I left work 30 minutes before closing time today so I could line up for the commodity that, for over two solid years now, has eluded motorists, grain millers operating in my friend Godfrey’s to-be-electrified-after-2014 home village and everyone that it almost seems golden – fuel. I have been prudent enough with the last supply that I was so fortunate to have accessed a little over three weeks ago – walking to the grocery store whenever I can (good for my exercise) and cutting down on non-essential travel. Granted, this behavior change has bought me some days but it was only a matter of time before the orange light popped up again.

Nobody wants to spend their evening waiting for what should be a basic commodity. No mother deserves to lose their life and that of their unborn child because the ambulance that should have taken them to the major hospital to treat a complication is grounded due to a lack of fuel. In this 21st century, my 85 year old grandmother should never have to draw out her labor-intensive stone-age tools to prepare maize flour for her next meal. Unfortunately, that’s what is happening every day in Malawi. It is very unacceptable.

But then Malawians are a patient lot. I wonder how my Kenyan friend and his Kikuyu kinsmen would react if they were faced with the same hardships. Not that Malawians should take machetes and rise against the authorities. It’s about demanding of authorities what is rightfully theirs. The president has made it clear the current problems will be fixed when he is out of office, in 2014. That’s ONLY two more years to go…

PS: after three hours, I’m still on the line waiting to get a little gold…and if i succeed (the gas station doesn’t close because it is very late or the supply does not run out), I will get 15 liters because there is not enough for everyone. That should be enough to run around for three days, and who knows what will happen thereafter.

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It is my second weekend back in Malawi. A friend asks me to help him collect data for an evaluation of a project that has a catchy short name – SY2SE. He won the consultancy a while ago from among several bidders. I am delighted to help him out. During the process of familiarizing myself with SY2SE, I learn that SY2SE is a project that has been going on since 2006. It was being implemented by the National Youth Council of Malawi, a body that was established by an Act of Parliament many years ago with a mandate to address issues/problems affecting Malawi’s young people. I also discover that SY2SE stands for “Scavenging Youths to Scholars and Entrepreneurs”, which is what the project sought to accomplish.

SY2SE, in brief, is a project that sought to stop young people from one area of Lilongwe City (Malawi’s capital) from scavenging at one of the city’s major dumpsites. Scavenging at the dumpsite is a common practice among youths and adults alike in this part of rural Lilongwe (the “city” is sub-divided into Lilongwe Urban and Lilongwe Rural). Our two guides from St. Peters, a local NGO that the Youth Council collaborated with on the project, inform us that ‘waste collection’ is a more polite description of the activity. They tell us that the project has so far benefited about 90 families out of 3,000 who initially registered. The idea was to target young people who frequent the dumpsite and offer them scholarships to go back to school. The project provides each student with school supplies (uniforms, notebooks, pens, etc) and pays for his/her school fees (if any). For those youths who cannot go back to school because of age, they are taught vocational skills (carpentry, brick-laying, tailoring and knitting) and are provided with start-up capital after the training to establish their own trades. A total of 53 young people have been assisted to date in one of these ways. To ensure sustainability, the project works with each student’s family to help them get a loan from a local bank to start a small business.

For my first interview, I talk to a woman who used to look after an orphaned boy who collected waste at the dumpsite. The boy now lives with his grandmother. He is back in school. My respondent received a loan from the local bank for 10,000 Malawi Kwacha (about $66). She used the money to start a trading business – she buys charcoal and resells it. She also sells popcorn. I learn that the charcoal trading business brings her a better profit margin than the popcorn business. She makes a profit of K200 on every sack of charcoal she sells. In total, she makes about K2,000 a month in profits when the times are good. During our interview, she expresses her delight at being selected for the project and how much it has changed her life. She now has food to put on the table and some money for other basic necessities. She has nearly paid off her loan, including interest which she told me was charged at 2.9% per month. As I close the interview, I feel a sense of happiness for her. At the same time, I wonder how she is able to help the boy who now lives with the poor grandmother.

For my next interview, I talk to a young woman (aged 25) who tells me another inspiring story. She lost her mother when she was a teen and has been living with her father since. She walks me through the agonies of growing up without a mom (mothers are breadwinners in most rural households – they fend for the family). She dropped out of school in Standard 7 because they did not have the money for school supplies (uniforms, books, etc). They usually went hungry for days. About a year ago, she decided she wanted to start up a trading business but did not have the capital for it. She however had a small amount of money given to her by a stranger. With that money, she went to the dumpsite to buy plastic bags for resale. The other kids at the dumpsite would dig out the plastic (shoppers) bags, empty them and sell them to her. She would take them home, wash them and take them to the market for sale. She managed to grow her capital to 4,000 Kwacha, enough to start a proper trading business. It was during that time she was seen at the dumping site that she was identified as a potential beneficiary for the SY2SE project. At the same time she had her 4,000 Kwacha from selling plastic bags, she got a loan for 10,000 Kwacha through the project. She used the money to start trading in dry beans. She buys the beans from other traders and sells them for a profit. I asked her if that is what she wanted from the project and she told me she would have been happy to learn a skill – tailoring. She dreamed of opening up her own tailoring shop some day and employing other people but the project did not give her the opportunity to choose how she wanted to be involved. The trading business does not look sustainable, one negative shock to the household (e.g. a serious illness) and all the capital will be lost. She will have to start all over again.

Felix standing outside the chief's house

I manage to talk to one student, Felix Kuseli, who is in Form 3 at a local secondary school (an equivalent of the junior level of high school). He is 21 and he remembers starting waste collection (scavenging) when he was only 8. He had been going to the dumpsite until a year ago. He tells me he started going there because of peer pressure. He eventually got used to being at the dumpsite. The project offered him a scholarship to go back to school. He enrolled in Form 1 (high school freshman). Last year, he passed his Junior Certificate exams in secondary school. He will sit for the final exams next year, but the project has already ended and so has the support he got from it. He is pretty confident that he will make the final exam but he does not know how he will get the money to pay for the school fees for the senior year of high school. Already, his parents had to borrow money for his school fees because the project has been late in making the payments. I ask him if he would consider going back to the dumpsite and he tells me that is a closed chapter. He is more happy and healthy now than he has ever been.

I am anxious to visit the dumpsite. After the interviews, we drive in our little old Toyota Corolla to the site. The road is bumpy, as are all the roads in this part of Lilongwe, and it takes us a while to get there. Our two guides brief us on the ground rules that we have to follow when we get to the site. No one is allowed to spit while at the site, however awful they feel. If flies cover your face, you should never attempt to chase or remove them. You should all keep a straight, happy face. You should never take pictures of anyone unless they offer you the chance to. Anything to the contrary is offensive to the people at the dumpsite and they can kick you out. A female reporter from the country’s only TV station nearly got beat up here for breaking these house rules.

Some of the people at the dumpsite

We find boys and girls as young as 7 at the dumpsite. They have a leader, a mid-30s man who directs activities at the site. He had been offered the chance to learn a skill at one of the technical colleges in the city through the project but he bolted a few days into the training. As he talks to our two guides from St. Peters, he regrets his decision to quit the training as he now sees his classmates running their own carpentry and tailoring shops in the community. As a leader at the site, he gets to pick first when the dumpster offloads. After he has selected the “goods” from the waste pile, he lets the others know they can start collecting whatever they want. He still retains the right to every valuable item – he can confiscate anything he thinks is valuable that has been found by the other people at the dumpsite. This is a dumpsite for everything from expired grocery and food items to used medical supplies. We observe there are broken glasses and sharp metals too at the site. Some of the young people at the site are wearing mismatched boots (collected from the site) while others are barefooted. They use sticks and their hands to dig for valuables from the heaps of waste and they have no gloves on. During our tour of the dumpsite, we learn that there is one particular dumpster that is everyone’s favorite. They nicknamed her Dalo (or Darling) because she brings in more food than every other truck. Dalo brings in rotten chickens, beef and everything from grocery stores in Lilongwe. Some of the food brought in by Dalo is sold to the community – to households and to vendors processing food by the roadside. In our conversation with one of the chiefs in the area, he admitted to eating chicken from the dumpsite.

The dumpsite used to have a fence around it but the people who collect the waste took it down because it prevented the

Me at the dumpsite

m from getting there. As we leave the site, I feel so sick to my stomach. The air at the site is awful, my clothes stink. There are flies everywhere on the ground. I wonder how these young people would survive such a place. I have questions for Felix that I want answers to. How did he make it from such a place? He admitted to getting sick once in a while but if I spent my every day here, I would barely make a week. I am physically and mentally exhausted. It has been a long day but I never imagined it would be as enlightening as it has been depressing. I have always thought I grew up in poverty (and I did, by our standards of poverty) but I had never fathomed anything like this happening in the capital city of Malawi. Urban poverty in Malawi is worse than rural poverty. This, to me, is a huge public health issue. I have questions for the city assembly who manage this dumpsite. My friend has scheduled a meeting with them and I hope I will be able to get the answers that I need.

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Today feels awesome. My thesis got accepted for publishing, which effectively means I am done with my MS training (the thesis defense was last week). I am pretty impressed with how much ground I covered for my thesis research. As I mentioned earlier, I have been working on measuring the impacts of the Farm Input Subsidy Program in Malawi on a series of phenomena. Previous evaluation studies have focused mainly on the program’s impact on national production of maize. My research investigated how the program impacted the behavior of smallholder farmers and other outcomes. Here’s an abstract of the thesis:



Thesis title: Measuring the Impacts of Agricultural Input Subsidies on Fertilizer Use, Land Allocation and Forest Pressure: Evidence from Malawi’s 2009 Farm Input Subsidy Program

This thesis investigates the impacts of Malawi’s Farm Input Subsidy Program (FISP) on smallholder farmers’ behavior, decisions, and outcomes. Four phenomena are studied: (1) use of fertilizer for maize production; (2) maize yields; (3) land allocation; and (4) forest clearing. The study uses cross-sectional data from 380 farm households in Kasungu and Machinga districts of Malawi. The FISP was implemented through a voucher system that targeted deserving households based on select criteria. To study the impacts of the FISP, a two-stage regression approach is used. In the first stage, selection into the subsidy program is treated as endogenous and conditional on household- and village-specific factors. A multinomial logistic regression is used to predict the probability of participation. In the second stage, Tobit regressions are used to examine the impacts of the subsidy program on fertilizer use and forest clearing. Subsequent to this, a production function for maize is used to measure differences in maize yields between program participants and non-participants. To examine the impacts of the FISP on land allocation, a system of three land share regressions is estimated.

Results suggest that the most vulnerable people in the communities studied were not the main recipients of the coupons, contrary to program design. Nevertheless, the results suggest that the subsidy program increased fertilizer use among participating households. Fertilizer use was found to be positively correlated with maize yields. In addition, farmers who planted improved maize seeds, such as those subsidized by the FISP, obtained higher yields than those producing traditional maize. The results also show that households that received coupons for maize inputs allocated 20% more land
to maize than those that received no coupon. The analysis suggests that the program may have promoted intensification rather than extensification of maize and tobacco production in the two study areas. Households that participated in the Farm Input Subsidy Program cleared less forest land for agricultural expansion in the study year than those that did not, although those who received subsidies related to tobacco production had a program-induced derived demand for trees, which were used to construct tobacco drying sheds.


Me and my advisers  are now working on publishing three papers (from three chapters) out of the thesis. I will continue to work on this when I get back to Malawi in a couple of weeks. I am very excited about the results and the storyline that we were able to uncover.

It has been a while since I updated this blog, my apologies for that. A lot of things have happened since. I am almost done with my thesis research, and will post a summary of the findings on the blog very soon. My research attempted to measure the impacts of the 2008/9 Malawi Input Subsidy Program on the use of chemical fertilizers by smallholder farmers, land allocation among different crops, and forest clearing for agricultural expansion. I am pretty excited with the story that’s unfolding.

If all goes well, I will be back in Malawi towards the end of July to pick up a temporary job at IFPRI in Lilongwe. In the interim, I have a thesis defense to worry about that’s coming up in a few days’ time. Once that is out of the way, I will be back to my old blogging self. Thanks for the patience!

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Going through my old files, I found this article which I did way back in September of 2004. It appeared in The Nation newspaper of 28 September 2004. Note that I haven’t updated it so some information might be outdated, but it’s worth reading.


The World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade (GATT) in 1995. The three main objectives of the WTO are to help trade flow as freely as possible, to achieve further liberalisation gradually through negotiation, and to set up an impartial means of settling disputes on trade. Its main purpose is thus to promote free international trade. Compared to GATT, the WTO is much more powerful because of its institutional foundation and its dispute settlement system. Member countries that do not abide by the WTO’s trade rules are taken to court and can eventually face retaliation. The 134 countries members of the WTO have had to adapt their national legislation to the rules of the WTO. The most powerful members of the WTO are USA, the European Union (EU), Japan and Canada. Developing countries are the majority in number (2/3), but not in power. Malawi joined the WTO on 31 May 1995.

Historically, GATT enforced phased-in tariff reductions worldwide up until the Uruguay Round (1994). The trade negotiations focused on non-agricultural goods, mainly because the U.S. wanted to protect its farm sector. As the corporate interests of the developed countries have expanded, they have lobbied for an incorporation of more issues into the GATT/WTO. Its agenda now includes agriculture, services (financial, telecommunications, etc.), intellectual property rights, and electronic commerce.

Theoretically, the WTO is a democratic body, and all WTO members have an equal voice, but in practice, the WTO is still a way from being fully democratic, and poor countries are subject to bullying unlike at the UN. Decisions at the WTO are made behind the scenes, as countries trade concessions with one another and naturally this horse-trading favours those countries with a lot of financial & political power. Rich countries, particularly the US, EU, Japan and Canada, have well funded teams of specialist negotiators at the WTO headquarters, while half of the poorest countries in the WTO can’t afford even one and, in addition rich countries have been known to use intimidation and threats to get their way.

The least developed countries (LDCs) are less likely to benefit from the WTO because they are marginalized in the world trade system, and their products continue to face tariff escalations. US and other industrial countries have exorbitant textile tariffs which constitute big barriers to the export of textile and clothes from Africa (Zimbabwe, Zambia, Uganda, Tanzania, Mozambique, and Malawi), one of the sectors where these countries could be competitive. Washington has promoted free trade principles only in sectors that benefit the U.S. economy; in other sectors, like textiles, protectionism reigns.

While at the UN, the principle is “one nation one vote”, this is not the case at the WTO, where the big countries are the real “decision-makers”. Within the WTO framework, developing countries have less power and influence because although they make up 75% of WTO membership and by their vote can in theory influence the agenda and outcome of trade negotiations, they have never used this to their advantage. Most developing country economies are in one way or another dependent on the U.S., the EU, or Japan in terms of imports, exports, aid, etc. Any obstruction of a consensus at the WTO might threaten the overall well-being of dissenting developing nations. Trade negotiations are based on the principle of reciprocity (or “trade-offs”) i.e. one country gives a concession in an area, such as the lowering of tariffs for a certain product, in return for another country acceding to a certain agreement. This trade-off benefits only the large and diversified economies, because they can get more by giving more. Negotiations and trade-offs therefore take place among the developed countries and some of the richer or larger developing countries. Sub-Saharan African countries have fewer human and technical resources. Many cannot cope with the 40-50 meetings held in Geneva each week. Hence they often enter negotiations less prepared than their developed country counterparts.

Africa has very little saying and on top of it, it has not the means to participate fully in all the discussions in the working groups in Geneva, because it lacks the economic and technical fibre. Only 26 out of the 39 African countries have a permanent ambassador in Geneva, and only Uganda has an ambassador specially attached to the WTO. Even the countries having ambassadors in Geneva they can hardly follow all that is going on at the Geneva WTO Centre.

Under the WTO, use of subsidies in production is discouraged so that all countries have a level playing field. Subsidies help reduce the cost of production to the producer and this implies a relatively lower output (and selling price) is required to break-even. However rich countries use subsidies to support their own large companies and traders while poor countries have been forced to reduce the protection that they can give their own producers. Both the European Union and the United States protect and subsidise their agricultural producers, encouraging production of large surpluses of food while there are no such subsidies for the smallholder producer in Malawi. The African market is often flooded with European or USA food dumped products (sold at a price lower than its real value because they are subsidised by their governments). These lowers prices threaten local production of food as local producers cannot compete in these conditions. A country’s staple crop production can be easily devastated by an influx of cheap imports. Trade liberalisation can cause deterioration of farmers’ life standards and influence negatively food security. Small producers in poor countries are increasingly expected to compete with large scale, technically advanced, subsidised producers on the world market. Removing subsidies that lead to dumping of cheap exports in poor countries is certainly beneficial and the UK Government deserves credit for having pushed for this in the EU.

The rich countries claim that the WTO is helping the world move towards a system of ’free trade’ in which every country will specialise in producing what it’s good at, and everyone will benefit. They claim that if all countries play by the same rules, this will be fairer for all, but in such an unequal world, this kind of trade would be far from fair. It would be like a football match between Manchester United and the local Bunda Socials FC – there might be a level playing field, but Manchester United will still win each time the two sides clash.

For African countries, a change in the EU farm policies e.g. by eliminating subsidies, would benefit them far more than all the EU aid programs to help poor countries. Africa could also benefit from processing its agricultural products, but the barriers to imports in industrial countries make it difficult to export them. The EU and the USA fear competition, and thus keep their trade barriers for processed food.

There is little or no evidence to support claims that free trade lifts people out of poverty and, in fact, there is much that indicates to the contrary. Such countries that have rapidly opened their markets to free trade, as Mali and Zambia, have very poor records of economic growth and poverty reduction. On the other hand, South East Asian countries, which have successfully reduced poverty through trade, did not use free trade policies. Some of the policies they used (such as restrictions on investments by transnational companies, selective protection of imports, and flexibility on patents) would not have been allowed under current WTO rules.

According to the IMF, sixteen sub-Saharan African countries have lower trade barriers than the EU, yet these countries are struggling to improve living conditions for their people. As Nelson Mandela observed, rules uniformly applied to WTO members have brought about inequalities because each member has different economic circumstances. The WTO should therefore put poor people and the planet first, rather than apply the same rules to all countries regardless of their specific needs.

For most poor producers, local markets are far more important than international markets. Poor producers do not have a realistic chance of benefiting from foreign markets, so it is very important that they can sell their produce locally other than focus on the international market fantasy. African firms and farmers are small and lack the technology and marketing skills to compete in the world market. The opening of markets has mainly benefited the transnational corporations at the expense of national African economies and the small farmers, workers, and jobless persons.

Economic theory suggests that protectionism enhances growth of infant industries. If poor countries’ industries are to reach the standards and productivity required to benefit from international trade, then they need the support of their governments and require a protected local market in which to grow. Many developed countries used government intervention in the past to develop their own industries, but the UK Government is trying to make it difficult for poor countries to follow the same course.

In countries such as Zambia and Malawi, where 85% of people depend on farming for their living, millions of farming families don’t have electricity, piped water, adequate housing, or money for shoes, medicines, school fees and sometimes even food. Poor farmers, who lack tools, transport, capital to buy seeds, and even proper roads to reach markets, simply can’t compete equally with agri-businesses in rich countries. Poor countries need special treatment to protect their agricultural sectors and small-scale producers.

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I read with interest James Mphande’s article on how much profits banks in Malawi are making, which appeared in the Daily Times of 5 April 2010. I concur with Mr. Mphande and seek to extend the discussion to disclosure of bank charges.

How much money are you losing to bank fees each year? Odds are you don’t know, and despite being required to do so by law, many banks fail to disclose their fee structures and charges to customers. Some have the information on their websites but I do not expect a tobacco farmer from T.A. Simlemba to have access to the internet. It is disturbing that many consumers are not provided with account terms and information about fees before opening an account. You don’t have to buy a car before you find out how much fuel it consumes, and you don’t have to move into a house before you find out what your monthly rent will be. In the same way, consumers should not be forced to walk blindly into the terms and conditions of a bank account.

What are the major types of charges that banks impose on your money? First there is the monthly account management

RBM Headquarters in Lilongwe

charge – a fixed service fee for the provision of the account. This is levied on all current accounts, and a few banks impose this fee on savings accounts too (as I write, I have one such savings account with a local bank which is now in the negative due inactivity– I will let them decide what to do with it). Have you ever wondered why customers have to pay for online account management? And then there is the double-charge for ATM withdrawals on ‘foreign’ or ‘out-of-network’ machines (other banks’ ATMs) – your bank charges you and the owners of the other ATM charge you too.

Banks in Malawi, it seems, are very dependent on fees to meet profit goals. In defense, the banks argue that Malawians are actually paying for state-of-the-art ATM and computer technology, invested into a market with relatively few consumers and that it is unfair to compare bank charges in Malawi with those of developed countries. Granted, it is risky to extend credit in Malawi because the country lacks the mechanisms for protecting lenders (and our judicial system is always crowded with cases) but there is no justification for selling cash withdrawal slips when deposit slips are free in the first place. And does anyone know why nobody asks any questions when you try to deposit huge sums of money into your personal account but you get frustrated with questions when you attempt to withdrawal the same amount? If Malawian banks were indeed not making so much money, why is there more interest from international banks in the Malawian market? Why have we seen the birth of new local banks and an influx of international banks into the industry over the past five years?

Last year, I had a colleague send me money from the US by telegraphic transfer which I was to use to pay for some services he had used during his visit here. I had looked up the exchange rate from the schedule my bank publishes in one of the dailies and it said K140. I did my conversions and told my friend the US$ equivalent, plus a tiny contingency in case my calculations were off. After waiting in line for almost an hour (only two teller counters were open out of 5, and I have grown to accept that as the norm), the teller asked me to step aside while I wait for confirmation that the account was mine (which took a good 15 minutes – the owner of the account probably was not picking up the bank’s calls). My friend had told me that he paid all the necessary wire transfer fee at his bank in the US but when the money reached my account here, I discovered it was 5% less than what I had expected. I tried for several days to get an explanation from my bank for the difference but was never successful. Without an explanation, I could not ask my colleague to send me extra money – I had to meet the shortfall from my own pocket. It comes as no surprise to me that most Malawians in diaspora would rather risk carrying all their foreign currency savings in their pockets (and those of their kids and spouses, if any) when returning home than to safely deposit it into their local accounts before departure. This customer service (or lack thereof) is a prime example of how our banks operate. In Malawi, the customer is no longer the king. We all are at the mercy of our banks that you sometimes wonder if saving your money in a hole underneath your bed is a better option.

A strange lack of serious research into the issue of bank charges baffles me. As far as could be established, none of our public universities has ever properly researched the issue. This is an indictment against tax-subsidised research institutions, and suggests that Malawian consumers are not getting their money’s worth from their universities.

I suggest that the Reserve Bank of Malawi include assessments of the need for disclosure in their regular oversight of banks and lenders, and that consumers regularly receive fee and penalty disclosures prior to opening an account. By the way, do we still have the Competition and Fair Trading Commission? Consistent conspiracy theories have it that the banks have for years colluded over pricing. Nearly all of my friends seem to know someone who knew someone who once worked at one of the banks and regularly attended meetings between officials from different banks where price levels were agreed. As Mr. Mphande pointed out in the prelude to this article, there is no competition in the banking industry in Malawi. You can almost just pick a bank by looking at which of them has your favourite colour and logo, they are all the same.

Earlier this year, parliament passed the Credit Reference Bureau (CRB) bill whose objective, according to Finance Minister Ken Kandodo, is to ensure that individuals and companies in the country have easy access to loans. The CRB will also allow lenders to check defaulters through the sharing of a borrowers’ credit behavior. The Reserve Bank of Malawi has been mandated with the oversight of the CRB. During debate on the bill, opposition politicians worried if the CRB will not be used to victimize people, especially those deemed to be critical of the powers that be. In some countries that have an operational credit bureau industry, one of the problems is that CRBs are not required to give any consideration to the circumstances around a defaulting lender. A responsible person who loses his job unexpectedly, for instance, is treated no differently from a fraudster. Indeed, one of the biggest problems faced by entrepreneurs is access to credit, and a system of blacklisting without sufficient regulation and transparency can severely undermine national economic objectives in the promotion of entrepreneurship and the development of the small business sector. I sure hope the CRB is going to have a human face. Government needs to look at all these issues, and to develop a clear policy on how it is going to police the credit bureau industry. More generally, it also needs to decide how it will regulate the collection and distribution of consumers’ personal information.

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News stories coming from back home this week have been very fascinating, hilarious, and infuriating at times. There is this other 89 year-old village chief that is making a living out of other people’s misfortune by selling rainfall – yes natural rainfall! The guy must have some supernatural powers to do that, although I do not trust him. And then there’s there’s this other 32 year-old wife who beats her husband to death because the guy used up 500 Kwacha (about $3.50) of the family income on beer. Poor guy, I wish he had known. But the two stories that angered me were about price hikes: government raising passport fees and one mobile company hiking its tariffs.

I have no problems whatsoever about government raising fees for the services it offers, but this one hike is simply unjustified. The news is that effective immediately, the processing fee for a new passport has been increased by nearly two-fold to K15,100 from K8,000. To make sure that they reap the benefits of the new fee increase, government is calling on all citizens that have passports to have them replaced within 6 months as they have introduced some additional security features on the revised passport. That makes me question what those that are outside the country will do if they cannot get back to Malawi to have their passports replaced within those six months. I think the price hike is highly uncalled for and it is therefore ridiculous. There certainly has to be better ways of raising money for government than charging exorbitant prices for essential services like passports and drivers licenses. It is an abuse of the monopolistic power that government has over these services.

And then there is the story of Zain Malawi, one of the two cellular providers in Malawi, increasing the prices of its airtime. It still baffles me why mobile companies in Malawi are allowed to charge for their airtime in foreign currency when there is a law that prohibits such a malpractice (makes me wonder what the Reserve Bank was established for). Now that the Malawi Kwacha has fallen against the US$, this was always going to happen. In a country that has one of the highest mobile tariff rates in the continent, the last thing consumers would expect is to be asked to pay even more for services that are nearly non-existent. Just recently, customers on the Zain network were unable to make or receive calls, and that was not the first time in as many months. The explanation from their top guru? “Some of your cellphones are not capable of acquiring the signal from our network”. Is that all you could say, really? Is it because Malawians are the most silent of consumer societies in the region? We don’t demand better service for our money, and the companies keep abusing us. In other places, there would be a boycott of Zain’s services, but that would never happen in Malawi. Remember the song by Lucius Banda? Buledi akakwera mtengo, mmalo mogwirizana tonse tikane, ukapeza ena amatama agula malofu asanu (when the price of bread goes up, instead of everyone agreeing to not buy it, some people go and buy 5 loaves at once instead). That is how naive we are as a society, and it hurts nobody but ourselves.

I wish we were as aggressive in demanding value for our money as our colleagues in other countries are. We can no longer afford to lose our hard-earned money on services and products that never are.

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Much has been said about the agricultural input subsidy program that was introduced by government in 2005. The success of the subsidy program, aside from pop star Madonna’s adoption of David and Mercy, is one story that has helped transform the profile of the country. It is a successful case study that is now often cited in agricultural policy classroom sessions to demonstrate to students about how governments in the developing world can help attain food security for their populace. In a world faced with widespread food shortages coupled with increasing food prices, Malawi has become an example of how sound domestic policies, rather than imported ideas, can work for the people. As a result of the successful implementation of the subsidy program, coupled with favourable weather, the country has since 2005 trebled maize production from 1.2 million tonnes to 3.4 million tonnes in the 2007/2008 agricultural season. It has never felt so good to be a Malawian.

Malawi’s recent success in turning around the agriculture sector and ensuring food security for the country has confounded critics. Economists have generally tended to regard subsidies as inefficient, expensive, socially inequitable and environmentally harmful, imposing a burden on government budgets and tax payers – all seemingly strong arguments against using them. They argue that subsidies distort prices and resource allocation decisions, thereby altering the amount of goods and services produced and consumed in an economy. A subsidy is government interference that takes money from taxpayers and gives it back to producers. While food prices tend to become lower, the savings are paid for by the taxpayer. This can be inefficient if the goal is to redistribute income as there are arguably better ways to do it, such as progressive taxation or even negative income taxes.

But how has the country gained from implementing the program? Malawi’s success in this program, against donor advice, has made the country a grain exporter and helped contain food costs. In addition, the program has helped save the country of the much needed foreign exchange. In fact, the phenomenal increase in maize production has saved the country a reported yearly budget of US$120 million that it had spent in 2005 importing food aid (was that free food?). Malawi has become a model to follow when it comes to using local policies to boost agricultural production. The emerging consensus now is that such subsidies are essential for African agriculture. As a result, last year the United Nations’ Food and Agricultural Organization rewarded President Bingu wa Mutharika, who also serves as the country’s Minister of Agriculture, with the Agricola Prize.

The rich nations have continued to prod the poor ones (through such institutions as the IMF and World Bank) to deregulate their economies by, among other things, eliminating subsidies and opening up their borders to free trade. Ironically, this donor opposition to agricultural subsidies in Africa is coupled with refusal by rich countries to reduce their own expensive subsidies to commercial farmers in their own countries and imposing prohibitive tariffs on commodities for which they know Africa has a comparative advantage, such as sugar. Yet the case for subsidies is far more compelling for African smallholder farmers who often lack minimum access to agricultural inputs.

The justification often given for the removal of subsidies has been that, with the cost of food so cheap globally, poor nations can always buy staple goods on the world market if necessary, and so would be better off putting their farmers and farmland to more efficient use (I would also argue that the food is supposedly ‘cheap’ globally because the rich countries are subsidizing its production). But with increasing global food prices, relying on the global market to feed your own is a highly flawed undertaking.

With the rising price of oil, the United States and the EU began providing incentives for their farmers to switch production from food to biofuels. Overall, rich nations now spend as much as $15 billion annually in biofuel subsidies. In the United States alone, some 20 million acres of cropland have been converted from growing maize for food to growing maize for fuel. This number is sure to rise, since America’s Renewable Fuel Standard legislation mandates that, by 2010, at least 28 billion liters of fuel used in the country must come from non-petroleum sources. There is thus no guarantee that Malawians will be able to access maize from these countries, let alone afford the ‘oil price of maize’.

If you cannot take care of your own, do not expect others to do it for you and the president is only trying to live up to that. If the argument is that the program is so costly and a huge burden on the government budget, someone will have to tell me how cheap it is to import maize from the US or Europe. My simple back-of-the-envelope calculation tells me it is more convenient and efficient to buy fertilizer now than to compete for maize with American and European vehicles later. In Malawi, the subsidy program has more than paid for itself by reducing costs for food imports, and therefore improving the country’s balance of payments. It is a lesson to the proponents of agricultural privatization that privatizing agriculture simply does not work for African countries. Removing the input subsidy program and privatizing ADMARC is simply not an option for Malawi, especially at this time in global history. Instead of pursuing a one-size-fits-all policy in Africa, the World Bank and IMF must start looking at each country individually.

However, even supporters of increased subsidies warn that subsidies must also be sustainable, and that other factors must be considered, including the cost of imported inorganic fertilizers and long-term impacts on the environment. It is imperative on the government to strongly consider increasing funding for agricultural research, the kinds of efforts that sparked the original Green Revolution–and might just provide the country with new ways to increase crop yields. Much focus should also be placed on promoting proper food storage and processing, which would help add value to production. In addition, there is a great need to develop rural market infrastructure so that farmers get good value for their production. This includes strengthening producer groups and other rural organizations to enable them gain mastery of the market and reduce transaction costs; gain access to information on domestic, regional and international markets and facilitate technology transfer.

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Hello friends. Today I have decided to honour one brave Malawian boy whose dream has inspired me and many

The boy who harnessed the wind

The boy who harnessed the wind

 others across the globe – William Kamkwamba. You might have heard his story of determination and courage against all odds. For those who might have missed his story, William is a boy from Kasungu District (Wimbe to be specific). When he was just 14, he built an electricity-producing windmill from spare parts and scrap, working from rough plans he found in a library book called Using Energy and modifying them to fit his needs. The windmill he built powers four lights and two radios in his family home.

I have just completed reading his autobiography The Boy Who Harnessed the Wind that I got from the online store Amazon. I must admit that it is truly an inspiring story, I have not been disappointed with the buy. In the book, William shares his life story, which strikes a chord in my own life. It is a tale of how courageous one man can be in the face of adversities. In the book, William tells of how the society around him shaped his life – from magic through traditional dances to the boy he is today, how his family made it through the 2001 famine and how it almost shattered his dream of getting a good education, and his inventiveness that has led him to where he is now. I’m not reviewing the book on this page, suffice to say it is worth every cent.

Now 21, William is a student at African Leadership Academy, a pan-African high school in Johannesburg, South Africa. The future looks bright for this young man. As a Malawian, I cannot be any more happier for him. I applaud everyone who helped unearth this promising leader. If you appreciate good things, I recommend you buy his book from Amazon.

If you missed his video, here it is:

The Malawi Kwacha

The Malawi Kwacha

The Malawi Kwacha has for the past three years been trading at K140 to the United States Dollar. In the wake of the recent global economic crisis that has seen the devaluation of some of the world’s major currencies – key among them being the United States Dollar and the British Pound Sterling, there have been calls from some sections of the Malawian society and the international donor community for the government to devalue our local currency, the Kwacha. The Bretton Woods Institutions (the World Bank and the IMF) too have been calling on the government to lessen its grip on the exchange rate. The president has however stood his ground (just as he did when he first introduced the fertilizer subsidy program) and has so far resisted all calls to devalue the Kwacha. What, though, is devaluation and what are the likely consequences of such a move? In this article I attempt to explain this and more.

The Malawi Government maintains a managed float exchange rate system, which is a hybrid of a fixed exchange rate system and a flexible exchange rate system. Unlike in a fixed rate regime, the Reserve Bank does not have an explicit set value for the currency; and unlike in a flexible exchange rate regime, it doesn’t allow the market to freely determine the value of the currency either. Instead, the Reserve Bank has either an implicit target value or an explicit range of target values for the currency, determined by pegging the Kwacha against a trade-weighted basket of currencies of the country’s major trading partners. The Bank intervenes in the foreign exchange market by buying and selling domestic and foreign currency to keep the exchange rate close to this desired implicit value or within the desired target values.

Only a decision by the government through the Reserve Bank of Malawi can thus alter the official value of the currency. The government could, if it wished, take such a measure, often in response to unusual market pressures. Devaluation, the deliberate downward adjustment in the official exchange rate, would reduce the Kwacha’s value. To illustrate, the present exchange rate is K140 to one dollar. To devalue, government, through the Reserve Bank might announce that from now on K280 will be equal to one dollar. This would make the Kwacha half as expensive to Americans or anyone intending to buy it, and the U.S. dollar twice as expensive to Malawians.

Under what circumstances might a government devalue its currency? It is often because the interaction of market forces and policy decisions has made the currency’s fixed exchange rate untenable. In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves. Going back home, there have been numerous cries about the shortage of foreign currency in the country, which climaxed with the arrests of several people suspected of externalizing forex and the closure of all unlicensed forex bureaus which were thought to be hoarding forex. This is one of the reasons why the aforementioned stakeholders have been calling for the devaluation of the Kwacha.

A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country’s exports relatively less expensive for foreigners. This would seem to be consistent with the president’s vision of turning Malawi into a net exporter as it would drive up exports. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country’s exports and decrease imports, and may therefore help to reduce the current account deficit.

However, the president’s argument has been that devaluing the currency will make things more expensive for the average Malawian. “Devaluation of the kwacha would only benefit a few people, and most of them are not even Malawians,” the president is quoted as saying. “On the other hand, devaluation would impact badly on poor people as it would increase prices of commodities… the cost of raw materials and equipment importation for companies.” This is a highly valid argument as a significant risk is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, eventually slowing down economic growth.

One other risk of devaluation is psychological. Often times devaluation is seen as a sign of economic weakness. This would place the creditworthiness of the nation at risk. As a result, devaluation may lower investor confidence in the country’s economy and may reduce the country’s ability to secure foreign investment.

The government is thus faced with a tough choice here. In the end, it all depends on who has the most votes as the issue of devaluing the Kwacha becomes more of a political decision than an economic one. The business community, who the president argued he is trying to protect too, wants assurance that there will be enough foreign currency reserves in the country. I would not be surprised if I found the Kwacha still trading at K140 to the US$ come the World Cup in 2010!

This article was also published in Malawi’s Daily Times newspaper and the online Nyasa Times (http://www.nyasatimes.com/columns/of-devaluing-the-malawi-kwacha.html)

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