Malawi needs to be a developmental state if MW2063 is to be achieved
For ‘Inclusive Wealth Creation and Self Reliance’ that is enshrined in the MW2063 national vision is to be achieved and delivered, the government needs to play its role as a developmental state — a state that takes an active role in the market especially where market failures exist.
This was said by National Planning Commision (NPC) Director General, Thomas Munthali during an interface with the media at Palm Valley Executive Lodge at Bvumbwe, saying as a developmental state, the main message of the MW2063 can be achieved — which is aimed at transforming Malawi into a wealthy and self-reliant industrialised ‘upper-middle-income country’ by the year 2063.
The MW2063 thus advocates that the Agricultural Development and Marketing Corporation (ADMARC) should be fully commercialized to be jointly managed with the private sector and that Malawi should have its own mining company in strong alliance with the private sector.
The defunct Malawi Development Corporation (MDC) needs to resuscitated for it to trail-braze investments in all strategic sectors of the economy so that a diversified economy would be built that will be resilient in times of exogenous shocks.
Munthali said the mining company has already been developed awaiting being gazetted, through which all foreign mining investors will be strictly regulated and monitored so that minerals are not smuggled out of the country.
The resuscitation of MDC was also suggested in October by South Africa-based Malawian Chifipa Mhango — a chief economist and director of economic research & strategy for Don Consultancy Group, who wrote to Malawi Government proposing that Malawi must put itself in sanction mode and revive MDC as a vehicle for industrial financing through direct lending and equity participation with international partners.
Mhango shared with the Office of the President and Vice-President — copied to Secretary to the Office of the President & Cabinet; Minister of Finance; Minister of Trade & Industry and the Malawi media, that such creation of strategic investment is what his host country did in fertilizer manufacturing.
He had added that South Africa was forced to invest in industrialisation based on imports substitution when the country was under international sanctions due to apartheid.
Thus the Industrial Development Corporation of South Africa was created to support the creation of industries for self reliance against sanctions.
Mhango made the suggestion when it was discovered that the Ministry of Agriculture found itself in a mess when it engaged with a bogus UK company to but fertilizer for the agricultural input programme (AIP).
Thus he said the model of importing fertilizer in Malawi should be replaced by a key massive investment locally with participation of MDC and international partners.
Chifipa, who is revered in his host country for his economic contributions there, offered his thoughts having worked for the Industrial Development Corporation (IDC) for over 10 years, stressing that this statutory company “is a perfect link to addressing the mess that is occurring in Malawi and how we can have a long-term solution”.
“The history of the IDC is a lesson for development financing in Africa, for its diversified sectors of lending and also having not received any financial support from South African Government since 1958,” he wrote. “In other words, it’s a self-sustaining development finance institution (DFI).
“South Africa, under the apartheid system was isolated for a long period, and even its colonial past made it difficult to trade and attract investment into the country. The country decided to embark on an import substitution program of industrialisation.
“Key to this was also the establishment of the IDC to support the financing of the major industrialisation projects by the then South African Government.”
Mhango added that key sectors identified through the IDC were agriculture, agro-processing, manufacturing, mining and construction — which is also what is contained in the MW2063 that says Malawi should be a “vibrant knowledge-based economy with a strong and competitive manufacturing industry that is driven by a productive and commercially vibrant agriculture and mining sector”.
Mhango went further to say that crucial to South Africa’s plan towards import substitution was the financing of the establishment of Sasol for oil, gas and chemicals such as fertilizer manufacturing before introducing Foskor fertilizer manufacturer — several other manufacturing initiatives.
“It is also through the IDC of South Africa that Malawi Government — under Dr Kamuzu Banda — was granted a loan of R3 million for the construction of the Capital Hill in Lilongwe — the seat of Government,” he said.
A fully commercialized ADMARC; having a mining company and resuscitating MDC to trail-braze investments in all strategic sectors of the economy will thus build a diversified economy that will be resilient in times of exogenous shocks which are the main challenges of the MW2063 First 10-Year Implementation Plan (MIP-1).
During the workshop, the media was appraised that the challenges being faced include:
* Persistent exogenous shocks (tropical cyclones, CoVID-19, cholera etc) amidst less resilient infrastructure and non-adherence to environmental laws; coupled with no buffer resources to face the shocks head-on;
* Unsustainable debt (K7.9 trillion equivalent to over 65% of GDP);
* Implementation capacity deficiencies both at key central government ministries, departments and agencies (MDAs) and decentralised levels; * Sheer negligence arising from lack of strong accountability mechanisms (low levels of adherence to regulations governing public servants); and
* Corrosive impacts of corruption that fends off investments into Malawi and diminishes government’s revenues for socio-economic growth.
But to get back on track amidst the exogenous shocks as main focus on wealth creation and self-reliance interventions, there is need for prioritized investment in large-scale mining, megafarms, agro-processing, manufacturing and tourism.
This should also go along with creation of an enabling environment that includes investments in energy, information technology, strategic transport networks, macro-economic stability and good governance especially around adherence to public finance management and fighting corruption with speed.
However, NPC takes cognizance that those if authority to make MIP-1 work “know what needs to be done — but are not holding each other accountable enough” to roll out the MIP-1 interventions that were modelled as the best options to achieve MIP-1 milestones.
The presenters stressed that to achieve the MIP-1 milestones, the national budget needs to ensure resources are financing identified MIP-1 priorities, saying “Government is the biggest economic agent in the economy” and that it “sets the tone and shows the way.
One key reasons for low performance of the Vision 2020, which has been succeeded by MW2063, was that the national budgets were not financing the vision.
Thus the media interface, the third of interaction by NPC since the MW2063 was launched in January 2021, was:
* to enlighten the journalists what is in the MIP-1 vis a vis its budgets;
* to remind the public and duty bearers what NPC has committed to and how its progressing; * to scrutiny of national budgets’ alignment to MIP-1 (interventions) and make mention of it; a signal the wealth creation and self-reliance agenda to state and non state actors;
* to spearhead the developmental state philosophy — mining company, resuscitation of MDC and advocate for commercial-oriented ADMARC;
* popularize the National Research Agenda across the entire development space, targeting all players (academia, public and private organizations);
* promote research, innovations and technological outputs emerging from the National Research Agenda, facilitate uptake by policy makers, private sector and consumers;
* support in identifying, technological and innovations needs in the development space and catalyze impetus towards research across the development sector; and
* support identification of impact-full and innovative ways of disseminating research, innovations and technological outputs in the development space.
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