanent chief economist in the civil service.

When Wilson was prime minister, he brought in a Cambridge don with socialist leanings called Nicholas Kaldor. Similarly, when Thatcher became prime minister, she also hired an economist with Conservative leanings. These advisers lost their jobs when the prime minister who hired them lost office. But the chief economist was always there, immune from the instabilities of politics.

From the study of recent economic history of Taiwan, Singapore and South Korea, we notice how highly educated technocrats were left to do their best in the parastatals.

They were people who were engineers, scientists and economists, first and foremost, not politicians.

The first prime minister of Singapore Lee Kuan Yew both in his autobiography and press interviews pointed out that in making appointment, he picked up persons who were highly talented and those who were above average.

He said these are the people who are capable of bringing about change. Without labouring the point further, I suggest we should get acquainted with the achievers of the Far East. Only in this way, we visualise a system that succeeds.

We often talk of diversification of the economy at the production level. But we must also look at diversification at the consumption level. As I look at my boyhood days in the 1990s, I marvel at how the villagers of those days managed to cope with years of famine.

They did not only cook nsima out of maize flour but also out of millet flour. The people of the Vipya Plateau called this porridge kambala. It used to take us through the lean period.

Why are our restaurants not coming up with new dishes out of cassava and sweet potatoes? The food security the country has achieved is partly due to good luck in that rains have been good. But will they always be good?