The kwacha is not a problem

Over the last week, the Malawi kwacha has lost some ground against our major trading currencies. As is the case, in the punditry world, we come about with reasons of the fall. None of us of goes to work and produce for export of course.

Of course, any depreciation is worrisome. It sends waves of fear, and the different schools of speculation and wisdom get most of us scared. Memories of fuel shortages and particularly images of petrol stations are not distant. But we should try to remind each other that the problem is not the kwacha, but our inability to produce for exports.

Tobacco exports of $300 million are not enough to sustain an import bill of $1.3 billion. Unless we get to the real business of exporting a variety of goods and services, let us get used to kwacha depreciation in the mid of tobacco selling season.

It is a story that is too common whenever the kwacha loses some kudos. Business captains usually lead the furore to think that government is not doing enough to save the currency or provide an enabling environment. There is some merit, but one needs to minimise the economics of the tongue. It is a usual business. I brand it that way.

Capital Hill does not own any farm and factory, I like to say and remind my readers. The few businesses it owns include the mighty Escom, water boards, airspace, roads and the rest are public institutions that serve the nation at zero cost. These do not bring any foreign exchange. Capital Hill sold many assets through privatisation to entrepreneurs who for a variety of reasons still reckon business is getting government contracts. This does not bring you any foreign exchange and therefore relinquishes any right to blame it, including Reserve Bank of Malawi (RBM) for any loss in the value of the kwacha.

The business of government is not exporting goods and services, even though there might be some little revenue out of such operations. If anything Capital Hill has made attempts to get our private sector to export through numerous trade agreements. Some few years ago, we had free trade agreements with South Africa on conditions that we export only locally produced materials but it appears some clever businesses opted to break the rules of origin and we lost it. The Agoa Act never lived to its expectation because local companies failed to meet orders. You do not ship one container of textiles and expect to compete with ruthless Bangladesh or Vietnam. But could we blame the Malawi Government for this? Not all. They do not own any textile company.

These are just some examples of many that sometimes lead us to blame everything on government. In 2015, I reckon it is time that the Malawian private sector raised their game and thought outside the box. It should be business unusual and be willing to venture into external markets by taking more risk and expanding their production.

The export market can be tough but requires good quality products and large volumes. Our players must raise their game. While the cost of capital is high, there are many alternatives to raise capital. The Malawi Stock Exchange (MSE) has had no listing for some years but remains a cheaper source to raise capital in the wake of prohibitive interest rates. But guess what? The stock market comes with commitment to transparency in doing business, good corporate governance practices that our private sector is very much apprehensive about. This is where an element of doing business unusual was conceived.

So let us not always blame the government whenever forex is limited in the bank. Water boards do not generate foreign exchange and sadly we have left everything in the hands of tobacco farmers that cultivate their fields using wooden hoes to bring the much-needed green bucks.

If anything, what we should be asking government is to tighten security, ensure adequate supply of electricity and water, good roads and efficient delivery of services that support businesses. The events of the past three weeks in the realm of security have not been encouraging and this is the stuff we have to hold leaders accountable, but not piling forex shortages blame on Capital Hill. That is the role of exporters, not Capital Hill.

In truth, the kwacha is not the problem.