The State and private sector

The State (public) and private sectors are technically different spheres of human activity. But in practice, they are complementary; one cannot exist without the other. Most States these days, including Malawi cannot help being interventionist in the economy while the private sector cannot make headway without the benevolent rule of the State.

The public sector malfunctions largely because it sticks too much to bureaucracy. It must borrow from the private sector the spirit of innovations and entrepreneurship. These activities are decisive in the growth of firms. The State too must keep changing to effectively fulfil its role in the public and private sector partnership.

Private firms that grow and weather storms embrace two virtues of efficiency and effectiveness. Efficiency means doing a job in such a manner that you achieve maximum production at the lowest cost. It does not matter whether the job is the one needed most or not. Efficiency at the job is about productivity.

Effectiveness is about the correct use of time; correct use of time means doing something that contributes to the goals of organisation. It is about setting out priorities, giving first attention to the most essential tasks, and discarding those that count as trivial.

Does the public sector operate according to the principles of both efficiency and effectiveness? Prima facie it does so up to a point. Too many things which are dysfunctional keep coming up through the media.

Five or more years ago there was constant talk about decentralisation in the public sector by transferring some public sector powers and functions to local governments. It was contended that in this way, the public would be empowered in decision-making. The devolution or decentralisation was apparently done haphazardly without thought. The corruption and misappropriation of funds which take place in ministries are also ubiquitous in local authorities. There is a good deal on inefficiency.

The decision to decentralise was a decision for effectiveness undertaking a necessary job but inadequate measures were put in practice to achieve efficiency. Conglomerates also practice decentralisation. What arrangement do they make to ensure that branch or regional directors do not abuse their power? Do they have techniques that the central government can adopt?

Companies, gigantic and small, face the bogy called produce life cycle (PLC). The products or service that is introduced into the market starts life like an infant, reaches adolescence and maturity when its sales neither increase nor decline. It then starts to decline and sales dwindle. Eventually it dies.

The State must itself operate with the PLC in mind. The PLC is not just of concern to a company, but to the State as well. When a company’s product sales rise, it is able to earn higher profits and pay taxes to the government proportionately. When the product is on the descent, its sales decline, it makes little or no profit, and hence it is unable to continue paying taxes as before.

The State must, therefore, make itself aware of what is going on in the private sector with regard to the PLC. Those firms which are paying ample taxes these years may not be able to do so in the next 15 years or so.

The State must, therefore, be promoting substitute sources. Are new products being invented or innovated which could be the cash cows of tomorrow? This is a question for both the public and private sectors.

Science and maths are essential as foundations of the engineering profession, and engineering is basis of innovations and invention. But the most urgent need in Malawi at present is competences in management administration and entrepreneurship.

Though the civil service is currently staffed by highly educated people, time and time again we hear that a ministry has to pay money to a donor because it has misappropriated it or to pay compensation to a foreign company whose contract the government prematurely terminated.

We do wonder why a civil service of chartered accountants, masters and doctorate degrees is making these blunders.

Often I have received telephone calls from the media asking what we should do to pull Malawi out of the economic stagnation. My answer has been that the causes of Malawi’s poverty are many. To solve them we should first be better organised for success. It is the competent manager or administrator that is the main missing link in the chain of development. n