The trend of subsidies has been around for several decades even centuries with varying degrees of execution in different societies.
But the question is; what really determines government’s intervention in subsidies?
Any country that decides to roll out subsidies will first have to look at their reserves and choose the kind of subsidies they want to offer. It then follows that a rich country like Saudi Arabia will give subsidies in more service areas and to a larger percent of population as compared to a smaller economy like Malawi.
Here in Malawi, a subsidy such as Farm Input Subsidy Program (FISP) was deliberately structured to target the lowest bracket of the population in terms of earning order. This is so because government understands how a small economy like ours cannot manage to cover the whole population with such an amenity.
Though this is the case, it has been observed and proven that Malawians just love subsidies without even thinking of how such an attitude depletes government resources that could have been used in developmental programs.
One major reservation on subsidies is that they are not sustainable in a Capitalist/ free-market economy like Malawi.
Institutions such as Economics Association of Malawi (ECAMA), Reserve Bank of Malawi, Ministry of Finance and Malawi Economic Justice Network (MEJN) have all begged Malawians to start withdrawing their reliance on government subsidies.
Government – they argue- should not be burdened with leveraging activities that are supposed to be pushed to the private sector which should in turn offer them to the public at a market-value fee. This is the only way an economy grows healthily.
Also from an individual authoritative perspective, Business and Economy experts like Henry Kachaje, Thom Mpinganjira and Finance Minister Goodall Gondwe among others have all agreed on anti-subsidy sentiments terming the practice ‘unsustainable’
Even on an international stage, no economy –regardless of its strength- has flourished in value because of subsidies. Subsidies kill production, they kill innovation and they kill any meaningful economic drive.
A good example is on oil producing countries who at one point raked in huge amounts of money from oil sales. For example, oil boom in countries like Nigeria, Angola and Venezuela led to huge subsidies for almost every crucial aspect of service delivery in initial stages. However, it was a utopia that could not be sustained and gradually weakened the respective economies.
The economic matrix surrounding subsidies in Malawi are such that government spends millions upon millions paying for services and goods, expenditures that are supposed to be sorted out by the citizens themselves. Save for targeted and essential subsidies like FISP, the rest are unnecessary to say the least.
Costs that government incurs in printing documents like passports and driving licenses are way too astronomical as compared to what users pay to acquire the same documents at Immigration Department and Road Traffic Directorate.
Interestingly, government subsidies on the aforementioned documents are mostly used by the middle class and top-class brackets, who can afford just anything. Ironically, they are the same people who complain when government up-scales fees for one to process a passport or driving license.
Talk of our Education system. You turn to wonder when kids from rich homes – who have all along attended elite schools- end up scrambling for government loans/subsidies once they earn places in public universities.
Another area which is subsidy-bent is the Health sector where you find everyone getting free services and complaining when they are supposed to throw in a dime or two to get necessary treatment. Surprisingly, there have been times when rich Malawians who have been patronizing elite health facilities end up using government subsidies when they are referred to specialist doctors stationed at public hospitals such as Queen Elizabeth Central Hospital (QECH) or Kamuzu Central Hospital.
All this indicate that the mentality of Malawians has for many decades been caged into believing that government – whether Socialist or Free-Market economy- must give subsidies at all costs. Even after attaining a fully Capitalist economy at the advent of political change in the early 90s, we have sadly dragged with us economic philosophies that kill our vision to develop.
Time has come for Malawians to change their mind-set and attitude towards government-administered subsidies. No two ways about it.Follow and Subscribe Nyasa TV :