Our Comments on Idle Pension Funds

Is Malawi suffering from the embarrassment of riches? We seem to have accumulated huge savings through our national pension fund now at  (K825.3 billion, representing 16.3 per cent of the Gross Domestic) . RBM projects that by end 2020  pension assets would swell to K1.1 trillion. However, we apparently have no clue what to do with the money.SEE HERE

The Governor of the Central Bank has complained about the low rate of translation of money into a growth-enhancing investment. Only a few days ago, Mr Chihana RBM Chief Examiner for Life Insurance and Pension Funds, said growth in assets has not translated into investments in infrastructure.

 “We have done very well to accumulate the savings but to translate them into infrastructure investment has been a bit of a challenge,” he said.

The new buzzword in development circles is "domestic resource mobilisation" instead of the debilitating focus on attracting aid. We will dance up and down because an IMF mission is coming when we can't find a use for the resources we already have. 

This is not a minor failure. It suggests gross incompetence on the part of those managing our pension funds. The head of the pension fund once suggested that we should export our funds to other countries apparently because there were no investment opportunities Malawi. This calls for a complete overhaul of the management of the pension fund to bring financial experts with some ideal of the great developmental potential of such funds. management of pension funds is not confined to simply receiving funds but also in investing the funds intelligently.  The levels of incompetence in our major financial institutions are simply mindboggling.

Our comments on the Salima-Lilongwe water project

Judging by the Attorney General's warning this week See,  there is apparently some dilly-dallying by the government over the Salima-Lilongwe water project. The AG’s concern is about contractual obligations which could turn out to be costly should they not be honoured. But there is another more significant argument: The sheer urgency of getting the project moving if Malawi’s development is not to be strangled by lack of water. Our three major cities are all faced with serious threats if we do not embark on new investment in water immediately See. One can hope that we have learned something from the electricity debacle following the dilly-dallying over the Caborra Bassa interconnection.

Our Comments on Textile Industry

Here is a hair-raising story. A Chinese Company has set up a large textile factory in Salima, and they are ready to begin producing. But there is one hiccup - Electricity. The company is begging the company to connect the factor to national greed.  https://malawifinancialmirror.blogspot.com/2019/08/china-africa-appeals-for-government.html

A few months ago, we commented on the fate of large projects in Malawi – why their execution lasts so long. https://malawifinancialmirror.blogspot.com/2019/03/our-guest-comment-mismanaging-large.html.  Big projects are awfully managed in Malawi. One explanation is that our bureaucrats have no interests in projects in which there are no kickbacks and workshops. So dossiers of such project lie in the shelves unattended.

Back to the Salima textile project. We have known that the project will need electricity and cotton. There seem to be no plans by the government to connect the plant to the national grid. The company needs 40,000 tons of cottons, but our production has fallen from a high of 100,000 to 10,000 tons.

Properly managed, the textile industry, with its many upstream and downstream linkages, can spearhead a dynamic export sector. However, for this to happen, we need a governments agency that oversees the projects. We have the MITC (Malawi Investment and Trade Corporation, which is supposed to be the one-stop link between investors and national governments authorities. It does not seem to be going much for the moment.

Our Comments on Magufuli's visit  to Malawi

https://www.youtube.com/watch?v=jt6zrkoOJts

Magafuli talked about key economic issues - the Mtwara port, the improvements at Dar port and the Songwe border post.  Shame that we as a landlocked country should be told by others about the need for access to new ports.

We have failed to understand and exploit our strategic position in the new transport re-ordering as access to Asia becomes an important preoccupation.  Malawi runs South-North to the East of Zambia, DRC, parts of Mozambique and even Zimbabwe which is building an extension of its railroad to join the  Nacala route about which we have been so passive. We could exploit our strategic position to connect these countries through Malawi Making Nkhata Bay and Liwonde important nodes for the region.  The multiple routes would also reduce our vulnerable and make our road-connected rather land-locked image a credible one.

We have been holding up the Songwe border for five years!.  We have been slow in finding funds that would connect Zambia to Nkhata Bay-Mbamba Bay-Mtwara route although this would be an easy project to fund.   Both the Songwe and Nkahta Bay have received financial support but it would seem Malawi is the reluctant or inefficient partner in all this. And it could easily fit into the China One Belt One Road.

Our host had quite precisely identified the issues to discuss. We had nothing to say about any of these things.  Instead, we worried about illegal migration which is probably not anybody/s mind in the region, especially when the main talking point is the ease of mobility in Africa. It was so embarrassing.

We obviously had no economic issues to talk about.  Our preoccupation was electoral.

What a waste of opportunity once again. And we wonder why we are so poor.

Our Comments on Economic Growth

In recent speeches, our President has claimed that the economy's performance has been exemplary. Available data shows quite the opposite (See graph). Under Muluzi the economy performed terribly. Bingu substantially improved the economy only to leave it in shambles with negative growth in the final year. Joyce Banda took drastic and unpopular measures and improved the growth rate. Since Peter Mutharika took over we have had two years of negative growth rates and anemic growth rates after. There is really nothing to show for now. Our advice:  Rather than campaign on his non-existent success, he should focus on future plans.

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Our Comment

One remarkable thing about the recent revelations that something more than One billion dollars has gone missing from state coffers  is the absolute inactivity on the part of the government. Other than asinine Press Releases from the State House there have been  no indication of any  sense of urgency about the  matter. In many countries some senior people would have been  suspended to facilitate investigations. The Minister of Finance and Reserve Bank governor would have been fired for having completely failed to see such massive theft under their watch.