Pilirani (not her real name) is a university student who tries to make a bit of extra money by traveling to Tanzania to buy some goods that are sold to her customers in Blantyre. After the most recent trip she stated that the Malawi Kwacha was not buying much in Tanzania as compared to the past, and that she was considering pulling out of the trade.
Since the early 1990s the Malawi Kwacha has been steadily becoming a currency with continuously depleting value. In 2009, K141.20 could buy USD1. Now the exchange rate is at 824. Some of the steepest deprecation occurred between 2011 and 2012 (from 156.5 to 249.1), between 2012 and 2013 (from 249.1 to 364.4) and between 2015 and 2016 (from 499.6 to 718.0).
Over the past 10 years we have literally seen the tambalas vanish from our currency. Coins are no longer in circulation in Malawi. There was a time at which tambalas could buy some goods. I remember a radio advertisement in the 1970s for a brand of cigarettes called Filter No. 1, whose price was 2 tambala for a packet of 5 cigarettes.
There is something not quite right about we generate our foreign exchange. The Malawi Kwacha is not anchored by any substantial reserves because we fail to generate such reserves in adequate amounts. Not surprisingly, fingers get pointed at the authorities, those in power.
This article will attempt to offer some thoughts on what could be done in the medium to long term to put a dent into this perennial problem. The authorities should take this as friendly advice, which they cannot get from their political rivals. The main focus of their rival would not be so much identifying solutions to the problem as dislodging them from government
It is common knowledge that the recent hiking of petroleum prices has subjected Malawians to very harsh economic conditions. The price increase has been brought about by a whole nexus of factors, among which is the deteriorating value of the local currency. Even if the price of petroleum products, by some fluke, remained unchanged, the unstable currency would still cause prices of goods to escalate.
There are a number of imported products that exert a great deal of pressure on our reserves. Perhaps the most important of these are fuels and fertilizers. We have to find means of dealing with these two, if not in the medium term certainly in the long term.
We need to search within the country for solutions to this and similar problems. Can anything be done on fuel in terms of reducing the importation bill? This columnist believes something can be done. I have written at least one article before lamenting lack of progress regarding alcohol driven vehicles. In 2015 I stated that switching to ethanol would spawn many winners and that the country’s economy would be the biggest winner, for more reasons than one.
Ethanol is a product that is one hundred percent local. As such it does not exert any pressure on the country’s foreign reserves, a far cry from the forex drain that importation of petroleum is. Using ethanol would be equivalent to having a part of OPEC in Malawi. Lilongwe Technical College conducted extensive tests on an ethanol driven vehicle and concluded that it would be perfectly feasible in Malawi. All that motorists needed to do was buy a special kit and get it fitted to their petrol propelled vehicles so that they may be run on a blend of petrol and ethanol in any ratio, including 100% ethanol.
The management of Press came up with a pricing structure in order to start marketing ethanol to motorists, as reported in my 2015 article, but there was no response from government. To date, ethanol is not a fuel commodity that motorists can access on the market. Meanwhile pressure keeps piling up on our foreign reserves and Kwacha continues to perform poorly.
Let me point out that diesel vehicles can switch to bio-diesel, another local product. Bio-diesel does not require any changes to be effected to diesel engines.
Besides saving forex, biofuels will also create a knock on effect on the value chain as farmers will have a ready market for crops like sugarcane, jatropha, soy beans and others. This will be one way of creating employment for our youth. The manufacturers of ethanol and bio-diesel will also need more employees, which is more good news for employment creation.
As for fertiliser, the objective must be to manufacture it locally. This may require a mindset change as what can be readily manufactured in Malawi is organic rather than inorganic fertiliser.