Views by Collins Magalasi

Between a Hard Place and a Rock: EU Economic Partnership Agreement and Malawi

2008-08-15T10:47:00.001-07:00

Between a Hard Place and a Rock: EU Economic Partnership Agreement and Malawi

By Collins Magalasi
cmagalasi@gmail.com

January 2007
ACRONYMS

ACP Africa, Caribbean and Pacific
COMESA Common Market for Eastern and Southern Africa
CPA Cotonou Partnership Agreement
DWP Doha Work Programme
EAC East African Community
EEC European Economic Community
EPA Economic Partnership Agreement
ESA Eastern and Southern Africa
EU European Union
GDP Gross Domestic Product
IDS Institute for Development Studies
IGAD Integrated Authority for Development
IOC Indian Ocean Commission
REC Regional Economic Community
SADC Southern Africa Development Community
WITS World Integrated Trade Solution

1. Executive Summary

Poor Malawi is under new form of siege by rich nations in the north! With the expiry of the EU/ACP Cotonou Agreement coming close, pressure for Malawi and other Africa, Caribbean and Pacific countries to enter into reciprocal free trade agreement with Europe is mounting. If Malawi goes ahead signing onto the Economic Partnership Agreements (EPA) with Europe in their current form, Malawi will be poorer than it is now as concluded by this paper. This paper challenges the claimed benefit of EPAs by looking at among others, the potential impacts of the EPA on the Agriculture, manufacturing, and services sectors in Malawi. In detail, the paper confirms that the poor country will be hit hard by fiscal revenue loss, adjustment costs, and the state of play of negotiations. Indeed one is left with questions whether Malawi by moving on from Cotonou to EPA it is not getting into a harder squeeze.

The dangers of EPAs also reach to the regional integration process in COMESA. Two consistent stories underpin this concern. The first is that the EU stands to gain significantly in terms of expanded trade into Malawi and consequently into the RECs markets. While part of this trade expansion will result from welfare creation, which is welfare improving, significant proportions of the trade gain will also be due to trade diversion from the rest of the world and from within the ESA- EPA grouping itself. As a result, while the reciprocity principle appears to be trade expanding, it will pose serious implications for deepened regional integration in Africa. Indeed, unless there are clear mitigating measures, the EPAs could seriously undermine the gains that have been achieved so far in the integration process of the continent.

The second consistent result is the potential adjustment costs that Malawi will have to bear as a result of revenue shortfalls. Given the prominence of EU imports into Malawi and the country’s reliance on tariff revenues, tariff dismantlement result in significant revenue shortfalls. The major challenge that these revenue shortfalls will pose is the adjustment costs associated with tax policy and administration reforms.

Proprietors of Washington Consensus have used formulas and models to promote free trade. This paper uses the adopted analytical tools developed by the World Bank and other international institutions - the very same proprietors of free trade - to assess and prove the potential negative impacts of the EPA on the economy in general, by looking at revenue loss, trade creation and diversion, welfare creation and adjustment costs. For result interpretation and specific sectoral impacts, the paper was informed by structured interviews of key players in the sectors concerned, and literature of previous assessment on the impact of trade liberalisation on Malawi. It is worth pointing out that these two methods are used in support of each other and not in mutually exclusive.

2. Background

The Cotonou Partnership Agreement (CPA) between the European Union (EU) and the African, Caribbean and Pacific (ACP) countries which succeeded the expired Lomé Agreement envisages the signing of Economic Partnership Agreements (EPAs) by December 2007 between the EU and ACP countries. Malawi is one of the countries that decided to negotiate this EPA under the Eastern and Southern Africa (ESA) configuration of states. The broad mutual expectation between ACP and the EU is that the EPA will be the cooperative framework under the CPA that will “aim at fostering the smooth and gradual integration of the ACP States into the World economy, with due regard for their political choices and development priorities, thereby promoting their sustainable development and contributing to poverty eradication in the ACP countries”[1]

One of the essential characteristics of this multilateral partnership is that it hopes to combine trade, development aid, and a strengthened political dimension. The key principles for this trade cooperation are reciprocity; differentiation; deeper regional integration; and coordination of trade and aid.

A huge debate has since ensued; especially on how free trade can deliver development when two unequal groupings are expected to be partners in that arrangement.

The interim period between the signing of the CPA on 23 June 2000 and the launch of the EPAs by 1 January 2008 is supposed to be the time for the negotiation process about the final form and decision making by countries whether or not to sign EPAs. There are two phases in the negotiation process. The first phase was launched on 27 September 2002.

The second phase is underway, and is progressing gingerly as the ESA grouping try to negotiate in favour of curbing some challenges that they see arising from the EPAs, and these include:

(a) How to ensure development needs are adequately addressed through the EPAs;
(b) How to manage and finance expected costs of adjustment;
(c) How to manage the expected losses of fiscal revenue;
(d) How to cope with more competition expected to arise due to the principle of reciprocity of the EPAs;
(e) How to ascertain net benefits from the EPAs, especially in LDCs, that is, incentive compatibility between EPAs and the EBA provisions that do not require reciprocity;
(f) How to deal with limited negotiations capacity because EPAs negotiations are stretching the already limited resources available to the ACP countries;
(g) How to ensure consistency between the negotiations under the EPAs and that under the Doha Work Programme (DWP), in particular, how to improve market access for agricultural and non-agricultural products to the EU that continue to impose difficulties in trade negotiations at the multilateral level.

Given this background, this paper provides an assessment, among other things, aimed at informing EPA negotiations so that they benefit to the maximum poor people in Malawi and other ACP countries and to aid the Government of Malawi to make an informed decision when the time of signing comes.

This paper is therefore designed to contribute analytical and qualitative work towards assessing the potential benefits or de-benefits from the EPAs on the part of Malawi’s industry, agriculture, and services sectors. Moreover, the paper hopes to play a crucial role as an indispensable building block for eliciting common negotiating positions, for the consultations in Malawi and Malawi’s input into the Regional Negotiating Forum.

The paper is an academic contribution the Development Economics training by the University of KwaZulu Natal and ActionAid International Malawi. Much as this is so, the paper contributes to effective participation and evidence for lobby for all people centred organizations within the ESA-EU framework, it also hopes to play a part in expediting work on alternatives as it is becoming clearer that the EPAs will not benefit small economies.

3. The Malawi Economy

Malawi is a landlocked country with an estimated GDP of 1.75 billion and a per capita GDP of $163[2] making it one of the 10 poorest countries in the world. Over 60 % of the population live below the poverty line[3]. Malawi’s growth has also been severely affected by the HIV/AIDS pandemic whereby about 16.4 % of the adult population between the ages 15 to 49 years is estimated to be infected with the virus. HIV/AIDS-related diseases account for some 70 % of hospital in-patient deaths (United Nations, 2003).

The country has a predominantly agrarian economy and is dependent on subsistence farming, with 3.5 million people wholly dependent on agriculture. Agriculture contributes between 35 to 39 % to Gross Domestic Product and over 90 % of export earnings[4]. It employs about 80 % of the labour force. This dependence on raw agricultural commodities for exports has made the country vulnerable to fluctuations in world commodity prices (over which it has no control); and has tied aggregate real GDP growth to fluctuations in the climatic conditions[5]. This is evidenced by the drop of Real GDP (at factor cost) in years when the country has experienced drought.

Table 1: ECONOMIC OVERVIEW OF MALAWI
Natural resources
Limestone, arable land, hydro power, unexploited deposits of uranium, coal, and bauxite
Agriculture products
Tobacco, sugarcane, cotton, tea, corn, potatoes, cassava (tapioca), sorghum, pulses, groundnuts, Macademia nuts, cattle, goats
Industries
Tobacco, tea, sugar, sawmill products, cement, consumer goods
Share in GDP
Agriculture: 37% Industry: 16% Services: 47%

Malawi’s growth performance has generally been weak. Between 2000 and 2001, Real GDP growth per capita registered negative digits (Table 1). Subsequently, there has been an improvement in GDP growth from 2002-04, mainly as a result of stronger showing in the agriculture sector. The slow growth of GDP was mainly due to economic mismanagement and the poor performance of the agriculture sector.
Table 2: GDP and GDP Growth

2000
2001
2002
2003
2004
2005
GDP at Factor Cost (MK millions)
13,166
12,6206
12,883
13,386
14,066
14,326
Real GDP growth per capita
-1.1
-5.9
0.2
2.0
3.1
0.0
GDP growth at Factor Cost
0.8
-4.1
2.1
3.9
5.1
1.9
Source: RBM, NSO (2006)

Tobacco is the largest export crop, followed by tea, sugar, coffee and cotton. Despite the growing anti-tobacco lobbies, growth in sales in Eastern markets has maintained demand. However, Malawi’s over reliance on raw tobacco trade makes it vulnerable to commodity price shocks as has been the experience in the past. The manufacturing sector remains small, volatile and has shrunk considerably and more visibly from 1989 with the manifestation of world bank/IMF induced ‘adjustment’ policies since 1981.

Although the agriculture sector has been making significant contributions to GDP since independence, in recent years the growth of the services sector has seen it eclipse the agri-sector in terms of contribution to the country’s GDP (see table 3 below).

Table 3: Sectoral Percentage contribution to GDP

2000
2001
2002
2003
2004
2005
Agriculture
39.5
38.8
39
39.8
38.9
34.7
Smallscale
30.8
30.6
29.9
32.3
30.3
26.3
Largescale
8.7
8.2
9.2
7.5
8.6
8.4
Mining and Quarrying
1.4
1.6
1
1.1
1.5
2.3
Manufacturing
12.9
11.5
11.3
11.2
11.4
12.5
Electricity and Water
1.4
1.4
1.4
1.4
1.5
1.5
Construction
2.2
2.2
2.4
2.6
2.8
3.1
Ownership of Dwellings
1.4
1.5
1.5
1.5
1.5
1.5
Services

41.1
43
43.4
42.4
42.5
44.4
Distribution
20.9
22
21.9
21
21.3
22.7
Transport and Communication
4.2
4.3
5
5.2
5.3
5.9
Financial and Professional Services
8
8.1
8.5
8.6
9
9.4
Private Social and Community Services
2.1
2.2
2.2
2.2
2.2
2.2
Producers of Government Services
9
9.4
9.2
9
8.7
8.7
Unallocable Finance Charges
-2.9
-3.1
-3.4
-3.6
-4
-4.5
Source: RBM, NSO (2006)

4. The Cotonou Agreement & Malawi’s Involvement

4.1 History of Africa Trade With Europe

In 1975, the 9 Member States of the EEC (the future European Union) and 46 ACP signed the first of five year agreements called Lome Conventions. This agreement defined the aid and trade relations between these two regions. It was remarkably original in that it was negotiated and ratified between “donor” countries and “beneficiary” countries. In terms of trade, the special feature of Lome Agreement was the acknowledgement that the difference in development between European countries and ACP countries must result in a difference of obligations. That led to the introduction of non-reciprocal trade preferences.

The Lome Convention and its system of non-reciprocal trade preferences has contributed to establishing the EU as the ACP’s premier export market. It has provided preferential access to EU markets for ACP countries manufacturing exports (like refined sugar from Malawi) and a wide range of ACP agricultural exports.

Due to the non-reciprocal nature of the Lome system of trade preferences, other countries have argued that they do not qualify as a “regional free trade arrangement” (FTA) and therefore, require a waiver from WTO regulations[6]. The current waiver expires in 2007.

In the light of these challenges, the EU decided that it needed to rethink its trade relationship with the ACP countries in order to comply more fully with WTO rules and in an attempt to find a new developmental trade perspective. The successor to the Lome Convention, the Cotonou Agreement, was to provide the framework within which this was to take place.

4.2 The Cotonou Agreement

On 23 June 2000, after 18 months of negotiations, the European Union and 77 African (including South Africa), ACP countries signed a new partnership agreement governing their aid and trade relations. The new agreement, called Cotonou, was signed for 20 years. Whilst the Cotonou Agreement lasts until 2020, its trade regime is due to be replaced by 2007 with a set of EPAs which fulfil the requirements of the World Trade Organization (WTO) for free trade agreements[7].

It was landed as the beginning of a new era in economic and political cooperation between ACP countries and the EU as it was to have poverty reduction and sustainable development as its main focus and equality of participation for its partners as one of its guiding principles. These ideas are clearly stated in the signing agreement:

“The partnership shall be centred on the objective of reducing and eventually eradicating poverty, consistent with the objectives of sustainable development and the gradual integration of the ACP countries into the world economy”

The principles underpinning the ACP-EU Partnership Agreement (Article 2 of CPA) are:
1. Equality of partners and ownership of development strategies: In principle, is up to ACP states, in all sovereignty, to determine how their societies and economies should develop.
2. Participation: Apart from central government as the main partner, partnership is open to non-state actors, which include: civil society, private sector, and local government/authorities and members of parliament through the joint parliamentary assembly.
3. Dialogue and mutual obligations: The Cotonou Agreement is supposed to create a platform of dialogue. The parties have assumed mutual obligations (e.g. respect for human rights). These will be monitored through dialogue.

At institutional level, the ACP-EU cooperation is overseen by a set of ‘joint institutions’, including the ACP/EU Council of Ministers, the Committee of Ambassadors and the Joint Parliamentary Assembly.

4.3 Economic Partnership Agreement

Article 37 of CPA provides for a new trading framework termed EPAs. Technically, an EPA will be a Free Trade Agreement between the ACP and the EU. In addition and worth pointing out is one salient characteristic of this new trading agreement - ‘reciprocity’: The ACP will have to remove tariffs on imports from the EU, in contrast to Lomé which were non-reciprocal i.e. in return for preferential access to the EU market the ACP had only to treat imports from the EU no less favourably than from other sources.

Negotiations on the ESA-EC EPA began formally on 7 February 2004 in Mauritius with the adoption of the official roadmap for the talks. The ESA side consists of Burundi, Comoros, Djibouti, DR Congo, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe.

Europe[8] is the most important trade and investment partner for the ESA region as a whole as well as for nearly all the countries in the region. The EC is ESA’s largest trading partner. The average value of total trade flows between this group and the EC is about €10 billion per year. For example, latest figures show that in 2004 ESA exports to the EU were €5.1 billion, while ESA imports were €4.8 billion[9] Exports to the EC are dominated by a few products such as fish (both marine and freshwater), textiles, diamonds, vegetables, sugar, cut-flowers and tobacco.. Agriculture still represents more than half of total ESA exports. Overall, ESA exports remain largely confined to agricultural and primary goods.

ESA is confronted with at least three overlapping economic integration schemes with different political and economic priorities. The main regional integration arrangements with a trade policy agenda are the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC). COMESA has a Free Trade Area with 11 members and is working towards a customs union in 2008. EAC launched its Customs Union in January 2005. SADC has planned a Free Trade Area in 2008 and a Customs Union in 2010. The Indian Ocean Commission (IOC) and the Intergovernmental Authority on Development (IGAD) are other important regional organisations, but are sub-groups of the larger COMESA integration scheme and follow COMESA’s overall regional integration agenda.

All 16 ESA members which are negotiating an EPA belong to COMESA[10]. COMESA is the geographically widest regional organisation in Africa, with 20 members stretching from Egypt to Swaziland and including the 4 Indian Ocean ACP States. COMESA’s main areas of intervention include: standards, customs management and procedures, SPS, private sector development, investment policies, competition policy, public procurement, movement of persons, tax harmonisation, monetary harmonisation, trade (transport) facilitation, air traffic and telecom. COMESA’s functional policies cover agriculture and food security, infrastructure, transport, energy, fisheries and conflict prevention. However, progress towards the successful implementation of these regional goals has been slow and in some cases non-existent.

COMESA has a Court of Justice which establishes COMESA as a rules-based organisation, with rules which can be enforced through a court of law. In addition there are a number of specialised COMESA institutions such as the PTA Bank and the PTA re-insurance company, the leather and leather products institute and a few others.

Integration within COMESA is proceeding at different speeds but all COMESA members have agreed to the December 2008 date for the customs union. Intra-COMESA trade increased in 2004 by 10% to reach €4.8 billion, [11]which shows the potential to expand trade links between the countries of the region. COMESA is also working on the introduction of harmonised rules in areas such as transport, investment and competition.

The main challenge for the EPA negotiations is the overlapping membership of various regional integration organisations with diverging integration agendas; and the interplay of this scenario with having a Free Trade Area (FTA) with the EU at the same time. They are basically caused by the impossibility for any given country to be a member of two customs unions at the same time. Tanzania, Kenya and Uganda form the EAC Customs Union. Tanzania is a member of SADC, but not of COMESA, while Kenya and Uganda are members of COMESA, but not of SADC. Malawi, Mauritius, Zambia and Zimbabwe are in the SADC Free Trade Protocol with South Africa and also in the COMESA Free Trade Area. Both SADC and COMESA aspire to become a Customs Union. Based on this alone, the EPA proposal can only work if there is a strong regional integration impetus behind it. There is therefore a need for countries in the ESA region to clarify the economic integration agenda if they are to enter into any form of economic partnership with the EU.

5. Economic and Social Impacts of the EPA on Malawi

Malawi’s external trade structure paints a gloomy picture. Firstly, the country has experienced a sustained trend of current account deficits, to the magnitude of US$200-500million[12]. Secondly, over-dependency on a narrow range of primary commodities, with tobacco accounting for nearly 70% of exports, increases the country’s vulnerability to demand shocks. In recent years, there has been modest growth in non-traditional exports of textiles and garments but the overall position is far from diversified. Besides, uncertainty surrounds these products with the phasing out of WTO Multi Fibre agreement in January, 2005. The country’s other exports of tea and coffee also continue to face challenges in developed country export markets such as silent EU private sector protective tendencies, inability to meet ‘standards’, lack of economies of scale to meet demand, just to name a few . Malawi has a high product concentration, with low value addition and the reliance on imported raw materials and intermediate goods; low productivity due to lack of investment in new technology and over dependence on rain fed production in the case of agriculture; low capacity utilization; and poor infrastructure which makes transportation costs account for up to 40%-60% of total production costs thereby drastically reducing export competitiveness[13]. This is in contrast to a 17% average for developing countries and 8% for OECD countries.

Despite being a signatory to a number of bilateral, regional and international agreements, the supply-side constraints highlighted in earlier sections of this report significantly lower the effectiveness of Malawi’s capacity to exploit these markets and restrict it to a passenger status. The general conditions of trade facilitation are poor especially customs procedures.

Although Malawi has embarked on the formulation of an export strategy it still lacks a comprehensive overarching trade policy and strategy into which this export strategy should fit. A strategy whose goal would be a complete structural transformation that would end in Malawi being more competitive on the international market through among others, value addition, and elimination of supply side constraints.

In terms of trade with the EU, the table below presents an outlook of the import and export structure (2005 figures).

Table 4: HS4 main traded products imported into EU
Product
Value US$
Share of Total Imports from EU
Cumulative Percentage
H0: All commodities
122,387,052
100%
39%
H490700: Documents of title (bonds etc), unused stamps etc
7,702,182
6.3%
6%
H300220: Vaccines, human use
7,690,118
6.3%
13%
H300439: Hormones nes, except contraceptives, in dosage
7,567,681
6.2%
19%
H310590: Fertilizers, mixes, nes
6,272,056
5.1%
24%
H490199: Printed reading books, except dictionaries etc
5,059,973
4.1%
28%
H300490: Medicaments nes, in dosage
3,110,572
2.5%
31%
H840710: Aircraft engines, spark-ignition
3,017,740
2.5%
33%
H870120: Road tractors for semi-trailers (truck tractors)
2,653,316
2.2%
35%
H870323: Automobiles, spark ignition engine of 1500-3000 cc
2,635,036
2.2%
37%
H481910: Cartons, boxes & cases, of corrugated paper or board
2,388,840
2.0%
39%
Source: Comext 2005 and own calculations

The structure of EU-MALAWI indicates that Malawi is a predominantly agricultural commodity exporter to the EU, and the EU is a manufactures exporter to Malawi As such, imports and exports between the two countries are not in direct competition and are not direct substitutes, however there exists a significant level of complimentarity that will be explored in the next section[14].

Looking at overall trade statistics for Malawi they indicate that the country is a net importing country. However, Malawi has been running a trade surplus with the EU for at least the past five years. In terms of value, based on 2005 figures, the value of exports from Malawi to the EU was €172 million. Imports from the EU amounted to € 71 million. The main exported commodities were unmanufactured tobacco[15], cane sugar, tea, nuts, and raw coffee-accounting for 96% of total exports. On the importing front, the major products include medicines; fertilisers, worn clothing, tractors, motor cars, milk and cream, wheat, machinery, and malt among many others.

Trade with EU-Malawi Trade represents 0.01%[16] of EU world trade. Although this might not seem significant for the EU, for Malawi the EU market is the most important export destination especially for the major exporting commodity tobacco which is the bloodline of the economy. However, it is worthy noting at this point that the regional market (COMESA) is increasingly becoming important for the other types of exports as private sector succumb to the difficulties they are facing in accessing the EU market[17].

This has been the structure of trade between the EU and Malawi for the past thirty years or more and would continue to be the structure of trade unless Malawi would undergo structural transformation that would allow for Value Addition, Industrialisation, and the elimination of supply side constraints.

5.1 General Economic Impacts

Trade policy analysis such as that required in the evaluation of the potential impacts of EPAs largely involves analysing implications of trade policy instruments on the production structure in economies at the national and global level. Trade policy instruments such as tariffs and quotas have direct and indirect effects on the relative prices of commodities produced in a given country. As the mix of goods and services produced change, the demands for factors of production also change. Consequently, in any given economy, it is difficult to conceive a situation where the change in trade policy would affect only one sector. Due to the forward and backward linkages and their related strengths existing in a particular economy, the result is always one in which the relative mix of sectoral outputs change. This by extension affects the relative mix of the different factors of production in the different sectors.

Country-level effects on output mix and demands for factors of production can in the context of international trade be extended to the global economy. Changes in relative prices of outputs and inputs resulting in a given country’s change in trade policy are transmitted to the industries and input markets of other economies that the country trades with. Therefore, for trade policy analysis to be meaningful and for robust results to be produced, the interactions that prevail among different sectors as a result of a change in a given or group of countries trade policy instruments must be taken into account.

Since, the EPAs will potentially have these kind of impacts, the general equilibrium methodology presents itself as the most appropriate analytical framework that would allow the inter- and intra-sectoral changes in output mix and by extension the demand for different factors of production to be captured. However, the scope of this paper does not allow for this model to be utilized as it is not intended to analyse the potential impact EPAs on the ESA region. And in addition to this, such a model would only allow the assessment of the EPAs at the continental level through a hypothetical ESA-EU EPA due to data limitation with respect to representation of African countries in the GTAP database as stand-alone regions. It was therefore necessary to look for an alternative methodology that would allow analysis at the country level and also at HS 6-digit level of products classification. This paper found it necessary to consider a partial equilibrium methodology, in spite of its weakness of ignoring sectoral and regional feedbacks when trade policy instruments are changed either in a given sector or all sectors in a given country.

Given its capacity to allow analysis at high level of disaggregation, the partial equilibrium models become indispensable especially because of the interest to establish sensitive sectors either with regards to industrial or fiscal policies. The World Integrated Trade Solution (WITS/SMART) model[18] was chosen as the applied partial equilibrium framework. The WITS/SMART model brings together various databases ranging from bilateral trade, commodity trade flows and various levels and types of protection.

WITS also integrate analytical tools that support simulation analysis. The SMART simulation model is one of the analytical tools in WITS for simulation purposes. SMART contains in-built analytical modules that support trade policy analysis such as effects of multilateral tariff cuts, preferential trade liberalization and ad hoc tariff changes. The underlying theory behind this analytical tool is the standard partial equilibrium framework that considers dynamic effects constant. Like any partial equilibrium model, it allows for a pre and post analysis by taking a somewhat static picture. This is because the model has strong assumptions allowing the trade policy analysis to be undertaken on a country at a time. In spite of this weakness, WITS/SMART[19] helped to estimate trade creation, diversion, welfare and revenue effects for Malawi.

5.2 SMART Model Results

The question that this analysis sought to respond to was: what are the impacts on trade, revenue and welfare of eliminating tariff barriers that EU exports to Malawi face? In other words, what does it mean for Malawi to reciprocate on the trade preferences that it currently receives through EU’s trade preferences regime for ACP countries?

5.2.1 The simulation scenario

The only scenario simulated in this analysis looks at the reciprocity principal. Due to the weaknesses already pointed out especially the ceteris paribus assumption upon which this model operates; only one-way liberalization is possible. The results discussed here are the possible outcomes of reducing to zero the import duties that Malawi will impose on EU goods. This is not a far fetched approximation to put forward because practically, the EU and ESA countries are going to bind themselves to a schedule of reducing tariffs between themselves the idea being the creation of a Free Trade Area. Therefore although a country is a Least Developed Country and may claim some exemptions in as far as tariff reductions are concerned, for a Free Trade Area to be operational these concerns may have to be pushed aside in favour of lenient schedules for tariff reductions. As such, if Malawi signs on to a free trade agreement with the EU through EPAs, they will ultimately have no tariffs between them. In addition to this, Malawi has already liberalised to a great extent and does not maintain a significant level of tariffs on imports from EU countries.

However, referring to the present state of negotiations, the EU has stated consistently in GATT/WTO committees that it believes the Article XXIV requirement that an FTA must cover ‘substantially all’ trade can be fulfilled if both parties reduce to zero tariffs on products that account for 90 percent on average of the current trade between them. It has also indicated that it believes this average figure can be achieved asymmetrically, with the EU liberalising on more than 90 percent and its partner on less. In the specific case of the EU–South Africa TDCA, South Africa has liberalised on products accounting for 86 percent of its imports from the EU while Europe has liberalised on 94 percent. The agreement also indicates that the EU believes the Article XXIV requirement that liberalisation occur ‘within a reasonable period of time’ can be achieved through a transitional period of up to 12 years[20].

In light of the above a 100% reciprocity impact assessment might seem unrealistic or unrepresentative of a situation that is going to happen. Inspite of this possible shortfall, and in the absence of a clear and agreed definition of ‘substantially all trade’, what is of critical importance at this stage is to determine the direction of the impact (i.e. direction of the vectors of trade creation, diversion, and welfare). It is important for instance to gauge in which direction the trade being created is going; in which direction the trade being diverted is going; and most importantly the direction in which the welfare benefits are heading. In as much as the magnitudes are an important part of a quantitative assessment, in-light of the short falls that a partial equilibrium tools presents and in-light of the discussions in the negotiations thus far, they may only serve as a proxy for the 90% liberalisation. Thus this study places greater emphasis on the direction that the vectors of trade creation, diversion, welfare take in its interpretation of the results.

The transmission mechanism for the trade effects is simple: the elimination of existing tariffs on EU imports reduces the prices that consumers will face compared to domestic substitutes and the responsiveness of demand to the price change influences the amount of trade created or diverted. The substitutability of the EU goods for domestic goods is implicitly assumed. The Armington assumption[21] at HS 6-digit level is that goods imported from different countries are imperfect substitutes. It is also assumed that the supply response to the price reduction will allow the EU producers and exporters to meet any demand arising in the importing countries as a result of price reduction. That is, export supplies are perfectly elastic which means that world supplies of each variety of the goods by origin are given.

5.3 Trade creation and diversion effects

The partial equilibrium effects of reciprocal trade preferences between EU and Malawi, through ESA are shown clearly in Table 9. The results presented on the trade effects indicate there will be significant trade creation for the EU goods. Overall, the EPAs reciprocity principal, with all things being equal, will lead to expansion of trade. Another critical observation is that trade diversion does not exceed trade creation, meaning that there will be positive trade effect as a result of the EPAs. However it is worth noting that the trade creation indicated in the table is in favour of the expanded EU exports into Malawi within ESA. The created trade in the classical sense imply supplanting of domestic production in Malawi i.e. lower production from the productive sectors (agriculture/agro-processing, manufacturing, services)[22].

Trade diversions indicated on the other hand signify the level of trade that is shifted from the rest of the world including other ESA countries to the EU producers. Given similar conditions, the rest of the world would more efficiently produce the diverted trade, but because of the tariff reductions on EU imports, the more inefficient EU producers are favoured over the more efficient rest of the world producers.

The results presented in Table 9 can be interpreted as follows. If Malawi were to dismantle the tariffs it imposes on the goods from the 25 member-countries of the enlarged EU, trade worth US$15.1 million would be created in favour of the EU. This arises from the point raised above, that more efficient EU producers and exporters will supplant producers who have not yet built their competitive edge to produce ( and not yet benefiting from economies of scale or in some cases not present) in Malawi. While this created trade is considered to be welfare enhancing since it expands the consumer surplus and choice, the tariff dismantlement will also lead to a net trade diversion of US$6.5 million[23]. The EU captures this diverted trade; hence the overall EU’s trade gain of US$21.6 million. Of the US$6.5million worth of diverted trade, 17 percent is trade that before the tariff dismantlement originated from the COMESA region, the REC in which Malawi is a member. The tariff dismantlement by Malawi, while it appears to be trade expanding overall, has three potential negative implications. First, the overall diverted trade will be welfare decreasing for Malawians as it was originally from more efficient non-EU rest of the world. Secondly, there is significant loss within the regional economic community, and thirdly it will surplant Malawi domestic producers[24].

Thus, looking closely at the simulation results presented in the table, it is clear that producers in Malawi will face serious competition from the EU as the country becomes a market for EU exports. History has proved that the Malawi producer has failed to withstand such competition and has succumbed to such pressures. Malawi will lose out on 17% of trade from its neighbours and partners in COMESA as it is diverted to the EU.

MALAWI
Trade Creation
Net trade diversion
Diverted trade
EU’s trade gain

15,124,010.00
-6,545,825.00
-331,774.00
21,669,845.00

5.4 Revenue Implications

Malawi relies to a great extent on its revenues collected from import duties. After the RSA, the EU serves as a significant source of imports and is therefore a major component of the import taxes base. The elimination of the import tariffs on EU-sourced imports is therefore an important factor in the economic analysis of EPAs. Table 9 indicates the likely losses in revenue due to the reciprocal treatment of EU goods into Malawi’s market. The results of WITS/SMART simulations indicate Malawi would forego US$7,100,420.00 of tax revenue under the reciprocal arrangement for trade policy between the EU and ESA nations.[25]

This foregone revenue in itself presents a major challenge on Malawi’s ability to reciprocate on the trade preferences obtained from the EU. The reliance on trade taxes is dictated both by the simplicity of their administration and also their use as part of industrial policy[26]. In terms of their use due to ease of collection, the country is likely to find it difficult even in the short-term to come up with ways to replace the foregone revenues. This is likely to be made more difficult by the low productivity (both in terms of elasticity and buoyancy) of the alternative taxes to the import duties. The speed within which tax policy and administration changes can be effected to raise productivity of the other taxes to fill the shortfall from import taxes becomes a major determinant of the practicability of the reciprocal principle of the EPAs.

The adjustment costs of undertaking tax policy and administration reforms are likely to weigh heavily on Malawi. This is because the nature of these adjustment costs is such that they are not only financial, but involve also human resources. Administration of income taxes and consumption taxes such as the VAT are more human capital demanding than the administration of import duties.

Moreover, the EPAs generated revenue shortfalls will also have economic, social and political dimensions in as far as public service delivery is concerned. The fact that Malawi will most likely need to resort to income and consumption taxes will introduce growth and equity issues. Policy makers will be faced with the unwelcome option of having to rely on income taxes, which tend to have a more defined negative relationship with economic growth. And on the aspect of equity, consumption taxes are likely to be more regressive.

To further put this loss in perspective consider the following: The National Budget allocations for Protected Pro-poor Expenditure on Agriculture (Food Security Initiatives, Agricultural Extension, Technology Generation and technical services) for the past three years has been around US$7million annually.

The above results are consistent with other analysis[27] who found that annually the government coffers would be losing US$7.5 million from reciprocity via EPAs. They went on further to simulate scenarios where some tariff lines (of concern to the EU) would be exempted from reductions. The level of protection for which the simulations were carried out was 10% and 20% of tariff lines, respectively based on the importance to revenue criteria. The criteria was restricted to revenue because the Government of Malawi has not yet stated which criteria (e.g. revenue loss, food security, protection of manufactures, etc) it is likely to base its tariff line protection on.

Based on the IDS methodology[28], and using data coming from Euro stat on imports into Malawi, if the negotiations agree on a 20% mark up for the exclusion list (80 per cent liberalisation), this would translate to approximately US$ 1,664,035.71 (Malawi Kwacha 232,965,000) revenue loss on the other hand, if the hand if the mark up will be 10% or 90% liberalisation, the loss would be US$ 3,380,107.14 (Malawi Kwacha 473,215,000).

5.5 Welfare implications of the EU-ESA EPA

Welfare enhancing properties of trade liberalization have always made it an attractive policy and an excuse by the proponents of liberalization to unleash it on countries as a common denominator for development. Nonetheless, measuring the welfare accruing to a country as a result of trade liberalization has not been simple.

Empirical investigation of this question due to measurement problems has therefore not been a straight forward matter. Welfare changes arising from tariff changes have been analysed within the context of consumer and producer surpluses[29]. In addition, implicit welfare changes derived from government revenues arising from tariffs alterations can also be considered on top of the consumer and producer surpluses. In the case of Malawi, the welfare implications (consumer surplus) is US$ 2,105,759.00[30]

The WITS/SMART model applied to measure welfare implications of the reciprocal principle of the EPAs under estimates the total welfare change in that it quantifies only the consumer surplus change but ignores the producer surplus movements. Thus, the results reported in Table 10 are for the consumer surplus changes due to the EPAs reciprocity. The results indicate that Malawi stands to gain in terms of consumer welfare, and would lose out completely on producer surplus.

Weighed against the revenue loss, the trade expansion effect and positive welfare changes present the EPAs as potentially beneficial arrangements the country. However, these are static results and the welfare results do not account for the producer surplus loss that occurs due to the supplanting of domestic producers in Malawi by the EU producers. Moreover, the partial analysis ignores the changes in the economic structure, which in a dynamic sense are likely to have tampering effects on the potential gains indicated from the partial analysis.

6. Conclusion

The main conclusions that can be drawn from the results and the discussion are that country’s opening up to the EU will accrue benefits in favour of the EU and at the expense of Malawi. Irrespective of the magnitude or money value of loss to the Malawi Economy (which will be depended on the level of liberalisation the negotiations parties agree to), the above analysis shows that the direction of the benefits is in favour of the EU players and not Malawi.

Hence, trade created will be in favour of EU exports and consequently the EU producer; Trade diverted from other countries with-in and with-out the agreement will be towards the EU; Malawi will lose revenue, and welfare (for consumers from increased commodity choice) is most likely to be eroded by reductions in Malawi’s producer surplus as producers are surplanted from the economy, resulting in low production levels and consequently lower incomes.

One could therefore hypothesise that the situation would be different (in the sense that Malawi would have an offensive trading possibility) if Malawi was a competitive producer. And this is what might have prompted DFID-Malawi (2005) and some respondents from the private sector in Malawi to state that in the mean time the country should concentrate on regional integration and trade, as they build their capacity to trade competitively and profitably for the benefit of the county’s growth and development.

“Logistically alone, we do not see the EU as a profitable market…we would rather concentrate on our neighbours and brothers before we can think of anyone else or anywhere else”. Simon Itaye - Chairman, Malawi National Working Group on Trade Policy

The respondents further propose that EPAs should look beyond 12 years as the possible dates for introducing reciprocity. Before then, unrestricted market access, deeper ESA integration, structural transformation will have provided sufficient room for supply capacities and exports diversity to be built in the country. Not allowing for this would be tantamount to maintaining the status quo as expressed in the literature review section of this report and thus on the overall Malawi would not stand to gain from any form of trade cooperation with the EU.

The dangers to the regional integration process in COMESA emerged also as potential challenges against the EPAs. Two consistent stories underpin these concerns. The first outcome is that the EU stands to gain significantly in terms of expanded trade into Malawi and consequently into the RECs markets. While part of this trade expansion will result from trade creation, which is welfare improving, significant proportions of the trade gain will also be due to trade diversion from the rest of the world and from within the ESA- EPA grouping itself. As a result, while the reciprocity principle appears to be trade expanding, it will pose serious implications for deepened regional integration in Africa. In deed, unless there are clear mitigating measures, the EPAs could seriously undermine the gains that have been achieved so far in the integration process of the continent.

Another consistent result is the potential adjustment costs that Malawi will have to bear as a result of revenue shortfalls. Given the prominence of EU imports into Malawi and the country’s reliance on tariff revenues, tariff dismantlement result in significant revenue shortfalls. The major challenge that these revenue shortfalls will pose is the adjustment costs associated with tax policy and administration reforms.

A detailed analysis and accounting of potential adjustment costs would have to be implemented to assess the burden of the EPAs on the fiscal economy[31]. Interviews through this research showed that Government of Malawi has not done adequate impact assessments or analysis as to the level of adjustment costs. Such an analysis would be critical before the country signs on to an EPA with the EU, as adjustment costs stand to undermine any ‘gain’ and exaceberate negative impacts from the EPAs[32]. However, looking at some of the impacts above, Government will have to be prepared to foot the bill for adjustment in the production sectors as they are surplanted by more efficient EU producers; structural transformation, as they try to make the country competitive, The EPAs, if no appropriate measures are put in place to forestall the macroeconomic imbalances that are likely to result from falling revenues, and these other adjustment costs may undermine developmental objectives, that are the only hope for the majority poor people of Malawi.
Having experienced underdevelopment in the past 50 years, and having lived through the hard times under Cotonou Agreement, Malawi needs to break off the chains of exploitation. But offering it EPA is like inviting Malawi from the hard place into a rock.

APPENDIX 1

IDS Methodology Ideology and Assumptions

The Institute of Development Studies (IDS) has developed an analytical framework for assessing the impact of EPAs on revenue (international taxes) with the aim of supporting an informed national debate in members of the ACP group. It is part of an IDS project to help countries assess the implications of ‘reciprocity’.

Rightly or wrongly, reciprocity is perceived as a ‘cost to be borne in order to gain the ‘benefits’ of aid and trade preferences for exports. The extent to which an EPA would be a ‘good deal’ for any country will depend on the relative scale of these potential costs and benefits.
If Malawi reduces its tariffs on imports from the EU, this will have potential ‘revenue’ and ‘competition’ effects. The scale of these will be determined by the extent to which imports increase and their price in the domestic market falls. Their distribution (between sectors, producers and consumers) will be set by which tariffs are reduced.

The revenue effect of EPAs is easiest to describe and hardest to calculate. Most ACP countries rely heavily on import taxes to raise government revenue because they are relatively easy to collect. Reducing tariffs will tend to reduce revenue (unless alternative, administratively more difficult, taxes replace them), but not necessarily in a linear fashion. If a country levies an import duty of 20 percent on imports of $1 million it will raise revenue of $200,000; if the tariff is cut to 10 percent but the value of imports jumps to $2 million, exactly the same level of revenue will be raised.

Just as the scale of the revenue effect will depend partly on what happens to the flow of imports, so will the scale of the competition effect. If, following the tariff cut, importers reduces prices on the domestic market, sales can be expected to rise –putting pressure on domestic producers of competitive goods. Imports will increase and domestic production of the competitive goods decline. But a tax cut does not always feed through into a price cut! If prices do not fall (e.g. because suppliers increase their margins) there will be no increased competition for domestic suppliers.

Naturally this depends on the levels of tariff reductions. Thus the broader assumptions of the IDS methodology are that:
One about the proportion of imports that can be excluded from liberalisation;
the other that the country will wish to exclude the products that currently face the highest tariffs.
Bibliography
ActionAid Malawi and MEJN, 2005, The ABC of WTO and Malawi’s Involvement, Montfort Print, Malawi
Bivens, L. Josh. 2004. Shifting Blame for Manufacturing Job Loss. Briefing Paper #149. Washington D.C.: Economic Policy Institute.
Chirwa, E. W. (1994) Malawi: Industrial Sector Opportunities - The Domestic Market and Market Structure, Department of Economics, University of Malawi (Zomba): Report prepared for Maxwell Stamp Plc, London
Christian Aid, (2005), “The Economics of Failure: The Real Cost of ‘Free Trade’ for Poor Countries”, A Christian Aid Briefing Paper, June.
EU Trade Statistics. http://ec.europa.eu/trade/
EUROSTAT. epp.eurostat.ec.europa.eu
Gondwe T and Magalasi C (2006), Quantitative and Qualitative Assessment of EPA on Malawi, Lilongwe
Government of Malawi, (2005), Malawi Growth and Development Strategy, Draft final volumes 1 and 2
Government Of Malawi, National Economic Reports, 2000-2005
Imani Development, (2006), Identification Of Sensitive Products for Malawi, Prepared for Ministry of Industry and Private Sector Development
Kaluwa, B. M. (1992) "Malawi Industry: Problems, Policies and Performance", in Mhone G C, Malawi at the Cross-roads: A Post-Political Economy, Harare: SAPES
Khandelwal, (2004), COMESA and SADC: Prospects and Challenges for Regional Integration, IMF Working Paper WP/04/227, Policy Development and Review Department.
Madeley J., (2003), The Impact of Trade Liberalisation on Food Security and Poverty, Forum Syd, www.agobservatory.org
Magalasi C, 2006, Hong Kong Outcomes and Impact on Service Delivery in the SADC Region, SARPN discussion paper, South Africa www.sarpn.org
Magalasi, C, (2006), In the Kitchen of Civil Society in Malawi, in ‘Civil Society and Governance in Southern Africa,’ Institute for Security Studies, South Africa
MEJN, 2005, Trade Liberalisation: A Poverty Trap for the Poor in Malawi, Montfort Media, Malawi
OECD/ECMT (2005), International Trade and Transport, paper prepared for Transportation Research Board Summer Conference.
Reserve Bank of Malawi. Financial and Economic Review. Volume 38, Number 1. 2006
Santos-Paulomo, (2002), Trade Liberalisation and The Balance of Payments in Selected Developing Countries, Keynes College, University of Kent.
Tyson, Laura D'Andrea. 2005. Those manufacturing myths. Business Week. December 12 2005.
UNIDO Industrial Statistics- www.unido.org
World Bank (1989) Malawi Industrial Sector Memorandum, Washington: World Bank
World Bank (2003). Malawi: The Challenge of Competitiveness and Diversification. Washington, DC.
WTO (2003) Trade Policy Review: Southern African Customs Union, Geneva: World Trade Organization
WTO (2004), World Trade Report 2004, Geneva: World Trade Organization

[1] See Article 34 of Cotonou Partnership Agreement
[2] Over the past 5years, Per capita GDP has been hovering at an average of US$ 200
[3] As defined by the World Bank
[4] Business Climate Survey 2005 shows Agriculture trade in terms of exports is about 99% raw commodities
[5] Malawi’s agriculture is dependent on rain and thus vulnerable to erratic weather patterns.
[6]These are set out in WTO Article XXIV in relation to goods and the analogous GATS Article V in relation to services.

[7] EPAs will remain in existence past the 2020 timeline.
[8] See Ministry of Trade and Private Sector, Government of Malawi
[9] Source: Comtext 2004
[10] Note that there are a number of COMESA members that are not part of the ESA group. E.g. Egypt, Swaziland, and Angola
[11] See COMESA 2005 Annual Report
[12] See National Economic Reports.2000-2004
[13] See MGDS 2005, National Economic Reports,
[14] For example, Malawi produces tobacco which is an industrial input for EU Cigarette manufacturers.
[15] Tobacco accounted for 66.5% of total exports to the EU in 2005
[16] Source EuroStat
[17] See COMESA 2005 Annual Report
[18] See derivations and methodology in appendix 1
[19] http://www.wits.worldbank.org/
[20] The Commission for Africa Report recommends a minimum of 20 years.
[21] This is economic term referring to model of analyzing imperfect substitution between home and foreign goods in consumption, often examining the role of product, industry, political, and 'home bias' factors as determinants
[22] The results from structured interviews presented further below qualify as to which sector this impact will mostly pertain to and to the nature of surplantation.
[23] It is worth recalling that the current indications are that there will be 90% liberalization, as such these figures are not exact; however again it is worth noting that this is a partial equilibrium analysis that does not consider dynamic implications of tariff dismantlement. Considering dynamic impacts, the magnitude may be higher considering the direction of the vectors.
[24] This outcome is confirmed by the private sector in Malawi, who were part of this study process.
[25] WITS/SMAT simulations
[26] A practical case in point: Malawi is currently building a fertilizer plant in Kanengo, Lilongwe. The aim of this industrialization drive is to enable the poor Malawian to access cheaper fertilizers at national level in the mid to long term. At this time, the country imports fertilizers from the EU and as such has low (or zero tariffs) on these imports to allow their affordability to poor farmers. However, when the plant is ready, it would be in the interest of the Government and people of Malawi to protect it from competition coming from cheaper, established (with economies of scale), producers of the EU so as to unleash its mid to long term benefits. The aim of protection here will be to enable the plant to overcome high start up costs, build capacity that will enable production of cheaper fertilizers for the farmer in the mid to long term and in the process promote sustainability, self sustenance and livelihoods. Tariff policy is one such mechanism that can be used to protect this fertilizer plant.

[27] See MEJN 2006, McGrath (2003)
[28] See Appendix 1: IDS Methodology
[29] The debate on Consumer vs. Producer Surplus is the most common and heated in as far as trade policy goes. Whose benefits should trade policy prioritise? The producer or the consumer? The consumer basic argument has been the right to choice and the presence of competition that lowers down prices. On the other hand producers have argued that they should be prioritized because they provide incomes through employment and also government revenue through corporate taxes.
[30] WITS/SMART Model
[31] Such an exercise would prove difficult in the absence of an Economic Partnership Agreement- Ministry of Finance (Malawi)
[32]“ It is about adding and subtracting sums-if the costs are greater than the benefits, why would anyone want to agree to sign on to such a scenario?” Temwa Gondwe-MEJN

Collins Magalasi and Fighting Corruption

2008-08-15T10:40:00.000-07:00

COLLINS MAGALASI
YOUNG LEADER, AFRICA-GERMAN PARTNERSHIP

1. Introduction

As a young leader in the Africa – Germany Partnership, I feel honoured to be in the middle of promotion of youth political participation. Recently I was appointed member of the Blue Ribbon Committee to advise and report to the State President H.E. Dr. Bingu Wa Mutharika on the fight against corruption and the development of a national anti-corruption strategy in Malawi. This appointment comes at a time I was already entrusted by the executive and the nation to function as Commissioner for the Competition and Fair Trading Commission. I am also President of Catholic University of Malawi Parents and Guardians Association, despite my having only a brother at the university.

1.1 Responsibility 1: Member of Blue Ribbon Committee (BRC), Government of Malawi. Appointed by and accountable to His Excellency the State President

Background
The dawn of the 1990s brought with it winds of change over Malawi and resulted in the change of the system of governance in 1993/94 from one party system to multiparty democracy. In 1995 Malawi adopted a new democratic constitution. Section 13 (o) of the Constitution of Malawi talks about the need for government to deliberately put in place measures to guarantee accountability, transparency, personal integrity and financial probity and which by virtue of their effectiveness and transparency will strengthen confidence in public institutions.
It is against this background that Parliament passed a law on corruption - The Corrupt Practices Act (CPA) number 18 of 1995. The Act established the Anti-Corruption Bureau (ACB), which became operational in 1998, with mandate to carry out two main functions namely (a) to prevent corrupt practices in both public and private institutions and (b) to enforce the law on corruption. The ACB is a government but autonomous institution that is mandated by law to spearhead the fight against corruption.

The fight against Corruption in Malawi

Despite having the institution of ACB, corruption went up in the previous regime. Development partners such as Denmark, and the IMF pulled out/suspended their programmes in Malawi. Malawi scored 2.7 from year to year on corruption perception index, compared to Namibia, Seychelles, South Africa, Botswana and Swaziland that were improving. In 2004 Malawi went to the polls and saw the current State President Dr. Bingu Wa Mutharika get to power. As he spelt his vision of post 2004 Malawi, it was clear the President had zero tolerance policy on corruption and was committed to financial prudence, transparency and accountability. The same 2004, the Corrupt Practices Act (CPA) was amended in order to align it with regional and global conventions on corruption i.e. SADC protocol, AU Convention on Prevention of Corruption, UN Convention against corruption, but also to widen the definition of corruption and powers of the ACB.

Since the time the ACB started operations in 1998, no comprehensive assessment of the extent and locus of corruption had been done. In the year 2005/2006, a Governance and Corruption Baseline Survey was therefore conducted and the report was launched on 5th February 2007 – as part of commemoration of the National Anti-Corruption Day - by His Excellency the State President of the Republic of Malawi. The survey revealed the many gaps that existed, including the need to involve everyone in the fight against corruption, and increase civic awareness on corruption and reporting. (As at December 2007, the ACB had received a total of 13,400 complaints, of which 5,200 were authorized for investigations and the remaining 8,200 did not disclose corruption and were referred to other relevant institutions). The country had to come up with a National Anti-Corruption Strategy to deal with the shortfalls.

The Blue Ribbon Committee

It pleased His Excellency the State President of the Republic of Malawi Dr. Bingu Wa Mutharika to appoint an inclusive group of eminent Malawians into a Blue Ribbon Committee (BRC) to oversee the development of a national Anti-Corruption Strategy and advise him on the same from time to time. The BRC has the following as members: the Chief Justice of the Supreme Court of Appeal, the Speaker of the National Assembly, Representative of the Private Sector, Head of Traditional Chiefs – Inkosi ya Makosi, the Chief Secretary to the President and Cabinet, and me as Representative of all Civil Society. The BRC constituted a National Implementation Steering Committee (NISC) to do the drafting of the strategy under the guidance of the BRC. The BRC meets the State President and his Cabinet to report and advise on the fight against corruption in Malawi and the development of the anti-corruption strategy in particular.
In support of the President’s Political vision and Will, both the private sector and civil society have come up with own initiatives: the Business Action Against Corruption (BAAC) and the Civil Society Action Against Corruption (CSAAC) respectively. I am the current Chairman of the CSAAC. CSAAC contributes to the prevention, detection and prosecution dimensions of anti-corruption work through input into formulation and implementation of anti-corruption strategies, monitoring corruption (e.g. collecting and in-depth analysis of data and systematic documentation) and also through evidence-based advocacy. Our added advantage is in that we have the potential to depoliticise corruption and we also operate relatively flexibly.

1.2 Responsibility 2: Commissioner for The Competition and Fair Trading Commission (CFTC), Government of Malawi. Appointed by His Excellency the State President, but reporting to the National Assembly

The responsibilities are defined by an Act of Parliament – Competition and Fair Trading Act of 2000. As Commissioner I am responsible for:
· the functioning of the CFTC secretariat, including appointment and management of Directors and staff.
· carrying out investigations, in relation to the conduct of business so as to determine whether any enterprise is carrying on anti-competitive trade practices or unfair trading and the extent of such practices, if any;
· taking such action as we consider necessary or expedient to prevent or redress the creation of a merger or the abuse of a dominant position by an enterprise;
· providing persons engaged in business with information regarding their rights and duties under the Competition and Fair Trading Act;
· providing information for the guidance of consumers regarding their rights under the above Act;
· undertaking studies and make available public reports regarding the operation of the Act
· cooperating with and assisting any association or body of persons to develop and promote the observance of standards of conduct for the purpose of ensuring compliance with the provisions of the Act;
· advising the Minister of Trade and Private Sector Development on such matters relating to the operation of the Act as we think fit or as may be requested by the Minister;
· doing all such acts and things as are necessary, incidental or conducive to the better carrying out of the commission’s functions under the Act.

2.1 President of Catholic University of Malawi Parents and Guardians Association (CUNIMA – PGA); 2007 to-date

The PGA Executive:
· is the link between parents/guardians and the CUNIMA management;
· forms and works through subcommittees (e.g. student life, discipline, finance, development, communications etc) as necessary.
· develops and enforces the association’s by-laws (roles and responsibilities, Code of Conduct, calendar of events, etc).
· organises meetings for the PGA and facilitates setting of the meeting agenda,
· coordinates matters as referred to by the full association, and provides feedback to the association
· facilitates communication between the parents/guardians and the university

MEETING OF THE YOUNG LEADERS NETWORK OF THE GERMAN PARTNERSHIP WITH AFRICA

2008-08-15T10:38:00.000-07:00

MEETING OF THE YOUNG LEADERS NETWORK OF THE GERMAN PARTNERSHIP WITH AFRICA

PARTICIPATION REPORT
BY Collins Magalasi
30 January 2008

A. Introduction

I attended the meeting of Young Leaders (YLs) network of the German Partnership with Africa (PwA) held in Germany from 23-26 January 2008 with support form GTZ. The PwA is an initiative started in 2005 by the Federal President of Germany His Excellency Horst Köhler in partnership with the Zeit Foundation. My participation in the network activities dates back to year 2006 when I was nominated by the Bucerius Summer School of Global Governance that I attended with support from ActionAid International.

The meeting was held in Berlin Germany and was follow up to similar YLs meetings held in November 2006 in Germany and January 2007 in Accra Ghana. Thirty five Young Leaders attended the meeting representing Germany, Madagascar, Ghana, Uganda, Sierra Leone, Zambia, Cameroon, DR Congo, Burundi, Kenya, South Africa, Mozambique, Botswana, Nigeria Togo and Malawi.

Conference moderators were Dr. Bruno Wenn and Dr. Andreas Proksch - Director of the Sub-Sahara Africa Department at KfW Entwicklungsbank and Director of the Africa Department at GTZ respectively.

B. Meeting Progress

B.1 Day 1: Meeting with President Horst Köhler

On day one, the Young Leaders met the Patron, the German Federal President Horst Köhler, at his residence – the Schloss Bellevue.

The meeting looked back to the origin, objective, procedures of the YL Network, and also took stock of what has happened since Accra.
Specifically the YLs had to update the President on the activities and projects they have been involved in since Accra. I, Collins Magalasi (Malawi), together with Lars Allenstein (Germany), made presentations on behalf of the YLs.

In the evening the Young Leaders were welcomed by Andreas Proksch, GTZ GmbH and Bruno Wenn, KfW Entwicklungsbank at the GTZ Haus Berlin.

B.2 Day 2: Deliberations

Day 2 started with sessions that looked back in detail to what has happened since Accra at the global level in the fields of (a) Environment and the Natural Habitat, (b) Education and Employment opportunities, (c) Violence in Everyday Life and Armed Conflicts, and (d) Political Participation in Society. Experts from KfW (employment and conflict) and GTZ (environment and participation) facilitated the sessions and presented inputs about recent developments in the respective field of interest, taking into account the YLs’ Accra-Declaration.

Working Group1: Environment and Natural Habitat

Working Group 1 was chaired by Dr Rolf Mack, GTZ GmbH. The discussion was on the UNFCCC conference in Bali, Indonesia last year. The group recognized that huge steps were marked in connection with slowing down global warming. It is scientific consensus that rising temperatures could cause glaciers to melt and sea levels rise sharply, threatening islands and coastal areas, storms, droughts to become more intense. All effects cause serious harm to economies, societies and life sustaining ecosystems worldwide and lead finally to mass migration of climate refugees. In our discussion we looked at what happened in Mozambique at that time. Without any attempt to reduce the green house gas emissions, hundreds of millions people will be affected.

“Urgency of action on climate change has provided a political response to what science has been telling us that are needed”. Negative consequences of climate change, such as droughts and floods have brought new ways to reduce green house gas emissions, ways to widely deploy climate friendly technologies and financing both adaptation and mitigation measures into action. Poor countries are to be rewarded for protecting their existing forests and sell carbon credits to rich countries that want to compensate their carbon emissions.

At the UNFCCC conference a fund was agreed to help poor countries to adapt to the negative impacts of climate change, but no figure was mentioned. Despite the great achievement the UNFCCC agreement brought forward, it still leaves ample scope for scepticism and much more has to be done.

Working Group 2: Violence in Everyday Life and Armed Conflicts

Starting point for working group 2 was a presentation by KfW-Representative Patrick Rudolph about the conflict(s) in Sierra Leone and KfW’s engagement in Sierra Leone that helps to support constructive conflict resolution. In response members of working group 2 discussed the use of the Accra Declaration in the present situation in Sierra Leone. They came to the conclusion that two steps should be followed up on the process of inclusion of the CRC and its optional protocols into national legislation as well as the new gender acts. A monitoring process by the Working Group should be possible as some members are active in Sierra Leone.

Apart from some fundamental subjects regarding the structure of the Young Leaders' Network, working group 2 discussed the possible succession of the current President Kufuor of Ghana by Minister Akufo Addo. He participated in the 2nd Forum in Accra and should be approached by Young Leaders in Ghana referring to the Accra Declaration and reminding him of his participation in working group 2.

The last but strongly discussed point was a statement on the Kenyan crisis. As the Working Group was convinced of the urgent need for action, they deemed a statement to be useful for the Kenyan side, youth associations etc. as well as for the Presidential Office, BMZ etc. It was decided that this statement should include a brief analysis of the situation as well as suggestions for the steps to be taken by different actors from a young peoples’ perspective. Its focus should be on solidarity with youth organisations calling them to a non violent way of influence. It was important for working group 2 that the statement should not put the Kenyan members at risk. Their consent and contribution were regarded as indispensable. The Kenya Statement was then referred to the plenary.

Working Group 3: Education and Employment Opportunities

The third working group was chaired by Ulrich Jahn of KfW. Mr. Jahn opened the discussion with a presentation on the “Programme Based Approach in Education for All”. Throughout Mr. Jahn’s presentation the members of the working group articulated numerous comments and criticism initiating various discussions. The given financial approach was somewhat new to the working group members and consequently quite informative. Among the discussed issues were problems of public finance management and its necessary monitoring, organizing and distribution of funds through the Fast Track Initiative (FTI) for the implementation of Education For All (EFA) as well as the hypothesis that says increased access to education tends to lower quality. Most important reasons identified for the latter are still the lack of teachers, their bad payment resulting in low motivation, as well as problems caused by untrained or inexperienced teachers.

Woking Group 4: Political Participation in Society

Working Group 4, which was chaired by Ingo Imhoff, GTZ GmbH, looked at some events that have occurred since the Accra Declaration. These included the “Weltwärts Programme,” and the follow up of the African Youth Charter. Of the countries in the group it was learned that in Ghana the youth policy is still at the drafting stage and the youth of Ghana still face the question whether the in-coming government will continue with the youth policy process after the current President John Kufour has left office. Zambia has a youth policy in print which is accessible to a minority of Zambian youth mostly to those living in urban areas, while Malawi has a Youth Policy that is under review. Tanzania and Benin have their youth policies undergoing the ratification process though Benin has no concrete dates for the ratification, and Tanzania may discuss the fate of their Youth Policy in the next Parliamentary sitting.

The working group also discussed to coming AU Ministers of Youths meeting in Addis Ababa from 12-15 February, 2008. members agreed to negotiate for participation in the meeting. Members therefore agreed to take up the request with their Youth Ministries, German embassies and GTZ for support.

The working group also looked at various conferences that occurred in 2002 involving youths. These included the Africa-Europe Youth Summit, Junior G8, and the Pan African Youth Leadership forum. There were also some leadership programmes such as “Go Africa-Go Germany”, a German-African Scholarship Exchange Programme which is also an initiative of the German Federal President in cooperation with the Federal Agency for Civic Education. Last year’s exchange programme was held in Berlin, Germany and Windhoek, Namibia.

EU-Africa Policy

Later in the day, the YLs engaged discussions on European Africa Policy with inputs from respected panellists of Matthias Mülmenstädt, (Federal Foreign Office); Wolfgang Kroh, KfW Bankengruppe; Bruno Wenn (KfW) and Wolfgang Schmitt (GTZ)

After a hard day, we headed for a good meal and a dance

B.3 Day 3: Network formation and visioning

This day was dedicated to formation processes of the Young Leaders Network. Previously the YLs met at the programme and invitation of the Federal President’s and Zeit’s invitation. A decision was made that the Young Leaders be given the space to decide their own future and operations.

At the end of the day, the following were agreed as YLs Network Profile:

Who we are
We are the Young Leaders Network affiliated to the Partnership with Africa Initiative started by the Federal President of Germany, His Excellency President Horst Kohler in 2005.

Our Objective
We aim to contribute to sustainable development through fostering partnership between Africa and Germany bringing in a young people’s perspective and promoting the interest of young people though not exclusively.

Our Thematic Focus
We address a range of development issues bringing the perspective of young leaders working in a variety of sectors and advocating for the interest of young people though not exclusively. Our starting thematic areas of interest are as shown in our 2006 Accra Declaration namely:

§ Environment and the Natural Habitat
§ Violence in Everyday Life and Armed Conflict
§ Educational and employment opportunities
§ Political Participation in Society

In future we hope to expand to cover other themes of common interest.

What makes our network unique?
A number of features make our network unique. While in and of themselves, the individual items may not be special, the combination of all these elements makes our network distinct from other networks:
· Patronage from the German Federal President, which gives us access to influential policy makers in Germany and Africa. It is our intention to continue with high-level patronage beyond the term in office of the Federal president.
· Our network is made up of young people who are high achievers in their respective fields
· Our members are from a very wide range of professional, personal and national backgrounds ensuring a diversity that leads to innovative ideas.
· We work towards a common positive vision for Africa and Germany
· We function as a partnership of equals

Our methods
Our objective as stated above is met using a range of methods including:
§ Regular communication and exchange of ideas amongst ourselves using our online platform and occasional physical meeting
§ Joint activities involving members of the network including common projects, joint authorships of articles, meetings etc
§ Interaction with and influencing people who make policy in both Germany and Africa through advice, advocacy and lobbying
§ Support each other in striving for excellence in our respective fields of work
§ Advising each other and our external partners on a range of personal and professional issues

B.4 Network Management and Action points

The meeting elected people that would manage the affairs of the network as follows.
Messrs Collins Magalasi and Lars Allenstein were elected Coordinators for Africa and Germany respectively.
Peter Steudtner (Germany) will be responsible for Internal Relations.
The Public Relations team consists of Mwila Chansa (Zambia) and Miriam Haar (Germany).
Apart from the Steering Committee other group members have volunteered to take other responsibilities that the Young Leaders considered essential for a successful network with a long-term perspective, such as, for example, the legal status of the network and its constitution.The Fundraising Committee will be coordinated by Rodgers Atuhaire (Uganda) and Julia Pfinder (Germany).
Michael Kimmel (Germany) will be in charge of moderating the new internet platform

On Friday in the late afternoon after the official closure of the meeting the newly appointed Steering Committee and other group members continued the work on the structure of the Network and decided to undertake concrete steps.

Communication guidelines were set up which would encourage the Young Leaders to faster and livelier communication. Transparency and sharing of information will be the principles of communication among and about the Young Leaders.

To improve the internal communication as well as to provide information to the public the group plans to have its own website which should combine a public website with a non-public forum. A database with projects Young Leaders are involved in will be included into the new website. In addition, a bimonthly internal newsletter will be issued by Peter Steudtner. The option of a public newsletter has been left to further consideration.

A central question considered by the Young Leaders was a possible extension of the current network. Although there has been lively exchange on this issue no decision was taken in Berlin. However, it has been agreed that if the group intends to include new members, criteria for the selection of future members will have to be developed first.

C. Conclusions

The meeting ended on January 26, with commitment of the Young leaders to make a difference in their day-to-day lives.

As immediate actions, the meeting had the following action points:

Back to our respective countries
· Members agreed to report on the meeting to their respective Governments Ministries of Foreign Affairs and Youths; German Embassies and GTZ offices
Letter of Thanks
· Lars and Collins will facilitate letter of thanks to the federal President, GTZ, KFW

So many people played important roles in the success of my travel and meetings. Special mentions however go to the following:
The Country Director of ActionAid Malawi for approving my travel and the Policy unit colleagues for ably doing their jobs while I was away; the GTZ Malawi and Germany for the logistical arrangements including air tickets and accommodation respectively; the German Embassy in Malawi for the immigration facilitation including visas, the Malawi Embassy in Germany for the warm welcome and support provided and the Young Leaders from Germany, Madagascar, Ghana, Uganda, Sierra Leone, Zambia, Cameroon, DR Congo, Malawi, Burundi, Kenya, South Africa, Mozambique, Botswana, Nigeria, and Togo for entrusting their network into my coordination.

The Fifth African Development Forum (ADF-V) Youth and Leadership in the 21 st Century - CONCEPT

2008-08-15T10:35:00.000-07:00

The Fifth African Development Forum (ADF-V) Youth and Leadership in the 21 st Century
16 - 18 November 2006 UNCC, Addis Ababa, Ethiopia

Concept paper

Overview:

Africa is a continent of the young, with more than 60% of the total population below the age of 25. Any serious policy for social, political and economic development in Africa must recognize the importance of young people, especially in promoting social progress, reducing political tension and maximizing economic performance. The pace, depth and scope of any society's development depend on how well its youth resources are nurtured, deployed and utilised. Unlike other continents, Africa's population is becoming more youthful, with youth as a proportion of the total population projected at over 75% by 2015, due to the high fertility rate underlying the demographic momentum. Currently, youth account for 45% of the total labour force in Africa; hence, the need for Africa's development efforts to reflect this demographic fact.
A youthful population has several potential advantages for national socio-economic development. The social advantages provided by youth include a greater degree of mobility, versatility, openness, adaptability and tolerance. In economic terms, youth provide dynamism in the supply of labour required for faster economic growth. Since youth consumption is generally related to basic needs, for example in housing, a youthful population also provides opportunities for mass production and hence economies of scale required for the development of local industrial and commercial enterprises. Furthermore, where the appropriate mechanisms exist, youthful population can provide a support base for social security systems. Above all, development of a country depends on the creativity of its population. Youth are known to be more creative and innovative than the adult population, and in several areas of development such as in community development, peace building, IT, and HIV/AIDS education youth are already playing catalytic roles in Africa. However, on the whole youth are generally marginalized in national economic, social and political structures.
In 2000 over 200 of the world's political leaders, including African leaders, made a declaration that ushered in the Millennium Development Goals (MDGs). Though only Goal 8 of the MDGs specifically mentions young persons, the remaining seven goals directly or indirectly relate to them. Thus at least from the perspective of the MDGs, Africa's young people are tremendously important. However, older people including policy makers, appear not to know much about them- despite their numbers and despite the historical contribution of young people and youth movements to Africa's political history. Even the term 'youth' gives rise to confusion and conflicting images-some see youth as a threat to the established order while others focus on young people as the hope for the future. However, no young person is simply 'future potential' and a receptacle for learning. They are active and contemporary social, political and economic actors in themselves, and need to be sufficiently involved in Africa's development processes.
The scandal of child soldiers in Africa's conflicts, for example, cannot be understood without recognizing that the vast majority of these soldiers are young people who could be readily mobilized by leaders for productive action but instead are left wandering in the streets of African capitals without meaningful engagement. Additionally, the HIV/AIDS pandemic-Africa's number one threat to survival-cannot be overcome without a focus on youth, because they account for the largest proportion of its victims.
Youths are not typically conceived of as productive and constructive social actors, but rather as potential sources of political disruption, delinquency and criminality. Yet, pre-independence social and political movements were often led by young people who defined themselves as 'youth' to provide dynamic support to the leadership of the freedom and independence movements or in opposition to their elders who were supposedly content to be cronies of the colonial regimes. Some political parties were explicitly organized around youth.
The decision to devote the Fifth African Development Forum to youth emanates from the frank acknowledgement by various African development stakeholders that political stability, social solidification, and economic prosperity lie in harnessing the capacities of the youth.
Whilst youth has become a global issue, the situation of youth in Africa- characterized by embarrassingly high levels of unemployment and underemployment, exodus to other continents, involvement in violent political and social conflicts, etc.- is critical and requires strategic regional and national action.
Globally, youth concerns have been receiving increasing attention. The World Bank, for example, is devoting its 2007 edition of the World Development Report to youth under the theme, "Development and the Next Generation".
Within the UN system in 1995 youth issues were debated in the General Assembly leading to the World Programme of Action on Youth (WPAY). The ILO's 93 rd Session of the International Labour Conference in June 2005, where pathways to decent work for youth and the role of the international community in advancing the youth employment agenda were discussed . In October 2005, following the review of progress on the implementation of the WPAY, the UN General Assembly adopted a resolution (RES/60/2) reaffirming WPAY, which among other things:
• Called upon Governments to develop, in consultation with youth organisations, holistic and integrated youth policies based on WPAY,
• Requested the Regional Commissions to organise regional consultations with Member States and youth organisations in order to evaluate the implementation of the WPAY, and
• Called upon organisations, programmes and specialised agencies in the UN system to enhance inter-agency arrangements on youth policies and programmes with a view to improving coordination and enhancing synergies among relevant system activities in this regard.
The African Union Summit held in Khartoum in January 2006 by the decision of the Executive Council (EX.CL/Dec.273) underscored the need to restore hope and confidence to African youth and defined conditions that will enable them play a greater role in African development. In July 2006, The AU Summit held in Banjul by the decision of the Assembly of the Heads of State and Government ((AU/Dec.13 (VII)) adopted the new African Youth Charter that is now ready for signature and ratification from member states.
At the national level several countries have also initiated attempts to develop national youth policies. However, the policy deficiencies in youth development and the gap between the situation of youth in Africa and the realization of the potential contribution of youth towards the achievement of the objectives of development on the continent warrants deeper soul-searching, which would lead to better concerted efforts in developing our youth at all levels.
Vision Statement
The vision of the Fifth African Development Forum (ADF-V) is to endow African youth with material resources, skills, and intergenerational synergies, which would enable them contribute maximally to the democratic, gender-equal, peaceful and rights-based development of Africa.
The Forum, as a multi-stakeholder platform for debating, discussing and initiating concrete strategies for Africa's development, will be organised under the theme " Youth and Leadership in the 21 st Century", from November 16-18, 2006, by the Economic Commission for Africa jointly with its strategic regional partner, the Africa Union and in collaboration with other stakeholders in African development.
Objectives of ADF-V
The immediate objective of ADF-V is to fulfill the requirements of UNGA Resolution 60/2 of October 2005, by providing a platform for regional consultations and discussions on key issues affecting youth with Member States, UN agencies, civil society as well as African youth, with the view to evaluating progress towards the objectives of the WPAY, notably, the development of holistic and integrated youth development policies in member states and the enhancement of synergies among stakeholders including UN system agencies for youth development in Africa.
The ultimate objective of ADF-V is to deepen strategies at the regional and national levels for translating the potential of youth as a development asset into practical benefits for Africa's democratic, gender-equal, peaceful and rights-based development, in line with the objectives of the proposed African Union Youth Charter, NEPAD and internationally agreed development goals including MDGs.
A regional platform on youth development is necessary for a number of reasons. African countries face the same type of crisis of youth: limited access to (quality) education; unemployment; the threat of HIV/AIDS; conflict and post-conflict woes; social, political and economic exclusion; etc. The inter-twinning nature of youth issues across national borders, for example, youth migration, provides potential economies of scale in a joint regional policy making process.
Past ADFs have helped generate innovative ideas for advancing strategic issues affecting Africa's development such as national ICT policies (from ADF 1999) and HIV/AIDS research (from ADF 2000). ADF-V will provide the mechanism for articulating emerging concerns of youth and developing consensus regarding the solutions.
Specifically, ADF-V will:
• Develop strategies for the operationalisation and hence synergetic support for the implementation of the objectives of the proposed African Union Youth Charter, which will lead to new and or more comprehensive national youth policies reflecting the aspirations of youth collated through national consultations;
• Build partnerships, renew impetus, and deepen commitment to youth development, including the establishment of knowledge networks for sharing information and best practices on meeting the challenges of youth, especially challenges facing girls and young women, and
• Offer an opportunity for African youth to dialogue with key personalities as a launching pad for a youth voice at the continental level.
Definition of Youth for ADF-V
Governmental and non-governmental organisations alike have long faced difficulties in dealing with youth, partly because the child-adult dichotomy divides their focus either onto younger children or onto adults, and partly because of the problematic indeterminacy of the category 'youth'.
There are chronological definitions of youth, political definitions, and socio-cultural definitions. However, most official definitions are largely arbitrary. The United Nation's Department of Economic and Social Affairs defines youth as those persons aged between 18 and 24 years. However, in several African countries youth is defined to include lower ages such as 12 and higher ages such as 35. The AU in the adopted African Youth Charter defines youth as those persons aged between 15 to 35 years. This definition will be adopted for the purpose of ADF-V.
ADF-V Work Programme
The ADF-V Work Programme will revolve around the concept of youth as an asset in development. It will aim at developing approaches for maximising the contribution of youth to African development, with a focus on three principal pillars: 1) Youth as a base for economic development; 2) Youth as a dynamic force for social transformation and progress; and 3) Youth as a factor for change in governance and political development in Africa.
Deliberations will be clustered around these pillars, under the following subject areas or sub-themes:
Cluster 1: Youth and Economic Development
(Topics: Education and skills; employment and migration; entrepreneurship; ICT; health and HIV/AIDS; environment and sustainable livelihood; and participation in national economic policy decision-making)
Cluster 2: Youth and Social Development
(Topics : Culture and intergenerational relations; girls and young women; young people and children ; youth in the religious setting; young people and urban Africa; volunteerism; and participation in social transformation)
Cluster 3: Youth and Political Development
(Topics: Characterisation and definition of youth; Africa identity and citizenship; young people in the Diaspora; conflict resolution and peace building; and participation in democratic, rights-based and gender-equal development)
Outline of Thematic Sessions: objectives, sub-themes and issues
Cluster 1: Youth and Economic Development
• Young People, Education and Life Skills
It is estimated that about 133 million young people (more than 50% of the youth population) in Africa are illiterate. Instead of being in school more than 300,000 children serve rebel movements as bush soldiers. Many young people have little or no skills and are excluded from productive economic and social life, existing without hope and without support. Those that have some education exhibit skills irrelevant to current demand in the labour market, in a situation where educational and skill requirements are increasing, resulting in millions of unemployed and underemployed youth. The problem is compounded by continuing decline in real public expenditures on education and training in the face of high population growth.
The need to improve the quality of education and training for the youth cannot be over-emphasised. There is also a need for technical and vocational programmes for out-of-school youth. Technological awareness, problem-solving and scientific approaches in curriculum delivery must be the bedrock of education and training. Above all, access to education has to be expanded, especially for marginalized youth- notably, rural youth, the physically challenged, and isolated ethnic communities.
This session will focus on two broad objectives, namely, a) to review best practices in expanding educational access to young people, especially programmes and activities (including financing strategies) aimed at assisting disadvantaged youth "catch up" with their counterparts elsewhere; and b) to review best practices that improve the quality of education at all levels, especially those helping youth develop their creative skills. The issues to be deliberated upon include: What approaches need to be adopted and implemented towards helping the youth of Africa develop their human capital to meet the challenges of national and regional development in a technology and skill intensive world system? How can Africa sustain its long-term development and improve its competitiveness if it is not able to install an effective educational programmes that constantly inform her young people, equip them with the requisite skills, and develop their creative abilities?
It is expected that the outcomes of the session will contribute to the implementation of the AU Second Decade of Education for Africa (2006-2015).
2) Young People, Employment and Migration
The incidence of youth unemployment in Africa is over 20%, not counting the larger proportion of young people that are underemployed and eke out a living from indecent jobs. The rising hopelessness in the job situation facing African youth has forced an increasing proportion of them to risk their lives crossing dangerous paths and waters- over the Sahara and the Atlantic- in order to reach better pastures in Europe and America. ADF-V will attempt to examine the root causes of the lack of concerted action against youth joblessness, why African countries have been slow in joining the UN Secretary-General's Youth Employment Network, which seeks to assist UN member states to develop programmes for enhancing youth employment around the world, why are youth not being informed effectively about the opportunities in their own countries, what youth who resist the temptation to go abroad are doing to generate jobs for themselves and for others, and what lessons can be learnt from their experiences.
In order to address the issues of youth employment and migration, there is a need to examine youth transitions from the employment perspective- school, entering the labour market, remaining unemployed, and the unemployment-re-training-employment transition. Lack of careful attention and support for youth during these transitions plays a large role in determining their employment experiences. Another issue that requires attention is the provision of information, relating to both national and international labour markets, to facilitate decision making on the part of youth seeking employment. There is also the issue of systematically building the skills of young people systematically through internships, job attachments and volunteer work. Finally, what jobless youth do to sustain themselves and the implications of this for various dimensions of socio-economic development, including, health and HIV/AIDS, crime and violence, environmental degradation needs to be addressed.
The fight against poverty can be won if youth joblessness can be tackled head-on. There is ample evidence to show that inter-generational poverty- poverty from parents to children- is the main contributor to chronic poverty in Africa. A way therefore, must be found to break the poverty transfer cycle by facilitating employment, especially for vulnerable young people. Furthermore it has been shown that employment history at the early stages of entry into the labour market does affect individual performance in later life in terms of employment and income status.
The Forum will therefore document best practices in generating sustainable youth employment, and seek to identify the positive linkages between youth migration and youth employment and poverty reduction from which to develop coherent youth employment policies and programmes. It is expected that outcomes of this session will lead to partnerships in support of the formulation and the implementation of decent jobs policies and programmes in African countries.
• Young People and Entrepreneurship
Entrepreneurship starts from youth. Where support systems exist, the work of young entrepreneurs flourish and society benefits from their creativity and innovation. In Africa most young people end their dreams at the level of single-shop operations or in queues for government jobs. This tendency arises largely from the many limitations to the development of the business creativity of youth in Africa. There are, however, some cases of successful young entrepreneurs in Africa. What lessons can we learn from these successful young entrepreneurs? What message can they share with their peers?
The session on young people and entrepreneurship will review documentation on interventions aimed at developing young people for success in entrepreneurship and self-employment. The focus will be on the elements of their innovative and creative skills, and the type of support required to effectively develop these competencies and to build capacity for replication. Some of the issues to be examined include: What are youth doing to generate employment for themselves? What support are they getting? What are the best practices and lessons to be learnt? What factors inhibit the development and utilization of youth creativity? How can these be addressed at the national and regional level?
• Young People and ICT
The role of ICT in developing and utilizing the creative and productive potential of young people has been articulated in initiatives such as the World Summit on the Information Society and the African Information Society Initiative (AISI). New technologies can be used to unleash creativity, innovation, better education, entrepreneurship, decent employment and leadership among young people. As a tool, ICTs can foster youth leadership . Already ICT has been deployed to assist in peace building by youth in some communities in Africa.
Youth have been observed worldwide to be reliable and effective agents of technological change and harbingers of the information age, bringing existing and emerging technologies into the communities or sectors where lack of access to information has undermined and constrained development. Equipping youth with IT skills, creating an enabling environment for ICT innovations, entrepreneurship and employment, promoting their utilisation in policy-formulation, and in production, consumption and exchange can go a long way to catapult Africa over the digital divide and bring her into the global information society.
The focus of ADF-V session on Youth and ICT is to elaborate an enabling environment for youth leadership in all spheres of life through the deployment of ICT. The main issues for discussion will include: How to harness and spread ICT for quality youth education? How has ICT promoted youth education on the continent? What lessons can we draw from existing programmes and policies? In what ways can youth employment and entrepreneurship be enhanced by ICT deployment? How are the youth involved in the digital economy? How are the youth leading and pioneering ICT initiatives in the countries? What specific elements does ICT policy and regulatory environment need in order to promote youth SMMEs ? Are there policies regarding technology parks and business incubations? What is the role of the public, private, and international organizations? How can best practices from other regions be adapted to the Africa environment? What capacity building in research and development is needed to create an environment that promotes the involvment of youth in creative innovations? What are the lessons learnt?
It is expected that the outcomes of the session will promote the objectives of the African Youth in ICT for Development Network (AYIN), an offshoot of the World Summit on the Information Society (WSIS).
• Young People, Health and HIV/AIDS
HIV/AIDS is the number one threat to Africa's young people. The median age of infection for women in Africa is in the early twenties, implying that a substantial majority of girls that are HIV positive were infected before they turned 20. Only by focusing on young people will it be possible to halt the HIV/AIDS pandemic. There is much that can be done with young women themselves, both directly (by providing access to sex education, life skills, condoms, microbicides, etc.) and indirectly (by addressing the social environment in which girls and young women live, increasing girl's educational and socio-economic opportunities, and thereby increasing their power and decreasing their reliance on selling or trading sex).
HIV/AIDS is a major item for consideration in this session, but other communicable diseases, including especially sexually-transmitted infections, drug, alcohol and tobacco abuse and their health implications, accidents associated with dangerous occupations, violent crime, etc. should not be overlooked.
ADF-V deliberations will aim at articulating youth health concerns, in particular persistent social practices that affect the health of young women; review youth health initiatives; identify key factors explaining successes (or failures) of youth health initiatives; and discuss ways and means for strengthening youth health programmes and youth led health initiatives. This session will focus on interventions for improving the health status of young people and reducing their vulnerability to HIV/AIDS, and the role of young people in implementing these interventions.
6) Young People, Environment and Sustainable Livelihood
The United Nations Conference on Environment and Development (UNCED) 1992, identified youth as key players in the implementation of the environment and development agenda. Agenda 21, the programme of action for sustainable development that was adopted at the Conference dedicated Chapter 25 to the contribution of children and youth in sustainable development. Further, the Johannesburg Plan of Implementation (JPOI) adopted at the World Summit on Sustainable Development (WSSD) 2002, commits countries and organizations to promoting and supporting youth participation in programmes and activities relating to sustainable development.
Africa faces several environmental challenges: mitigating the effects of drought, reducing the rate of depletion of forest and mineral resources, clearing chemical waste, improving urban sanitation, etc. These challenges cannot be met without the participation of the youth population. The overall objective of the session will be to identify options for strengthening the involvement of youth in sustainable development decision-making and in the implementation of Agenda 21 at all levels. Specific issues to be covered include:
• Sustainable development from a youth perspective and how this fits in with the Johannesburg Declaration and the JPOI
• How have youth been involved in the implementation of JPOI and in particular, the Africa chapter of the Plan?
• What are the best practices and lessons learnt by youth in natural resource management?
It is expected that deliberations will, among other things, lead to the i ntegration of youth concerns in decision making pertaining to sustainable development, increased networking among youth active in the field of sustainable development, e stablishing or strengthening partnerships between youth and other stakeholders, and creating a c lear roadmap on the involvement of youth in the sustainable development programmes of ECA and partner organizations.
7) Participation of Young People in Economic Decision-making
Africa's youth feel excluded from policy platforms, even in matters that affect them. The results of this alienation go beyond individual self-esteem. They feel left out on the NEPAD initiative and the implementation of the MDGs. This affects their general sense of citizenship, which explains why the majority of youth would want to leave the continent. For the youth, the problem of economic governance cannot be solved just by allowing them to participate in decision-making, but also requires their inclusion in the distribution of the benefits of social progress.
All over the continent young people are developing platforms among themselves on various development initiatives such as NEPAD, MDG and PRSs; what they need are entry points into national and regional economic policy cycles. The Forum will examine the important role of youth in decision-making, models of participation and lessons and experiences that could guide future initiatives to harness youth for improvement of economic governance in Africa.
Cluster 2: Youth and Social Development
• Culture and Intergenerational Relations
African culture is highly heterogeneous, given her numerous ethnic groupings. One of the characteristics common to all, however, is that they are neither traditional nor modern, but a hybrid of old indigenous systems and foreign legacies of the colonial or imperial past. Hence, according to Nsamenang (2000), youth experiences today are shaped by "acculturative stress" and "behavioural shifts" incidental to the coexistence of the internal (local) and external (foreign) traditions.
The foreign culture's siege on indigenous African traditions is leaving African youth almost without a sense of cultural belongingness, with no embodiment of national or community values to hold on to in the face of the challenges of a global community. Culture is supposed to help society survive and make progress materially, emotionally and spiritually. For the youth of Africa there is a need to examine the apparent failure of African culture to resist external forces- slavery, colonialism and globalisation- and to overcome chronic poverty and underdevelopment; and which positive aspects of "culture" should be preserved.
Another major challenge to youth is the preservation of the "family" in terms of its ability to cater to its members economically, socially and politically. The traditional family is breaking down mainly as a result of economic exigencies. In some areas of Africa major additional threats to the family as well as the community are armed conflict and HIV/AIDS. What is being done to strengthen and support families that find themselves in these situations?
This forum will examine the mechanisms for intergenerational transfer of social values and skills, the issue of youth culture and how it should be nurtured to contribute to national and regional development, and meeting the special needs of Africa's young household heads in conflict and post-conflict areas. The aim of the session will be to document best practices in intergenerational transfer of skills and in youth development in general, define the main elements of African "positive" culture to pass on to the youth, and formulate the framework and action plans to rid the continent of obnoxious traditional practices.
• Girls and Young Women
Men and women experience life differently; men and women do not face the same constraints; they do not have the same options and incentives; and men and women frequently have different priorities and are affected differently by policy and development interventions. In most African societies, girls and young women are subject to socially imposed constraints that dampen their economic and social conditions. Adopting a gender approach in the formulation, programming and planning of development policies means taking into account the productive, social, reproductive and community roles and needs of both young women and men.
While the activities of African girls and young women have not often been the primary focus of research, their roles are nonetheless revealed in many spheres of African life, both past and present. We know, for instance, that household economies are heavily dependent on the labor of African girls, but how this labor is understood, and its effect on other spheres of life- such as the education of girls in the contemporary period and their economic and health prospects in the longer run-is of considerable interest. Young women in developing counties are known to be especially vulnerable to health problems, such as sexually transmitted infections (including HIV) that are compounded by inadequate health care and education, as well as poverty.
Women in general are emerging as leaders in many very contemporary and youthful cultural fields, including art, literature and music as well as in politics. There are many challenges, however. ADF-V will examine interventions that enhance the participation of girls and young women in mainstream socio-economic and political life. The session will also examine the extent to which African countries have implemented commitments such as the Convention on the Elimination of all forms of Discrimination Against Women (CEDAW), the African platform for Action adopted at the 5 th African Conference on Women in Dakar (Senegal), the Beijing Platform for Action, African Charter on Human and People's rights and the Millennium Development Goals with respect to girls and young women. It is expected that the session will develop a clear road map for ridding the continent of traditions and practices that impede the socio-economic progress of girls and young women.
• Young People and Children
Child-focused organizations tend to regard parents (especially mothers) as the key intermediaries for promoting the welfare of children. The pivotal role of mothers cannot be disputed. Young people-a substantial proportion of them children themselves-are also crucial intermediaries. Most African women bear their first child before the age of twenty, and teenage mothers account for about 15-20% of all births, many of who are unemployed and are in unstable relationships. This situation has according to the evidence, adverse consequences for the children. Currently, most programmatic interventions target these young women solely or primarily in their capacity as mothers, without also seeing them as young people embedded in the social networks and sharing the cultural and social attributes of this social group.
Young people relate directly to children. They are role models for children. Young people are older siblings, neighbours, part-time carers, schoolmates and friends to children. The social and cultural environment of non-infant children is strongly influenced by youth subculture, and this influence becomes stronger as children get older. Young people influence the attitudes of younger children about health, education and social norms as well as political development. We cannot expect Africa's children to make progress in these areas unless there is positive influence from young people.
This session will seek out ways to incorporate young people in public policy-making in order to enhance the social development of children in Africa. It is expected that the session will lead to the development of community level programmes to shape the influence of young role models on children.
• Young People and Religion
Religion plays a critical role in human development, according to socio-psychological studies, by building responsible and law-abiding citizenry. African societies are highly religious. But how has religion helped Africa in its development? In particular, how is religion passed on to young people and how do young people respond to religion and utilize the powers of religion to achieve their own economic and social goals in life?
Among the best-studied youth-based social movements in Africa are the evangelical and Pentecostal churches and Islamic movements. These formidable contemporary social movements are marked by a powerful youth orientation, and by the message that personal moral rejuvenation can redeem or transform a corrupt public order. What are the impacts-present and future-of these religious movements on governmental policy-making in Africa? How are we to engage with these religious organizations for social development?
This session will attempt to document best practices in youth development undertaken by various religious groups including traditional religious organizations, discuss ways and means to reduce youth vulnerability to religious extremism, and develop approaches to strengthen the role of religious organizations in national and regional development. It is expected that this session will initiate a draft social-religious code that reflects the principles of human rights, tolerance, transparency and accountability.
• Young People and Urban Africa
The rate of urbanization in Africa is one of the highest, and young people are more likely to move to cities. Whether they partake of the pleasures of urban life, form part of a vast Diaspora network, an increasing number of Africa's youth are choosing the city over the countryside or deliberately straddling the rural-urban divide as they make their way into adulthood. To navigate the opportunities and difficulties of urban life young people need to be economically and socially creative.
ADF-V will explore the symbols, strategies, and tools that youth employ to seek shelter, build self-esteem, make a living, and protect themselves physically and emotionally within and across diverse urban settings. To what extent does the urban landscape frame the choices that particular young people make? What interventions are available to mitigate the likely impact on urban social services and living spaces of the increasing number of youth some of whom have joined gangs or contracted HIV/AIDS? Alternatively, what mechanisms and modes have young people themselves adopted and adapted to confront the challenges of 21 st century urbanism? It is expected that this session will build on the strategic outcomes of the World Urban Youth Forum (Vancouver 2006) in terms of reducing the risks that young people face and enhancing opportunities for the fulfillment of their aspirations in the urban setting.
• Youth Volunteerism
The focus of this session will be on the activity of young persons in the mobilisation of civil energies for development at the community, national and regional level. Most youth programmes are designed to deliver services to young people, abut fail to recognise that youth can assist in delivering services to others, according Susan Shroud and others (Innovations for Civic Participation, 2005). Volunteerism is a mechanism that offers young Volunteering benefits both society at large and the individual volunteer. It makes important contributions, economically as well as socially and politially, by facilitating a more cohesive society through building trust and reciprocity among citizens. Yet in Africa the only volunteers we have are foreign nationals. Young Africans have been made to believe that they cannot afford to volunteer.
The absence of volunteerism makes it more difficult to serve the cause of peace, transmit the values of free will, commitment, engagement and solidarity among African people. The exigencies of post-conflict reconstruction in which more than a dozen African states find themselves require that African youth, the most populous and the most energetic demographic group, be mobilised for peaceful coexistence and economic prosperity.
This session will focus on the participation of youth in voluntary activities, including those organised by national, regional and international, both UN-based and non-UN, organisations with the view to making proposals for facilitating the creation of opportunities and strengthening youth volunteering; identifying and documenting the youth role in the processes of awareness creation regarding communicable and infectious diseases, environmental management, peace and conflict resolution. Some of the possible discussion topics are: what are the existing manifestations of youth volunteering in Africa? How relevant do young people consider the establishment of a regional (or sub-regional) mechanism of African youth volunteering? It is expected deliberations in this session will lead to the development of a framework for establishing an African Youth Volunteer programmes and the implementation of the African Youth Chater articles 15 on Sustainable Livelihoods and Youth Employment; article 17 (f) on Peace and Security; and article 26 (e & k) on Youth Responsiblities.
• Participation of Young People in Social Transformation
This session will attempt to reach a consensus on how to utilise the identifiable skills of young people to secure stable and sustainable progress in Africa's social transformation. In particular, the session will review the role of young people in the music and arts as well as through sport in establishing social cohesion and tranquility in African communities.
Young people are the principal actors in Africa's social and political creativity today. Under the onslaught of a range of adversities-HIV/AIDS, unemployment, political repression, conflict, and the collapse of education systems-young people are actively fashioning new social orders. Most of these emergent social networks, organizations and belief systems are poorly understood. Youth through music and art and through excellence in sport show their refusal to accept the deplorable social and political circumstances in which they find themselves, and their determination to find new ways to give meaning to their lives in an environment in which almost all avenues for self-advancement are closed. Through sport, youth redeem their self-esteem, learn team building skills, tolerance and adherence to rules- critical factors in social development. It is expected that the session will develop ways to mainstream sport, music and art in national development strategies, and in doing so create further entry points for youth participation in national development.
Cluster 3: Youth and Political Development
• Characterisations and Official Definitions of Youth
The discussion under this topic will attempt to reach consensus on: "who are Africa's youth?" Traditional African societies had sequences for the maturing individual: for men, child to single man or warrior or labourer, to married self-supporting adult and elder, and for women, from girl to wife then to mother (Aryee, 1997). In modern societies, the sequence has become: from school to employment, with perhaps an intermediate stage for higher education or training (with consequent delay in marriage). 'Youth' in social terms is therefore a problematic, intermediary and ambivalent category, chiefly defined by what it is not: youths are not dependent children, but neither are they independent, socially responsible adults.
With social and economic development, and the ratification of international conventions by African governments, a single juridical age of maturity has gradually been introduced, though not fully accepted, across Africa. The age definition and classification of different age ranges of young people such as teenagers, middle-age youth, and mature youth, has implications for public policy and individual welfare, which must be addressed. It is expected that the session will lead to a consensus on the rationale for the "definition of youth" adopted in the African Youth Charter.
• African Identity and Citizenship
This session will examine the issue of national and African identity, the transition that youth undergo as they become citizens; how early political and civic experience shape patterns of citizenship throughout life, and the impact of "meaningful" citizenship on participation, accountability and collective action in achieving development. How do young people perceive African identity in a globalised world? Are their perspectives different from "national" ones? What are the implications for national development if divergences exist in these perceptions? These are some of the issues that this session will be concerned with.
Many young people feel left out of national processes, and they show their frustration in terms of non-participation in voting, for example. To them citizenship has not much real meaning, in the absence of quality education, employment, access to political structures, and roles in business and finance for young people. What it means to be an African young citizen needs to be defined and strategies need to be developed for the protection of the privileges embodied in such definitions.
It is expected that the session will lead to a consensus on strategies for developing skills for national and African citizenship as well as nurturing the environment for the actualization of the African citizenship among youth.
• Young Africans in Diaspora
The population of African youth in the Diaspora is substantial and may be classified into four groups, namely, students, completed students not returning, recent immigrants other than students, and African youth born outside the continent.
Most African students are concentrated in the developed countries, especially Western Europe and North America. Africa accounted for nearly 5.0 per cent of the population of foreign students in US in 2002/2003. Some African countries like Kenya ranked among the largest student sending countries to the United States with a total student population of 7862 in 2002/2003. The number of African youth in the US is significantly higher if United States-born children of African immigrants are included.
The main determining factors for student migration from the perspective of the sending (home) country are lack of facilities, and hence an inability of African higher learning institutions to absorb the increasing demand by youth for education and the narrow range of specialized courses offered by these institutions. Student migration represents a potential flow of skilled workers, either during the course of their studies or when they have completed their studies.
The direct role of Africa's youth in the Diaspora in the continent's development is low compared with that of foreign youth on the continent. Is Africa offering opportunities for others and not for her sons and daughters? What can be done to tap the resources of young Africans living abroad? How could they be re-integrated in African society?
The session will a) discuss and share experiences arising from African Diaspora initiatives such as the AU Diaspora Initiative, explore and identify innovative ways and mechanisms at the national and regional level for harnessing the resources (financial, intellectual and otherwise) of the African youth in Diaspora, and develop consensus on practical and strategic plans for inclusion of Youth in Diaspora in Africa's development processes.
• Young People, Conflict Resolution and Peace Building
In Africa, due to the sheer number of young people and their estrangement from the formal social and political order, mass mobilization of youth for war has not had the effect of sparking political change. Young people are not a scarce resource, and as a result, political and military leaders tend to use them with impunity. Information about the socio-economic and political profile of regular and rebel armies in Africa is vital for effective disarmament, demobilization and reintegration programmes, and also for the project of building truly peaceful civilian regimes.
This session will cover issues such as: the reasons why young people have been involved in recent armed conflicts, both as victims and agents; effective options for addressing youth needs in immediate post conflict situations as well as during periods of peace-building and post-war reconstruction; experiences of best practices on these issues; and experiences on conflict prevention. Specifically, the session will attempt to cover the following: a) r ole of youth in African conflicts; b) the youth dimension of conflict resolution; and c) youth solutions to peace-building and post-conflict reconstruction.
Child soldiers have become the subject of much programming, advocacy and research in recent years. The focus has been on the illegitimacy of recruiting children (initially under 15, more recently under 18) as combatants, and the need for their demobilization and rehabilitation. The next stage in a campaign against child soldiers is to broaden the agenda to include young people and militarism. While it is not possible to make a legal or human rights case against young soldiers, it is both necessary and possible to address the structural conditions that make it so easy to militarise Africa's youth and to pave the way for solid social and political reconstruction.
The use of underage soldiers by armed groups is a war crime and efforts must be up scaled to deal with this scourge. However, we must be careful not to view the role of youth in conflict situations simply as that of victims of war. In order to effectively deal with these issues, the agency and rationale for wielding arms must also be taken into account. In that context, it is similarly important to focus specifically on addressing youth needs when dealing with issues of conflict resolution and peace building. In West Africa and SADC regions this is happening, and ADF-V should document best practices for emulation elsewhere.
It is expected that this session will develop strategies for strengthening youth's role in peace building and conflict resolution, and for embedding employment in the pursuit of collective security in the communities.
• Participation of Young People in Democratic, Rights-based and Gender-equal Development
Most young people are social and political beings, impatient to express themselves, organize and engage in the social and political affairs of their communities and nations. They often long to escape from their families and are already engaged with extra-familial networks. Given the chance, many join political parties and become among their most active and dedicated members. Some volunteer for armed rebel movements, which in some cases can become a means for personal as well as political emancipation and self-actualisation.
How could governments best engage with the force for positive change represented by Africa's multifarious informal youth movements? How could the potential for a positive contribution of young 'party militants' be maximised, and their criminal or radical potential minimized? How could the political motivations that child soldiers might harbour be translated into peaceful activism? What might be the best way to engage fruitfully with student unions and youth political movements? In countries, such as in Uganda, there are representatives of youth in Parliament. This is a positive step and other countries could learn some lessons.
The participation rights of young people need to be taken seriously, so that they are more adequately represented in community and national mechanisms for ensuring that citizens' voices are heard and taken into account. Institutions that represent the young, and that deal with the young need their capacities enhanced. Mechanisms for delivering services to the young, ranging from schools and clinics to banks and micro-credit institutions, need strengthening with greater and more effective participation by their young clients and stakeholders. Civil society organizations, youth organizations, schools and universities, government departments, and regional organizations should all become concerned with young people, as citizens in their own right. Addressing all of these issues promises to yield benefits not only for children and young people, but also to increase the stability of the governments that are able to engage their young citizens in the national project.
The session will consider the following among other questions:
• How can the visions and dreams of youth as well as the dynamic components of youth sub-culture be transformed into positive contributions towards the establishment and sustenance of rights- and peace-based governance systems in African society, from the community to the regional and global level?
• How best can marginalized groups be included in political governance processes
• What contribution has youth been making in support of Africa's political integration? How can this be strengthened?
• What can "traditional youth chiefs" tell us in drawing up programmes and mechanisms for youth participation and inclusion?
IMPLEMENTATION STRATEGIES
The implementation of the objectives of the Forum will be revolve around three building blocks:
• Principles underpinning consultations, involvement and participation of key stakeholders, notably youth in the ADF-V processes;
• Processes for the determination of the content of all core documents, including the Consensus Statement, selection of participants, including keynote speakers and resource persons; and
• Organisation, Format and Timelines covering the work programme and documentation; media and publicity; participation; logistics; budget and finance; and post-forum activities.
Documentation
Documented reports and background papers will inform the discussions at the Forum. The core documents include:
• Thematic papers- These will highlight practical approaches to and serve as background reports on youth development in the major areas of concern to youth, as classified under the sub-thematic and subject areas above, namely, a) youth and economic development, b) youth and social development and c) youth and political development. The papers will also attempt to consolidate youth proposals on approaches and specific actions for youth development in the specified areas of concern. These papers will be produced by joint teams made up of the collaborating partners working with their youth partners, under the oversight of the Joint Technical Team and the Steering Committee.
• Country Briefs prepared by national youth representatives through a process of national consultations undertaken by the Core Partners in collaboration with the national Ministries responsible for youth, which will highlight the national youth vision, key youth concerns and the way these concerns are being addressed, and will make recommendations for the way forward. The Country Briefs will be reviewed by a Technical sub-committee and consolidated into one document to be titled, African Youth Briefs.
• The AUC report "Status of African Youth 2006", which gives a comprehensive information about the socio-economic and cultural situation of African youth as well as national youth policies.
Parallel Workshops, Exhibitions and Cultural Activities
The Forum will encourage collaborating agencies to run skill building and information sharing workshops, exhibitions and cultural expositions, and to prepare participating youth for the relevant ADF-V sessions, in the following areas, among others:
• ICT Entrepreneurship
• National Youth Employment Policies and Entrepreneurship
• Motivation, Role Modeling and Mentoring
• Peace Building and Post-Conflict Reconstruction
• Youth in Development through Sport, and
• Youth and Volunteerism.
Partnership and Collaboration
In accordance with the general desire to participate in ADF-V and the UN General Assembly Resolution 60/2, ADF-V planning and execution will revolve around five main partnership and collaborative arrangements:
• Joint Organisers - It is expected that AU (and the regional communities) will join ECA in organising the forum, as strategic partners;
• Core Partners - It is expected that UN system agencies with established mandates for youth development, such as UNICEF, UNESCO, UNFPA, ILO, UN-Habitat, and UNDP, as well as regional bodies such as Organisation Internationale de la Francophonie (OIF) will also join as core partners and contribute technically and financially regarding the preparation of background reports and country case studies; running workshops; and assist in the identification, recruitment and sponsorship of key personalities and resource persons, youth groups and individuals;
• Other collaborators- ECA, AU and joint partners will individually or jointly solicit further support from other institutions such as national institutions, bilateral and private sector organisations, civil society organizations, and other UN agencies (and the UNCTs), to undertake specific activities such as the organization of workshops, preparation of documentation, and provision of funding for needy participants and resource persons;
• Funding partners- Will provide financial support for pre-forum, forum and post-forum activities; and
• Youth organizations- will assist in the preparation of the draft Consensus Statement, country, sub-regional and regional briefs and background documents and in the running of workshops, and general servicing of the Forum and related meetings.
Target Participants
Youth is a development issue. Hence, all development stakeholders are expected to participate actively in the Forum, including the following:
• Regional Economic Communities
• Ministers responsible for youth affairs
• Youth organisations
• National (official) youth organizations
• Regional Youth Organisations
• International Youth Organisations
• UN partners
• Private sector organisations
• Bilateral organizations
• Multilateral organizations
• Key Personalities, such as youth-oriented heads of government, intellectuals, business and civil society leaders
• Resource persons and youth role models
• Traditional and religious leaders of youth, and
• Civil Society Organisations
Core and collaborating agencies are expected to include youth in their sponsored delegation to the Forum, in accordance with Resolution 60/2. The full list of participants would be completed by August 31, 2006.
Pre-Forum Processes and Activities
Regional Experts Meeting
A regional Meeting on Youth Development in Africa will be held at the end of June 2006, involving UN/DESA Youth Unit and other collaborating agencies and youth, to prepare, among other things, Africa's contribution to the UN S-G's Report on the WPAY. The meeting will also discuss the proposed strategies for achieving the objectives of ADF-V, including the work programme, modalities for conducting the national consultations, and partnership arrangements for ADF-V.
National Consultations
The aim of the national consultations is to 1) develop country briefs summarising the vision of national youth in terms of youth role in African Development, identifying supporting environments and mechanisms they need in order to play their role effectively, and determine how these environment and mechanisms could be installed and operationalised; 2) set out criteria for selecting youth participants for the ADF; 3) identify best practices in youth development; and 4) establish networks for the implementation of post-forum activities and programmes.
This would be undertaken between mid-July and mid-August 2006 by a team of the core partners through the UNCTs and under the auspices of ministries responsible for youth in member states in collaboration with national youth organizations, private sector and non-governmental organizations as well as others involved in youth development. The report of the national consultations will be fed into the core documents of the Forum.
Post-Forum Activities
ADF-V is expected strengthen the process towards the ratification and operationalisation of the African Youth Charter. ADF-V partners will collaborate in support of this process by including awareness of the Charter in their activities and programmes. ECA will establish a programme on youth to assist African countries develop and implement their national youth policies, in collaboration with its partners.
---------------Youth participants would be selected on the basis of 1) accomplishment in one or more of the thematic areas, and 2) gender, age and regional balance, with the view to achieving broad-based participation- reflecting Africa's youth demographic realities.

IMPLEMENTING ENABLING LEGISLATION FOR SUSTAINABLE ECONOMIC GROWTH

2008-08-15T10:26:00.000-07:00

IMPLEMENTING ENABLING LEGISLATION FOR SUSTAINABLE ECONOMIC GROWTH
PAPER PREPARED FORSOCAM SYMPOSIUM ON
SUSTAINING MALAWI’S ECONOMIC GROWTH: PROSPECTS AND CHALLENGES

Introduction

The assignment I have before me can be claimed to be a simple one:
describe how to implement an enabling legislation for sustainable economic growth!
But so many dangerous assumptions have been accommodated in the statement. Among them
that the enabling legislation is in place and that it is implementable.

It also assumes that there is economic growth that can be sustained …

What is sustainability? What is Growth? Should we look at it from the view of the 1377 Arabian economic thinker Ibn Khaldun? Or David Hume, Ricardo, or the ‘Japan model’? Perhaps the ‘US model’?

I am however very happy with the topic as it allows expression of MY views

Presentation Outline
Definitions
Demands / expectations of sustainable economic growth legislation
Legislation in Malawi
Implementing legislation
Enforcement of legislation
Flash lights for successful legislation implementation
Conclusion

Definitions

‘Legislation implementation' is the process by which the state takes a variety of measures to bring stakeholders into conformity with their obligations under the law.
These measures may include laws, administrative procedures and regulations.
There is no single approach to implementation.
Economic growth is the increase in value of the goods and services produced by an economy.
It is conventionally measured as the percent rate of increase in real gross domestic product.
"Economic growth" typically refers to growth of potential output, i.e. production at "full employment," which is caused by growth in aggregate demand or observed output.
Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced.
As a field of study, Economic growth is generally distinguished from Development economics.
The former is primarily the study of how rich countries can advance their economies.
The latter is the study of how poor countries can catch up with rich ones.
Sustainable Economic Growth
The Economic Times, 12 October 2006.
"It is sobering to note that inexorable growth is the characteristic of cancers and nuclear fission- processes that ultimately destroy their hosts."
World Commission on Environment and Development defines SEG as
‘Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’
in contrast with economic growth as GDP growth or a long term expansion of the supply-side of the economy.

Sustainable Economic Growth

Sustainable Economic Growth is a product of both process and content of legislation. It demands
accountability,
transparency,
certainty,
competitiveness,
continuous improvement,
efficiency,
innovation,
integration,
evidence/science-based decision making, and
shared responsibility.
Legislation for sustainable economic growth should facilitate these.
Let us see how implementation of legislation for sustainable economic growth can be done:
Accountability
Setting performance-based standards and indicators and implementing mechanisms for compliance, auditing and reporting on progress towards sustainable resource management. An effective enforcement regime is a key part of accountability.
Transparency
Establishing open and understandable decision-making processes including consulting with key interests prior to making decisions. Transparency also includes the public release of monitoring and compliance records, and tracking of sustainability indicators.
Certainty
Making timely and clear resource management decisions within a predictable and understandable regulatory framework.
Competitiveness
Ensuring that Malawi remains internationally competitive by removing barriers to investment and promoting fair and open trade.
Continuous improvement
Learning from the past and looking for new and improved approaches to management.
Efficiency
Maximizing the net benefits arising from the allocation, development and use of natural resources.
Innovation
Encouraging innovative approaches, technologies and skills to ensure the sustainability of natural resources.
Integration
Ensuring that resource management decisions integrate economic, environmental and social considerations for the benefit of present and future generations.
Evidence-based decision-making
Making justifiable decisions informed by science-based information and risk assessment.
Shared responsibility
Encouraging co-operation among different arms of the government, national and local governments; industry and civil society in developing and implementing finance management policies.
Implementation of legislation
Successful Implementation is measured by quality and quantity of goods and services produced in the country
Requires institutions:
Policy direction
Joint ownership
Enforcement
Authorisation
Inspection
Reporting
Targets, indicators
Largely implementation of such legislation looks at
Economic Management,
Financial Sector Regulation,
Tax Management,
Public Expenditure Management,
Public Service Establishment, and
Corporate Services.
The principle on the part of government is "Spend within the means" – so as the national budget to have a surplus; to ensure that the rate of change of public expenditure is equal to or less than the rate of change of revenue; to maintain a sustainable debt profile; and to sustain inflation rate at single digits.
Marcus Tullius Cicero, 63BC
"The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt."
Marcus Tullius Cicero
Circa 63BC
Legislation in Malawi
Malawi already has several pieces of legislation that will facilitate sustainable economic growth as espoused by the Malawi Growth and Development Strategy (MGDS).
Among them are
Public Finance Management Act (PFMA),
Public Audit Act,
Public Procurement Act;
Competition and Fair Trading Act,
Consumer Protection Act
Public Finance Management Act
The act stipulates everything
Responsibility for Financial Management
Economic, Fiscal and Financial Policy
Parliamentary Appropriation and Budget
Public Money and Consolidated Fund
Trust Moneys and Unclaimed Money
Borrowing, Loans and Guarantees
Statutory Bodies
Financial Reporting
Offences and Discipline
What is at stake is ENFORCEMENT.
Flash lights for successful legislation implementation
An enabling legislation must boost growth, create a wider and more effective economic area; create more and better jobs and modernise the social welfare model; foster a knowledge-based economy and society, including through education and training; and promote sustainable development and decoupling growth from environmental damage.
1. Boosting growth
Sound, stability-oriented macro-economic policies based on sustainable public finances provides the essential underpinning of Malawi’s economy, in particular in the light of demographic multiparty developments.
The process of fiscal consolidation needs to be continued in accordance with the Malawi Growth and Development Strategy.
A comprehensive set of legislation was adopted in 2003 namely Public Finance management Act (PFMA), Public Audit Act, Public Procurement Act.
An essential condition for boosting employment-creating growth is to create a climate in which business and industry generally, and entrepreneurship and innovation in particular, can flourish.
2. Fiscal Policy
The key fiscal policy objective is to have national budget surplus. This in the long term would reduce interest rates and Government’s demand for loans, and stimulate growth in the private sector.
The critical management of the revenue, expenditure and debt programme is crucial to the achievement of the fiscal targets.
3. Revenue
The Tax regime has to be reorganised so that the MRA is fully accountable for meeting tax revenue targets.
The ability to increase revenue will be impacted as Malawi deepens its obligations under the Economic Partnership Agreements (EPAs) and other various trade agreements (e.g. WTO) while trying to maintain a competitive tax regime.
4. Tax Policy
In order to enhance sustainability in the economic growth, there is need to constantly review the tax policy to achieve consistency with growth;
bring tax legislation in alignment with the objective of economic growth;
modernise the Tax Administration functions;
establish a link between revenue and expenditure policies; and
increase the drive towards voluntary compliance. This will help the country to
increase tax revenues while minimising the burden being placed on the taxpayers;
set rates and the tax base at levels comparable to competing regional jurisdictions;
align Malawi’s tax rates with agreements signed with other SADC/COMESA countries or tax regimes; and
ensure that the proper legislative and administrative frameworks are in place.
5. Expenditure
The achievement of fiscal surplus is inextricably linked to prudent and tight management of Government's expenditure. To control the expenditure side of the fiscal equation government needs to:
contain public sector size and wage, (competitive contracting and value for money arrangements);
promote sound planning, management and monitoring of capital projects;
contain off budget expenditure within all Ministries and departments; and
develop and implement a MTEF three-five year budget programme
work with ministries and departments to manage the recurrent expenditure in line with Government priorities.
6. Debt
A budget surplus is crucial for the reduction of debt, since the excess revenue will fund the repayment of debt capital. The principal debt objectives for the medium term would be:
to satisfy the annual borrowing requirements of the fiscal budget; and
ensuring that the debt burden is reduced to sustainable levels over the period.
The strategies may include:
strengthening market mechanism for sale of government securities in the domestic market;
reducing the debt cost;
achieving and maintaining a more prudent debt structure; and
further diversification of the debt portfolio.
7. Monetary Policy
The main monetary policy objective is to maintain inflation at single digits.
This improves confidence in the currency as well as enabling investors to plan with more certainty.
Stability in the exchange rate market and reduction in interest rates encourage long-term foreign investments.
8. Private Public Partnerships (PPPs)
Poor infrastructure increases the cost of doing business and inhibits trade development.
To boost infrastructure development government has to look to innovative partnerships with the private sector.
It is clear that there is agreement on the need for effective legislation to enable PPPs and setting up regulatory structures.
However this is not the case with regard to the operational frameworks that define processes and programme structures, where "it seems that lack of PPP experience results in under-estimates of the complexity required to manage risk and raise the confidence level of the private sector" By Dr Mohan Kaul, Director General and CEO, Commonwealth Business Council (CBC)
9. Just and Accountable Governance
Sustainable growth requires a healthy private sector – one free from corruption and mismanagement, and is a part of improving overall business efficiency.
The Commonwealth Business Council Business Principles provide a good framework for companies, and need to be rolled out and made accessible, especially for the SME sector.
Sustained efforts are required to improve governance, and the formation of the Business Action against Corruption (BAAC) and Civi Slcoiety Action Against Corruption (CSAAC) - joint civil society-public-private initiatives to combat corruption - are developments in the right direction
PFMA
The Act states that Government shall pursue its policy objectives in accordance with the principles of responsible fiscal management which are:
managing total debt at prudent levels so as to provide a buffer against factors that may impact adversely on the level of total public debt in the future;
ensuring that within any borrowing programme the total overall expenditures of the State in each financial year is in the public interest and designed to achieve long-term fiscal stability;
achieving and maintaining levels of the State’s net worth; managing prudently the fiscal risks facing the State;
pursuing policies that are consistent with a reasonable degree of predictability about the level and stability of tax rates for future years and
agreement of Government on the fiscal limits that will apply to the current and future financial expenditure on Ministries and Government projects.
Implementation of Legislation
Conclusion
Malawi does not need any new legislation to ensure sustainable economic growth.
What we need is enforcement of existing legislation
END
Thank you for your attention

Input Subsidy in Malawi

2008-08-15T10:22:00.000-07:00

Input Subsidyin Malawi

Introduction:

Malawi, adopted World Bank/IMF economic reform measures from the mid-1980s, resulting in the liberalisation of agricultural sector, a process, which included removal of input subsidies and closure of some ADMARC markets. Fertilizer and maize seed subsidies were phased out completely in the 1994/95 season (Government of Malawi, 1999).

This immediately resulted in a serious drop of 43 percent of the usage of fertilizer in the year (93/94) preceding subsidy removal. Seed sales declined by 56 percent during the same period.

Liberalisation pushed ADMARC to closedown. Input supply to most of the remote rural areas became poor because of withdrawal of ADMARC. Local traders found it costly to move in because of infrastructure reasons including the road network which is in disrepair and own limited financial capacity. To date, input supply is one of the major constraints to crop productivity. The key issues relating to supply are: availability, distance to supply points, timeliness of supply, and affordability (Government of Malawi, Ibid).

In an attempt to deal with the problems of declining agricultural productivity and hunger the government has attempted to provide agricultural inputs, principally seeds and fertilizers using various mechanisms including free distribution, inputs for work programmes and “soft” agricultural input loans1 and the government inputs subsidy programme. This has met various stakeholders’ reactions, with IFIs strongly against government interventions.

Since 1994, the input interventions in Malawi can be roughly categorized into
three:
(a) Starter pack initiative (SPI)
(b) Targeted input programme (TIP)
(c) Targeted fertilizer subsidy programme.

The IMF and World Bank

“The government's strategy under IMF- and World Bank-supported programs in 1998 and 2000 was to end government interventions in the maize market while providing targeted food subsidies to the poor. Interventions through the Agricultural Development and Marketing Corporation (ADMARC) distorted prices and other market signals and impeded the development of the market. They were expensive, as the government bore the costs of these interventions by repeatedly bailing out ADMARC. In addition, they rarely were transparent and so raised governance issues.” (www.imf.org/external/country/mwi)

“These measures were supported by the World Bank's Third Fiscal Restructuring and Deregulation Program, approved by the Bank Board in December 2000.” (www.imf.org/external/country/mwi)

“The World Bank has served as the lead advisor on agricultural and food security policy reform. Given the impact of agriculture on the budget, however, certain elements of the reforms were supported under recent IMF arrangements as well. But while the government did make reference to the reduction in the maize stock and the restriction of the NFRA's role to disaster relief in its letter of intent to the IMF of December 2000, the letter did not include any conditionality related to food security policy.” (www.imf.org/external/country/mwi)

“Following reports from nongovernmental organizations that some regions were experiencing starvation, the government undertook field visits in February 2002, which revealed that the food shortages went beyond the usual seasonality. The government declared a food emergency in late February 2002. It turned out that two components of that carefully formulated food security policy had not been as effectively implemented as expected: …” (www.imf.org/external/country/mwi)

Objectives of the Input Subsidy programme in Malawi

Outlined in “Concept Document for the 2006/2007 Fertiliser Subsidy Programme (Ministry of Agriculture)

To contribute to long term economic growth and development, and … to guide the development of short and medium term objectives (related to poverty reduction and food security), and these in turn (will) guide decisions about the design and implementation of the programme and its interactions with other policies.

Specifically,
To increase agricultural productivity and hence improve food security at both the national and household level
To improve land and labour productivity and production of both food and cash crops by cash constrained smallholder farmers
To promote economic growth and reduce vulnerability to food insecurity, hunger and poverty
To promote development of the private sector agro dealer (input) network
(all these are consistent with the National Agricultural Policy Framework)

Production and Livelihood Outcomes

Bumper yield: 3.1 million tones, more than the 2005 yield of 2.7 million tones (Malawi needs 2 million tones)
Using regression and agronomic models:
Incremental production of about 700,000 tones
Incremental fertiliser application to maize as around 70,000 tones (total fertiliser subsidy was 150,000tones)
20% increase in area under hybrids
9% increase in area planted under OPV
Livelihood:
Lower fertiliser prices meant people did not need ganyu to buy fertiliser >> they concentrated on better crop husbandry
Lower maize prices led to reduced pressure on need for cash >>> lower inflation; tighter labour markets and raised real wages, all these generally benefiting the poor that the Malawi Growth and development Strategy targets.
Yes, increase in food stocks and reduced food prices benefited the normally food deficit producers, but reduced incomes of households that normally are surplus maize producers

Governance and Accountability

Parliament debated and increased allocation to the sector from ……… to …….

Financing of the 2006 / 2007 Subsidy programme
MK 8,955,700,000

Malawi Government
Donors
Malawi Government - 7,200,000,000
DFID/EU/Norway seeds 800,000,000

UNDP communications 35,000,000

DFID Finance Premium 378,000,000

DFID transport 405,000,000

DFID TA 137,700,000
Total Government MK7,200,000
Total 1,755,700,000

What needs to complement the subsidy

Social protection against shocks and assist the productive poor to access matching funds
Agriculture interventions that promote research and extension for maize and other crops, and access to finance
Infrastructure: Road construction and policies promoting growth of both non-farm economy and private sector
Human resources - Health and education investments to promote a flexible and productive population able to respond to and create new opportunities

Conclusions by various stakeholders

Government of Malawi (with support from DFID, USAID, Future Agricultures Consortium)
· ‘has potential to drive growth forward out of the poverty trap in which many Malawians and the Malawian Economy are currently caught’
· ‘Extra importation and distribution of fertilisers is generally considered to be cost effective than doing the same of food – but this is only achieved if weather is good enough’

cmagalasi@gmail.com

In the Kitchen of the Civil Society in Malawi

2008-08-15T10:12:00.000-07:00

IN THE KITCHEN OF THE CIVIL SOCIETY IN MALAWI

January 2007

by
Collins Magalasi
ActionAid International Malawi
cmagalasi@gmail.com collins.magalasi@actionaid.org

CONTENTS

List of Abbreviations and Acronyms ………………………………………………………………………………….... 3
Introduction and Executive Summary ……………………………………………………………………………………. 4
Introducing Malawi …………………………………………………………………………………………………………………….. 6
NGOs and CSOs: Definition Used in the paper …………………………………………………………. 6
History and Growth of CSOs in Malawi ………………………………………………………………………………………7
Manifestations of CSOs ……………………………………………………………………………………………………………… 13
Legal Establishment of CSOs …………………………………………………………………………………………………… 15
Registration ………………………………………………………………………………………………………………….. 15
NGO Law ……………………………………………………………………………………………………………………… 16
Relations …………………………………………………………………………………………………………………………………….18
CSOs and Government ………………………………………………………………………………………………… 18
International CSOs and Local CSOs …………………………………………………………………………… 19
CSOs and Legislature and Political Parties ………………………………………………………………… 20
Ten years from Now: recommendations for CSOs ………….……………………………………………………… 22
Endnotes ………………………………………………………………………………………………………………………………….. 25
List of Abbreviations and Acronyms
AAIM ActionAid International Malawi
C&S Church and Society
CABS Common Approach to Budget Support
CAP Country Assistance Plan
CBO Community Based Organisation
CLC Civil Liberties Committee
CONGOMA Council of Non Governmental Organizations in Malawi
CSC Christian Service Committee
CSO Civil Society Organization
DC District Commissioner
DBS Direct Budget Support
DPP Democratic Progressive Party
DFID Department for International Development
EHP Essential Health Package
FBO Faith Based Organisation
GBS General Budget Support
GDP Gross Domestic Product
IMF International Monetary Fund
ICSO International Civil Society Organisation
INGO International Non Governmental Organization
LCSO Local Civil Society Organisation
LNGO Local Non governmental Organisation
LRC Legal Resource Centre
MCP Malawi Congress Party
MEGS Malawi Economic Growth Strategy
MG-CSC-WP Malawi Government–Christian Service Committee – Working Party
MGDS Malawi Growth and Development Strategy
MOU Memorandum of Understanding
MPRS Malawi Poverty Reduction Strategy
NAC National AIDS Commission
NGO Non Governmental Organization
ODI Overseas Development Institute
OECD Organization for Economic Cooperation and Development
PRGF Poverty Reduction and Growth Facility
SBS Sector Budget Support
SWAp Sector Wide Approach
UDF United Democratic Party
1.0 Introduction and Executive Summary

The Civil Society sector in Malawi has grown tremendously in size, scope and over the past few years. Today the sector represents over 40% of the formal employment in Malawi. Globally, the number of international NGOs was reported to have increased from 6000 in 1990 to 26,000 in 1999. CSOs have also become significant players in global development assistance with the Organization for Economic Cooperation and Development (OECD) reporting that US$11-12 billion in contributions were made annually by CSOs from their own resources by the late 1990’s. [i]

The World Bank defines civil society as the “wide array of non-governmental and not-for-profit organizations that have a presence in public life, expressing the interests and values of their members or others, based on ethical, cultural, political, scientific, religious or philanthropic considerations.”[ii] Civil Society Organizations (CSOs) therefore refer to a wide of array of organizations: community groups, non-governmental organizations (NGOs), labor unions, indigenous groups, charitable organizations, faith-based organizations, professional associations, and foundations, just to mention a few.

The civil society sector has become important channels for delivery of social services and implementation of other development programs, especially in times that government presence is weak, in political turmoil, in emergency situations, or where civil society experience and expertise complements government action. CSOs’ influence on shaping global public policy has also emerged over the past two decades as evidenced in the successful advocacy campaigns around such issues as making the G8 focus on Africa, debt cancellation, banning of land mines, and environmental protection which have mobilized millions of supporters around the globe. This paper gives an in-depth discussion on the nature of civil society in Malawi, the environment in which they operate and the opportunities and challenges they face.

Particularly the paper gives in chapter 2 an overview of Malawi. Chapter 2 describes the history and growth of the civil society in Malawi, and takes the reader through CSO experiences before, during and after democracy. The chapter also gives some of the challenges that CSOs face in Malawi, including those of finance. The next chapter gives the manifestations of CSOs in Malawi and summarises localities, sectors and forms of CSOs in Malawi.

Chapter 5 describes the legal establishment of CSOs, requirements for registration and control. It also details the NGO Law in Malawi. The ensuing chapter describes relationships between CSOs and government, the legislature and Political Parties. The chapter also narrates the relations between local and international CSOs. The last chapter gives recommendations for the CSOs in the years to come.

1.1 NGOs and CSOs: terms and definitions used in this paper

Civil Society comprises of a wide range of non state actors. It therefore includes trade unions, employers’ organisations, chambers of commerce, churches, rotary clubs, youth groups, and many more. In this paper the author uses the term Civil Society Organisations (CSOs) to refer to not-for-profit Non state actors that are involved in development. They include trades unions, faith based organisations, women groups, youth groups and many others. The term NGO (Non Governmental Organisation) is used only when it is clear that a donor or government policy document is referring to this term. But for in this paper, the terms NGOs and CSOs are used interchangeably.

Within the CSO category the paper makes the following distinctions:

International CSOs (ICSOs) are CSOs whose origins and headquarters are usually external to the country where they are operating and whose operations span more than one country.

Local CSOs are CSOs indigenous to the country, founded and managed from within. Their operations may have national coverage and they may seek to advance the fight against poverty in Malawi at an international level. But their focus, identity and origins are confined to the country.
Within the definition of `local CSOs’, the paper distinguishes further between national CSOs – those with national coverage and/or those engaging with national policy issues – and Community Based Organisations (CBOs) – those operating at a district level that may engage in district processes and initiatives at times but are primarily focused on development and poverty reduction in their respective traditional authorities. CBOs are linked more to the social welfare department of the district assemblies.2. Introducing Malawi

Malawi is a landlocked country situated in South Central Africa, bordered by Tanzania to the north east, Mozambique to the south east and south west, and Zambia to the west. Lilongwe which is in central region of the country is the capital and administrative city while Blantyre is the commercial centre and is located in the south of the country. National languages are English and Chichewa. Malawi has a land area of 118,484 Km2, of which about a third is made up of Lake Malawi. Real GDP per capita in Malawi averages at around US$ 160-200 over the past five years. Poverty is widespread, social indicators are among the worst in the world and the country has to go a long way to meeting the MDGS[iii]. HIV/AIDS, malaria and tuberculosis are widely spread. Malawi’s infrastructure remains weak, with low levels of electrification, tarred roads and clean water supply/sanitation. Malawi, which has a young population, is densely populated, with about 50% living in the south, 39% in the centre and 11% in the north.

The economy is highly dependent on agriculture (particularly tobacco), with the sector accounting for over 38.6 per cent of GDP and employing about 85 percent of the labor force. The sector accounts for 83 per cent of foreign exchange earnings. Agriculture is characterized by a dual structure consisting of commercial estates that grows cash crops and a large smallholder sub-sector which is mainly engaged in mixed subsistence farming. Maize, the staple food, accounts for 80 per cent of cultivated land in the smallholder sub-sector. But agricultural output and productivity are low, mostly rain-fed and lacks diversification.

The country has a weak private sector. Since 1981, Malawi has implemented Structural Adjustment Programmes (SAPs) and the opening up of the economy, as was characteristic of the programme, saw the collapse of many industries. SAPs have since been dubbed by Civil Society Activists in Malawi as “Satana Ali Pano” (SAP) which literally translates into “the devil is here” in local Chichewa language. Worse realities approached the private sector around year 1994 when Malawi’s trade was liberalized. Today Malawi is one of the most liberalized economies in the world, yet among the poorest countries in the world.[iv]

Unlike the private sector, the Civil Society which used to be negligible in the one party state, grew rapidly after 1994. The sector now accounts for over 40% of the formal employment in Malawi. The civil society sector has played, and continues to play, influential role in political, social, economic and cultural affairs of the country. The political practice of Malawi’s leaders has, however, occupied the contribution of most of the civil society organizations of late, ranging from political transition, to fiscal management, accountability and transparency just to mention a few.

Malawi, a former colony of Great Britain and member of the Federation of Rhodesia and Nyasaland, became independent in 1964 and a Republic in 1966. The country was under the one party leadership of Dr. Kamuzu Banda of the Malawi Congress Party for 31 years before it turned multiparty in 1994. Dr. Bakili Muluzi was the first democratically elected President in Malawi under the United Democratic Party (UDF) and ten years later he was replaced by his handpicked successor, Dr. Bingu wa Mutharika, who has since resigned from the party that ushered him into power and formed his own Democratic Progressive Party (DPP); literally turning the UDF from the ruling, to the opposition, without elections.

3. History and Growth of Civil Society in Malawi

At the time that Malawi became independent in 1964, it can be said that there was no civil society as we define it today. All non-state interventions were linked in one way or another to political institutions and/or parties. A few years later CSOs began to come on to the scene, but only for direct services delivery, particularly in sectors of infrastructure, agriculture, food relief distribution and health. Another characteristic of the CSOs was that many of them had religious link. Christian Health Association of Malawi (CHAM) constituted 40% of health provision in Malawi. It must be pointed out that any CSO that attempted or was suspected to be involved in policy and advocacy was banned outright. Christian Service Committee is one such case. The experiences of CSC are sample of those CSOs that were established before the end of Kamuzu era.

The Case of Christian Service Committee

The Christian Service Committee (CSC) was the first faith based organization (FBO) constituted in the independent Malawi in 1966 as a service delivery organization.[v] It was however formally registered with the government of Malawi in 1968/69. In 1970 the CSC developed an empowerment programme called “Development Animation.” The programme, which had a Mr. Panje as its programme officer, was aimed at teaching communities to take charge of their own development and not to rely on government and other external players for their sustenance. The programme had district structures, including district committees with District Chairpersons to facilitate its delivery. All this was after the constitution saw removal of the Bill of Rights that was in the colonial constitution.

This programme got CSC into trouble, for in 1976 Government of Malawi closed it down. It all started with Mr. Mlombwa, who was District Chairperson of the Malawi Congress Party in Dedza, who reported the district structure and titles of the Development Animation programme to the then only political party; the Malawi Congress Party (MCP). CSC was essentially closed down.

Recalls Mr. Nandolo:[vi] “I was in Rumphi at that time. I was called to the District Commissioner’s office only to be told that CSC was closed down and I had to leave for Blantyre ... in Blantyre I found the CSC building was surrounded by police and no one was allowed into the building.”

CSC was reopened after about a week of negotiations and submissions. But this time it was a changed CSC. The modus operandi changed, the district structures aware disbanded, and every time CSC staff wanted to carry out programmes in the districts, they needed to pass through the District Commissioner’s (DC’s) office who was providing members of the Malawi Young Pioneers to accompany them. CSC had to be reporting every month to the government of Malawi, and this was the start of “Malawi Government-CSC-Working Party (MG-CSC-WP),” a kind of Memorandum of Understanding. MG-CSC-WP held at least a meeting every month where CSC was giving updates on its programmes to government. Since then all civil society organizations coming to work or were working in Malawi had to have these Working party agreements.

In 1982, the World Vision International came to Malawi, followed by the Red Cross, and many more came in. Each organisation had to sign “Malawi Government Working Party” and this soon proved difficult to manage on the side of government; and called for some control house, a forum where these MOUs would be cleared and managed. The forum was created in 1984 and was called the Council for Social Welfare Services in Malawi. The Council changed name in 1992 to Council of Non Governmental Organisations in Malawi (CONGOMA). CONGOMA has since its birth had Malawian Executive Directors in the following order: Mr. Javis Chakumodzi, Mr. Tomoka, Mr. David Faiti[1] and now Mr. Ted Nandolo.

It must be pointed out here that the coming in of international nongovernmental organisations also brought other interesting organisations. For example the World Vision International facilitated to coming into Malawi of organisations such as Graham Carr – an audit firm, which is a private organisation.

The experience that CSC went through is sample of trends / experiences of the CSOs established before the end of the autocratic rule of Dr. Kamuzu Banda.

3.1 CSOs just before referendum

Most CSOs that were born around the early 1990s were registered as charity / direct social service delivery organisations, even if they were meant to be in human rights and policy advocacy. This was due to the manifested strong hand of the MCP government. The Evangelical Alliance for Rights and Development (EVARD), for example, was formed in 1988 with focus on the plight of Mozambican refugees in the south of the country, in particular dealing with questions of the environment and traditional relief work. But towards the 1994, EVARD changed focus to civic education related to the general elections.

3.2 CSOs after the Referendum

Malawians voted for multiparty system of government in 1993. During this period, more CSOs were born with clear focus on human rights, particularly abuse monitoring and exposure, documentation, seeking accountability and voter and civic education.

The Church and Society (C&S) Department of the Blantyre Synod was established in November 1993 with focus on civic education, reporting and monitoring, and voter education covering the theology of human rights. The Civil Liberties Committee, a network of individuals, rather than organisations was established in 1992 with motivation for organized monitoring of human rights violations by domestic groups--a function previously carried out by external organizations. CLC’s objectives were the documentation of human rights abuses, public education, and case action on the behalf of victims of abuse. Legal Resources Centre (LRC) was established in March 1993 under the auspices of the Law Society of Malawi to educate Malawians about their human rights, legal representation of the needy and low-income earners, as well as related research. The LRC held conferences on constitutional and electoral reform.

3.3 CSOs in multiparty

A few years after the first multiparty elections of 1994, CSOs continued to pursue their clear politics-related civil education, political rights monitoring and reporting. However towards the millennium, more social and economic policy and advocacy organisations were born. Hundreds of CSOs were established and the majority were in the service of policy and advocacy. Even the CSOs that were initially only in political rights sector expanded or switched to socio-economic and cultural rights. The impact of such CSOs cannot be doubted, but a lot more could be done to ensure that the CSOs make bigger impact in policy and practice of government and donors as the CSOs did in political rights sector. Government of Malawi has accused CSOs in advocacy of ‘speaking without thinking’ and ‘accusing government without evidence,’[vii]
The civil society organizations working in policy and advocacy face many challenges.

3.4 Challenges to CSO Engagement in Policy Processes

Overseas Development Institute (ODI) identified main obstacles to CSO engagement in policy processes and interestingly the majority obstacles were internal to CSOs “with respondents listing insufficient capacity and funding (62% and 57% respectively) as their biggest constraints. Others cited the closed nature of the policy process as an impediment to their participation, with 47% of respondents noting policymakers do not see CSO evidence as credible. ”[viii] The following chart gives more:
Source: Kornsweig et al (2006)

CSOs soon came to realise that working in isolation was not going to make the difference they wanted. In addition, CSOS in general have limited understanding of specific policy processes, systems, institutions and actors. CSOs also have weak strategies for policy engagement, inadequate use of evidence and have weak communication approaches in policy influencing. These problems were appreciated by members of the civil society and this ushered in a new breed of organisation: civil society networks. The networks in reference differ from CONGOMA in the sense that they have in their membership the unregistered organizations and associations, and they are issue based.

CSO Networks

The first CSO network (after CONGOMA) was the faith based “Jubilee 2000 Malawi” which was campaigning for external debt cancellation. The Catholic Church was instrumental in the formation and coordination of this network. Other policy networks that followed were around/after year 2000 are the Malawi Economic Justice Network (MEJN), the Civil Society Coalition for Quality Basic Education (CSCQBE), Civil Society Agriculture Network (CISANET), the Advocacy and Users Group, Malawi Health Equity Network, the LandNet, Food Security and Agriculture Network (FOSANET), Human Rights Consultative Committee, MAREFO just to mention a few. Some of these networks are formalized, registered and are having fulltime office and staff. Networks play critical role in bringing CSO stakeholders together around particular issues, helping sieve the right information for decision makers, amplifying the voice of the concerned, sharing capacity amongst members and also facilitate transfer of professionalism within the civil society.

3.5 Resources for CSOs and the role of Donors

Most CSOs in Malawi are donor dependent. They rely of donors for almost every aspect of their work. Indeed donors have exploited this muscle and have had more influence in shaping the nature of NGOs in Malawi than acknowledged. They have done this by coming out with resources meant for particular sector and with strings of accountability and reporting. This can be seen from the plethora of Human Rights focused CSOs in the first half decade multiparty dispensation. More donors put forward more resources into human rights and this translated into more CSOs working in human rights sector. When donor priorities changed, CSOs were also up for change.

Towards the millennium, Malawi, under the supervision of the World Bank and the International Monetary Fund (IMF), engaged the process of developing Poverty Reduction Strategy Paper (PRSP). A core principle underlying the whole Poverty Reduction Strategy approach was that strategies should be `nationally-owned’, not just government-owned. National ownership, said the IMF and World Bank, should be promoted through broad-based participation of the civil society in PRS’s,[ix] and meaningful participation should consider:[x]

i. The role of key actors (including parliaments, labour unions, trade and business associations, NGOs, mass media)
ii. Mechanisms for participation
iii. Sustainability of participatory processes (moving beyond consultation in PRS formulation to implementation, monitoring and evaluation of PRS’s)

This opened space for civil society in policy formulation in Malawi. A fairly consultative review process of the MPRS involving CSOs fed into this PRSP formulation process. The Malawi Economic Justice Network (MEJN) was appointed lead CSO in the MPRS process with mandate to mobilize and coordinate civil society to take part in the technical working groups and drafting committee formed for the MPRS annual review.

Bilateral donors began to recognize the role of the civil society in policy. DFID, for example, emphasises civil society participation in its background briefing on Poverty Reduction Strategies it states that `to ensure real ownership [of PRS’s], a wide variety of groups need to be involved in this debate and priority setting: the government, civil society and political opposition parties.’ It goes on to highlight the benefits that broad based participation can bring to poverty reduction:

`In particular, participation can improve the PRS process…The views and knowledge of the poor are important in diagnosing the causes of poverty. Policies are more likely to succeed if their choice has been influenced by civil society consultation and the voices of the poor. As a strategy comes to be implemented, the government will get clearer signals about what is happening if poor people are involved in monitoring the process.’ [xi]

Why DFID supports civil society organisations
`Civil society plays an important role in reducing poverty, complementary to the roles played by governments and the private sector, including:
· Building voice and accountability: civil society helps build effective and accountable states and supports voices for change.
· Providing services and humanitarian assistance: civil society can play an important role, particularly in fragile states, by delivering services to poor people and developing new innovative approaches to reducing poverty. It also has an important role to play in responding to humanitarian crises.
· Promoting awareness and understanding of development: a strong UK development community is important for building public support for development, contributing to policy debates and holding the international community to account.’

From `Civil Society and Development: How DFID works in partnership with civil society to deliver the Millennium Development Goals’ DFID, 2006

Today, almost every CSO in Malawi has policy and advocacy on its agenda, in addition to having staff dedicated to writing proposals and accounting to donors.

Towards the end of the 90s, most donors changed modalities of their support to governments. Direct Budget Support, a form of so-called `programme aid’ (i.e. non-project aid intended to finance the government budget) ushered in. Programme aid itself is not new. For example, the IMF and the World Bank have been providing programme aid in the form of support to governments’ structural adjustment programmes since the 1980s. Food aid, debt relief and other balance of payments support are also classed as `programme aid’. But the late 1990s saw the rise of a new kind of Budget Support specifically intended to support national Poverty Reduction Strategies. In this case governments are expected to be in the driving seat and CSOs and other players must follow and complement government’s priorities.
DFID’s strategy paper for example `Making Government Work for Poor People’ of 2000 focuses on the need to support national governments in delivering national strategies for growth and poverty reduction. By 2004/05, DFID’s Departmental Report showed that in four countries General Budget Support made up 70 per cent of DFID’s programme and in another four countries, it was over 50 per cent.

Ntonya and Magalasi (2006) states that by the post-PRSP period, some donors were of the opinion that a more genuine partnership should be encouraged through more direct support to the Malawi government and closer alignment of aid behind government plans and systems. Indeed, in the case of Malawi government having produced the Malawi Poverty Reduction Strategy, many donors felt it was time to move away from the piecemeal `project approach’ towards funding government budgets directly. Not all donors have embraced this approach in Malawi but for DFID, the World Bank, European Union and Norad, Direct Budget Support - or what others call Poverty Reduction Budget Support - is the logical consequence of the new thinking described above.

There are fears within the CSOs that the coming in of DBS will compromise the independence of CSOs who see themselves as watchdogs of government. Now that donors are cutting down projects that have essentially been run by CSOs, the CSOs fear they are expected to be subcontracted by government if they are to remain in business. In Malawi the health sector has Sector Wide Approach (SWAp), a form of DBS, and CSOs in the health sector such as CHAM, Banja La Mtsogolo are ‘subcontracted’ to delivery a service.

In 1999, the Government of Malawi, through the Ministry of Health together with key donors decided to move away from a project approach to developing the health sector to a Sector-Wide Approach (SWAp).The stated objective of the health SWAp is to improve efficiency and effectiveness of health services through strengthening and rationalization of existing systems. The SWAp is based on support to the Essential Health Package (EHP) to improve health service delivery in Malawi. The main instrument of implementing the SWAp is the Programme of Work (POW) covering 2004-2010. The implementation of the activities will be based on Annual Work Plans (AWP) drawn up at the district level and contained in District Implementation Plans (DIPs).

It is estimated that approximately US$ 735 million will be required to implement the SWAp POW over the six year period, the majority of which will come from donors. The major donors are DFID (GDP 100 million), Norway (USD 60 million) and the Africa Development Bank (USD 21.85 million). The coordination of the POW will be through two modalities namely the Health Sector Review Group (HSRG) and donor sub-group on health. A memorandum of Understanding (MOU) relating to the health SWAp was signed between government and donors in 2004.

As already stated, there is now more donor funding available to CSOs for policy, advocacy and campaigning activities,[xii] whether it is CSO monitoring of public expenditure and the implementation of poverty reduction strategies, support for evidence policymaking, or encouraging citizens to campaign for the realisation of a diverse range of rights (from civil and political rights to social, economic and cultural rights).

Theoretically, donor funding in these areas is intended to strengthen the capacity of civil society to hold to account those bodies which have power, influence, or responsibilities over local populations and resource use, whether it be the government, the private sector, or international institutions. However less funding is available for CSOs to scrutinise donors’ own practices. In this way, country ownership of the development process is supposed to be strengthened, extending beyond government to the population at large, in accordance with PRS philosophy.

4. Manifestations of the CSOs in Malawi

CSOs in Malawi are spread across the country, and across sectors. In the early years of multiparty in the country, the majority of CSOs were in the sector of human rights. Around the millennium, there were more CSOs in policy and advocacy, including budget tracking and evaluation. The fastest growing sub sector is the HIV/AIDS where, with the coming in of the Global Fund, thousands of Community Based Organisations (CBOs) have been born. This has also seen LCSOs that used to be in political rights, for example, adding HIV/AIDS in their work.

A distinct characteristic of CBOs is that they are largely rural based, operating in voluntary system and are linked more to, and supervised by, the social welfare department of the district assemblies. They are managed by an Executive Director who is often times the founder of the CBO. Unlike LCSOs, CBOs are not members of CONGOMA. Most CBOs do not have organisation systems such as accounting yet and do not manage many resources. As stated above most of them are working in the sector of HIV/AIDS and social marketing.

In terms of location by sector, most CSOs that are in direct service delivery such as water and sanitation, agriculture, education etc are in rural areas disregarding whether they are LCSOs or ICSOs.

Some commentators have argued that donors’ apparent embrace of CSOs’ policy and advocacy work is deceptive in that funding has tended to be directed towards the more moderate and less political CSOs rather than to grassroots activists with a real social cause or to social movements, thereby neutralising radical political dissent through this selective support.[xiii] This paper found no evidence of an overtly political agenda behind Donors’ CSO funding strategy or behind that of any other donors providing (though admittedly most of the NGOs consulted were in receipt of donor funds and therefore did not reflect the views of CSOs completely outside the donor fold).

However, some CSOs interviewed did feel that there is a donor bias towards funding the policy and advocacy work of urban-based, national NGOs – usually dominated by educated professionals – rather than the advocacy initiatives of district-level CSOs, in spite of the increasing amount of government resources now flowing to the district level. For example, very few district-level NGOs hve had the means to participate in the various monitoring and review processes related to the Constitution, PRS, Public Expenditure Reviews or the SWAPs processes, even though the experience of these NGOs arising from their proximity to poor rural communities would be extremely valuable to urban-based NGOs, governments and donors alike.

A new breed of CSOs have ushered in: Social Forums and CSO networks. Social Forums are unstructured, they have no legal entity but just a grouping of like minded organisations and individuals that come together on issues. The forum has proved to be a very powerful mobilization tool that even the government of Malawi watches what issues are discussed. The Social Forum concept was brought by the people that attended the World Social Forum (WSF), an international forum against neo-liberal policies and capitalist led globalization. The first World Social Forum (WSF) was in Porto Alegre, Brazil in 2001. The World Social Forum is an annual event that is deliberately organized to coincide with the World Economic Forum. The timing of the World Social Forum is meant to signify civil society voices “opposing the high level profit motivated deliberations at the expense of poor countries and their citizens.”[xiv]

Whilst individual CSOs can be limited in its constituency, scope and impact, the establishment of networks has brought about wider net casting for civil society, particularly around policy and advocacy. Most of the networks are policy and advocacy oriented. Some of the policy networks in Malawi are general such as the Council for NGOs in Malawi (CONGOMA) and Malawi Economic Justice Network (MEJN), while most are sectoral including the Civil Society Coalition for Quality Basic Education (CSCQBE), Civil Society Agriculture Network (CISANET), the Advocacy and Users Group, Malawi Health Equity Network, the LandNet, Food Security and Agriculture Network (FOSANET), Human Rights Consultative Committee, and MAREFO just to mention a few.

4.1 Issues with working in networks

Collaboration in NGO networks is time-consuming and frequently problematic as it involves bringing diverse and often competing groups to a table in order to develop a common agenda and strategy. `The formation of CSO networks has been a continuing process,’ comments Anthony Mangani, `but strong solidarity among the CSOs has been missing’. Meanwhile there are complaints that the secretariats of some networks have a tendency to express a position or take action on something without consulting network members, sometimes functioning like an individual CSO rather than acting on behalf of network members.

Nevertheless, the view from agencies consulted for this paper (mainly CSOs but also donors and governments) is that the creation of CSO policy networks has significantly increased and facilitated CSO influence over policy processes. It is observed that the CSO policy interaction with government is stronger now that the former are organising themselves into sectoral structures. Networks such as the Malawi Economic Justice Network (MEJN), the Malawi Health Equity Network (MHEN), Civil Society Agriculture Network (CISANET) and the Civil Society Coalition for Quality Education (CSCQBE) are now an accepted part of the policy process in Malawi.

4.2 Governments and donors: a block or aid to networks?

As explained, the growing numbers of CSO policy networks has been driven by increased support such networks now receive from donors. Donors and governments have consistently appealed to NGOs to harmonise and coordinate their activities for the same reasons that donors are harmonising (i.e. to avoid duplication, reduce transaction costs etc), yet government and donor behaviour has sometimes hindered rather than helped the effectiveness of networks, particularly on questions of ‘who elected you’ when networks raise raw nerves in policy and practice of government and donors.
5. Legal Establishment of CSOs in Malawi

Most Civil Society Organisations in Malawi are established under either of two main legal regimes. These regimes are as follows:
q Trustee Incorporation i.e. a Trust.
q Company Limited by Guarantee for charitable organisations

Each one of these legal regimes has its own peculiar features that distinguish it from the others. These deal with registration of the entity to create it into a legal entity as an independent corporate body. However once the corporate body has been created or established, for an NGO there is a requirement to also register under the NGO Act. This second registration is not a creation of another legal entity but only to obtain a certificate of recognition without which that legal entity will not be recognised as an NGO nor will it be granted the privileges and incentives granted to NGOs. Privileges include duty waivers on selected materials used by the CSO such as vehicles.
There are other legal regimes that exist but not very applicable to CSOs. These are Cooperative Society under the Cooperative Societies Act, whereby an association or group of members can register under this Act and become a legal entity. The other legal entity type is that of a Statutory Body. This is a legal entity created by an Act of Parliament and is therefore clearly out of question for the CSOs. Another legal entity form is that of a Partnership which is a legal entity formed by two or more people for a common goal.

5.1 Registration of NGOs in Malawi
Registering an NGO in Malawi can be said to be easy depending on the regime that one wants to take. As such it can take an organisation to be registered from as little a time as one week to years. Trustee Incorporation is approved by the Minister of Justice and this can be longer if the Minister is seeking clarification or is in doubt about the organisation’s credentials.
Part VI of the NGO Law (2000) gives requirements for registration of an NGO. A filled in application form is to be accompanied by:
1. a certified copy of the constitution of the NGO
2. Registration fees as may be prescribed by the board from time to time
3. plan of activities which the NGO intends to undertake
4. approval from responsible Ministry in a form of a Memorandum of Understanding or otherwise
5. Proof that the NGO is member of CONGOMA
6. A statement that the NGO shall not engage in partisan politics including electioneering and politicking, and
7. the source of funding for the NGO

The NGO Law makes it mandatory for NGOs to be registered with CONGOMA first, before registering with the NGO Board. Currently Malawian NGOs and International NGOs have to pay MK12,000 and MK32,000 respectively annually to CONGOMA. NGOs also have to pay MK 50,600 to the NGO Board.

5.1.1 Registering Local NGOs with CONGOMA
To register with CONGOMA, local NGOs have to provide the following:
1. A filled CONGOMA Membership Application Form
2. Articles of Association or a Governing Instrument of the NGO
3. A copy of minutes of the first meeting at which it was agreed to form an NGO
4. A brief Concept Paper outlining the Activities or Programmes that the NGO intends to undertake in Malawi
5. Sworn-in Affidavits of at least two trustees and/or Directors, giving their names, citizenship, occupation and address
6. A copy of Trustees Declaration
7. A copy of Certificate of registration with the registrar general
8. payment of a processing fee of MK 500.00

5.1.2 Registering International NGOs with CONGOMA
To register with CONGOMA, INGOs have to provide the following:
1. A filled CONGOMA Membership Application Form
2. Articles of Association or a Governing Instrument of the NGO
3. A copy of the Registration Certificate of the NGO from the originating Country
4. A brief Concept Paper outlining the Activities or Programmes that the NGO intends to undertake in Malawi
5. Sworn-in Affidavits of at least two Malawian trustees and/or Directors, giving their names, citizenship, occupation and address
6. payment of a processing fee of MK 500.00

5.2 The NGO Law: Victim of Game called Politics
The Malawi NGO bill was drawn in 2000 but passed into law in 2002. It must be stated that the idea of NGO law came from the civil society. A draft bill was put together by the CSOs and submitted to Cabinet for its blessing. According to Mr. Nandolo, the Executive Director of CONGOMA, members expected that Cabinet would refer to the CSOs incase there are clauses they did not understand or were not in agreement with. However to the shock of the CSOs, Cabinet amended the draft bill and incorporated clauses that disfavoured NGOs and submitted to parliament for approval without referring back to the originating CSOs. The bill was passed into law by parliament but was rejected by the NGOs.

It is said that the then government in power, the United Democratic Front, wanted to shed off CSOs that would be involved in activities that would stand in its political aim of retaining power in the 2004 general elections. Hence the Cabinet adding into the bill section 20(iv) that requires NGOs “not engage in partisan politics including electioneering and politicking.”

Specifically the NGO Bill addresses issues relating to registration and requirements for the NGOs operating in Malawi so that there is equitable sectoral and geographical distribution of the NGO activities in Malawi, accountability and transparency of NGOs in their activities; co-ordination and consultation with Government in implementation of activities of NGOs and uniformity in the interpretation of policies. The bill makes it mandatory for every NGO established or operating in Malawi to register with the NGO Board and be member of CONGOMA, where in both situations the NGO has to make financial support. This requirement has been challenged by many civil society organisations as unconstitutional arguing that it forces an entity to be a member of a particular organisation. Part of the requirements of registration under this NGO Act is that the legal entity must be a member of CONGOMA which is an association of NGOs. But section 32(2) of the Constitution of the Republic of Malawi says: “No person may be compelled to belong to an association.” By requiring that an NGO will not be registered under the NGO Act unless it is a member of CONGOMA, the Act is compelling an entity to be a member of an association. To-date there is no Court decision on the matter and neither is there a case pending in the High Court on this issue. It must be stated here that the law was produced without an NGO/CSO policy and as such even operationalising the NGO Law would be difficult in the absence of the policy. It can therefore be said that in practice, the Malawi NGO law is under moratorium. Currently the NGO Policy is being developed and CONGOMA is facilitating review of the law and hopes to submit the same to the end-of-year sitting of parliament.

6. Relationships

6.1 Between Civil Society and Government

“In the kitchen”

The relationship between civil society and government in Malawi is growing stronger, courtesy of the MPRS process, where initially the civil society gate-crashed for involvement but later proved to be asset for the government.[xv] Government now expects and makes demands to CSO to give it information, analysis and interpretation. CSOs are invited to policy formulation fora and processes by government. The latest Malawi Growth and Development Strategy (MGDS), for example, has been engaged proactively by the civil society. CSOs are also part of the Constitutional Review process. The challenge that CSOs have is to prove their salt; that they can provide constructive alternatives to the government policies. It is clear, however, that government needs CSO at formulation of policy stages, and not at implementation.

“The Prosecution”

It must be reiterated that this is cordial relationship is but new and is a phenomenon of the mid 2000s. CSOs and government have clashed before on several occasions, notably at the time the former State President Bakili Muluzi attempted to stand for presidency for a third term. The civil society stood a very strong force and the Muluzi campaign failed to pass through. Government dubbed the CSOs as agents of opposition parties.

Influential CSOs have been threatened with de-registration before but so far no one organisation has been deregistered. Also leaders of critical institutions have been the target of the former government. The former Executive Director of the Malawi Economic Justice Network went into hiding two weeks just before the 2004 presidential and parliamentary elections for fear of his life and that of his family. His vehicle was attacked and smashed by the Young Democrats, the violent wing of the United Democratic Party, and he kept changing houses after his Falls Estate house was attacked by a group of Young Democrats. He became target of attack simply because his organization was exposing abuse of national resources by the ruling party in the run up to elections. The organization also produced the first ever Civil Society manifesto in Malawi. Another example is the beating up of the Executive Director of Civil Liberties Committee in the same year by Young Democrats in front of the police after she had exposed human rights abuse by the government officials. Malawi now has a new government and it has not yet clashed with CSOs, suffice to say it is intimidating them and it has so far arrested member of the media for allegedly insulting the president. The government has arrested several former member of the government for corruption and early this year arrested the Vice President for allegations of treason.

“Sent”

A new challenge has come in as far as the relationship between CSOs and government is concerned. With the advent of Direct Budget support referred to above, where CSOs are expected to get to bed with government in service delivery, government has a new sieve that does not allow critical policy CSOs to pass through. A key challenge is that CSOs’ legitimacy in the eyes of governments tends to come from their role in delivering services, in a way taking over the responsibility of government in providing services to its people. More established and recognized local CSOs such as CHAM and Banja La Mtsogolo (BLM) are closely engaged with government at the policy level and are included in a number of implementation committees. In contrast, the Malawi Health Equity Network (MHEN), which is advocacy focused, enjoys relatively less trust and engagement with government.

Question of legitimacy

There have been statements questioning CSO legitimacy to hold the Malawi government to account. Indeed there is clearly a question as to where CSOs fit into this chain of domestic accountability and how they relate to citizenry. CSOs are part of wider society but they do not speak for all of it. Indeed some commentators make a distinction between member-serving, and third-party serving, CSOs. Member-serving CSOs (community-based organisations, trade unions, professional associations etc) are representatives of citizens and therefore have clearly defined constituencies. Third-party serving CSOs are NGOs that are not formally representative but nevertheless have legitimacy by virtue of their development work with poor and excluded communities at the grassroots, their expertise in development-related approaches and techniques (e.g. participatory approaches, disaster mitigation, humanitarian assistance etc) and/or the quality of their policy-related research.[xvi] It is these attributes rather than any kind of representativeness that provide NGOs with the legitimacy to engage with the policy process and to sit at the table with policymakers in government and donor agencies.

Donors and development commentators are increasingly wary of CSOs claiming to represent certain constituencies when in reality they do not have representative lines of accountability. In a functioning multi-party democracy, domestic accountability should hinge on the relationship between citizens, parliament (as citizens’ elected representatives) and government and CSOs must complement this all-important relationship rather than substitute for perceived weaknesses in that relationship.

6.2 Relations between ICSOs and LCSOs

Relationships between ICSOs and LCSOs have generally been cordial. ICSOs have facilitated development and growth of many LCSOs. For example, Christain Serice Committee that was referred to above was sustained by ICSOs. Also the birth of CONGOMA itself has roots in ICSOs. ICSOs have provided both financial and technical support to LCSOs. Indeed several LCSOs view ICSOs as their mother. However changes in funding mechanisms and modalities globally are contributing to significant changes in relations between ICSOs and local CSOs at country level, as the following section reveals.

Sub-contracting to ICSOs. A particularly notable feature of changing aid relations appears to be donors’ increased practice of sub-contracting the management of CSO programmes to ICSOs– a practice explicitly recognised by DFID’s recent paper, ` Civil Society and Development’: `Most of the country offices’ work supporting civil society is managed through intermediaries. These intermediaries can be local institutions, civil society networks, or local civil society organisations. Country offices also use international civil society organisations as intermediaries.’[xvii] Although ICSOs are mentioned last in this list, in practice more ICSO intermediaries are contracted – at least in the initial stages of programme establishment – because of their size and capacity in comparison to local CSOs.

Malawi National Aids Commission sub-contracting to INGO umbrella organisations

The National Aids Commission (NAC) Malawi now supports district and community HIV/AIDS interventions through sub-grants. These sub-grants are managed by five international NGOs (Canadian Physicians for Aid and Relief, ActionAid International Malawi, World Vision International, Save the Children USA, and Plan International) that have responsibility for managing funding to community based and faith based organisations in specific districts.

These ICSOs submit budget proposals to NAC for consideration on the basis of district work plans and once funding is agreed encourage CBOs and FBOs to apply for funding. The ICSOs carry out needs assessments, and support local partners through training in areas such as proposal writing, project and financial management and in how to work with local assemblies to mainstream HIV/AIDS in local development planning.The National AIDS Commission Umbrella Organizations Programme is such example, whereby five ICSOs were contracted to manage the programme in different parts of the country.

In the words of a DFID official, DFID regards itself as a `wholesaler’ of funds to CSOs, not a `retailer’. In the context of a rise in the UK aid budget and a planned decrease in staff numbers, bilateral engagement with large numbers of individual local CSOs is not regarded as an efficient use of DFID country office resources or its comparative advantage. In DFID Malawi’s view, it is more appropriate for the retailing of funds to local CSOs to be carried out by international CSOs and occasionally by large, well-established local CSOs.

6.3 CSOs’ relations with the Legislature and political opposition parties

Experiences in Malawi suggest that it is indeed possible for CSOs and parliamentarians to collaborate constructively together and thereby influence constitutional change and/or government policy. Many of the policy achievements attributed (at least in part) to CSOs over the past few years stem from their collaboration with parliamentarians in some way: the fight against the former president’s attempt for a third term; a strengthening of the Electoral Commission, and the Constitutional review process.

As one might expect, collaboration between CSOs and parliaments tends to happen when CSOs take the initiative, not the other way round. ActionAid International Malawi, for example, facilitated the formation of the Malawi Parliamentary Coalition on IFIs (MAPCOI), a multi-party grouping of Parliamentarians providing oversight over IFI agreements or negotiations with the government.

But it is clear that CSOs are themselves being encouraged to work with parliaments by donors in order to build parliament’s capacity to hold governments to account over the use of public resources. For example, DFID and CIDA (Canada) fund collaboration between CSOs and parliamentarians with regard to public expenditure decision making through the five-year long Tikambirane Project. This project is intended `to increase the capacity of civil society to participate in public expenditure decision making and to increase the capacity of the Government of Malawi to receive and incorporate public input into public expenditure decision making.’ Through this project, three local organisations – the Malawi Economic Justice Network (MEJN), Malawi Institute of Journalism (MIJ), and the Economics Association of Malawi (ECAMA) – work with seven parliamentary committees.

Ultimately, CSOs would be advised to weigh up the advantages and disadvantages of working with parliaments compared to other forms of policy and advocacy work - irrespective of donors’ interests in promoting CSO engagement with parliaments. The parliamentary committees that are supposed to hold ministries accountable are usually drastically understaffed, underfunded and underpowered and there is a danger that CSOs could end up substituting for this serious lack of resources in some cases. Whatever the case, until parliamentarians themselves have acquired real political power, ‘parliamentary scrutiny’ is a relatively meaningless notion and CSOs’ advocacy efforts may be better applied elsewhere.

Relationship with political parties have not been obvious as such. In the run up to elections and other possibilities of political change, CSOs have been interpreted or seen to side with Political opposition parties. This was the case towards 1993 when a national referendum was held and ushered in multipartism. The same was seen in 1994 (first multiparty elections) when Bakili Muluzi replaced Kamuzu Banda as president of Malawi. In 1999 (second multiparty elections) same trends occured, no wonder Gwanda Chakuamba (formerly of MCP) cried foul that the elections were rigged and he had support of many CSOs who were willing to support his court appeals. The 2004 (third multiparty) elections were even more interesting. This is the election that saw Bingu wa Mutharika elected President of Malawi on dubious procedures. There is strong belief that the UDF government rigged the elections and to-date is a case in the high court challenging his election.7. Ten Years from now: Recommendations to CSOs

Years are approaching when civil society will have to prove that they are a force to be accommodated. They need to prove (they will continue) to be independent, accountable and responsive to the needs of the poor communities that they claim to represent and serve.
The following section gives some recommendations of what needs to be done in this quest. By way of clarification, this section does not attempt to analyse all of the diverse and multiple steps by the CSOs to the current and future political and social contexts in the country (whether it be petitions and other forms of public campaigning, citizens’ juries, direct action such as demonstrations or strikes, investigative journalism, radio broadcasts or other forms of public education). It focuses more narrowly on the evolution of CSOs’ work targeted primarily at state and donor authorities.

7.1 Positioning of CSOs to effectively respond to the dynamic government and donor policy environment

CSOs are by no means to be passive recipients of the recent shifts in government and donor policies and mechanisms described in this paper. CSOs have played a part in shaping some shifts and are therefore also `architects’ to some extent. Consultations to this paper indicate that CSOs are actively adapting their own thinking and approaches in the changing policy context.

7.2 Increase CSOs’ policy and advocacy activities

As the paper has shown above, there is reported an increase in policy and advocacy-related activities amongst CSOs in recent years. However, again as the sections above stated, the increase has coincided with the promotion of the Malawi Poverty Reduction Strategy by the donor community and the opportunities this have presented for civil society engagement in policy processes. Donors have encouraged CSOs to embrace PRS process by providing funding specifically earmarked for policy and advocacy. More recently, Budget Support donors have been particularly keen to encourage CSO monitoring and scrutiny of public budgets and expenditure, as a means of improving the accountability of the government to its citizens and the proper use of aid monies channeled through government budgets. Hence the increase in funding available for CSO budget monitoring activities in Malawi.

In the course of consulting stakeholders for this paper, a number of CSOs representatives indicated that their organisations had changed their work and structures in recent years in response to changes in external funding and policies. This is not correct as there is potential for CSOs to be derailed and serve the interest of the donor at the expense of the poor communities that they are to serve. There is therefore urgent need to establish sustainable source of funding for the CSOs. The fund must not have any donor strings. Meanwhile CSOs need to challenge the underlying structures and power relations that gave rise to their not being able to set their own agenda.

It would be inaccurate to suggest that LCSOs and ICSOs have only responded to either donor or government agendas in an effort to access fresh resources. Domestic political factors have also played significant roles. The introduction of multi-party elections over the last decade, after 31 years of single-party domination, and a gradual shift from authoritarian to more open and tolerant political culture have influenced the focus of CSOs. Specifically in Malawi, a new democratic constitution drawn up after the fall of the Banda regime enshrined a Bill of Rights which included the right to freedom of association and this facilitated a proliferation of new-style CSOs, either solely or partially dedicated to policy and advocacy work. Banda had only permitted certain faith-based organisations to operate and had restricted their operations to service delivery. Thus further opportunities do exist.

7.3 CSOs’ capacity deficit

Government and donors often seem frustrated that CSOs are not moving fast enough to embrace new areas of work. One donor representative, for example, asserted that CSOs were reluctant to venture out of the traditional `comfort zone’ of service delivery. Malawian CSOs, on the other hand, have countered that it is a capacity deficit in these new areas that is holding them back.

CSOs’ perceived lack of capacity i.e physical resources, time and dedicated staff, but also skills and capabilities of CSOs necessary to engage meaningfully in policy processes remains a predominant concern amongst a range of stakeholders in the country. Apart from a handful of very specialised, policy-orientated CSOs, most CSOs still have few staff if any dedicated solely to research, alternative thinking and creation and policy/advocacy work and they rely heavily on external consultants for specific policy-related activities

Ironically, CSOs’ policy capacity deficit seems to have been accentuated by the democratization and policy spaces provided e.g. introduction of MPRS. The problem is compounded by the holistic, multi-sectoral nature of PRS, covering a range of areas identified as strategic for poverty reduction. CSOs may be invited to attend a meeting on agricultural extension services one day, and a meeting on constitutional review the next. CSOs may respond to these demands by specialising rather than trying to cover a multiplicity of issues and activities - either in a certain thematic area, or in a certain activity, with the result that we may see more of a differentiation between policy-oriented CSOs and those delivering services in the future. That there are now CSOs in Malawi dedicated solely to policy and advocacy is an indication that trends are already moving in this direction, although the majority of CSOs still combine policy and advocacy work with more traditional development activities.

Donors’ esteem for CSOs often comes from their perceived proximity to poor communities on the ground – a closeness that is frequently sustained through service delivery. A NORAD policy paper, for example, recognises that direct support to civil society actors `contributes to the establishment and maintenance of links to the local level – links that are often lost in the sector-wide approaches.’[xviii] As many CSOs shift the focus of interventions from simply the provision of direct benefits to the empowerment of poor communities to claim basic rights, often through advocacy and campaigning, the situation becomes less clear.[xix] Engagement at a grassroots level does not have to depend on service delivery. This assumption that CSO legitimacy is derived from their role in welfare and service delivery may discourage CSOs from confining their activities solely to policy and advocacy-related activities.

Aside from specialisation, the other logical response to the capacity deficit is to share and pool policy capacity through networking.

7.4 Remember the district!

In spite of the plethora of policy oriented CSOs that have sprung up in recent years, district-level influencing appears to be weak. Consultations to this paper showed that the dearth of NGO policy influencing at a district level is disappointing but less of an issue because of the absence of any real decentralization, including public funds, to the district level. However since 2004, more resources are channeled directly to the districts and District Commissioners are controlling officers. It is high time therefore that policy focused CSOs prioritise district level policy and practice.

7.5 Improve CSO accountability

Calls for greater CSO accountability and transparency have resonated, particularly amongst government staff. For example, a government official expressed the view that CSOs are more accountable to their donors than to the people they are serving, but`You can vote out a government but not CSOs,’ he asserted. This could be interpreted as a government backlash to the increasing challenges mounted by CSOs to government’s own accountability. But it probably also reflects a growing disquiet amongst the government and donors alike about CSOs’ legitimacy in general. Who do CSOs represent? On whose behalf are they advocating? Have they contributed sufficient resources to warrant admittance to high-level policy processes? Is their work of sufficiently high calibre to be taken seriously? As donors’ focus shifts more towards state institutions and as CSOs’ role in the bigger picture arguably recedes, CSOs are clearly going to have to work harder to justify their right to a place at the table.

There is some defensiveness on the part of CSOs to these accusations. CSOs responded to the criticisms of the Malawian government official by saying that the funds they receive to implement their activities are not Malawian taxpayers’ funds and that therefore they are not accountable to Government. At the same time, CSOs themselves are increasingly conscious of the need to improve their own transparency and standards of accountability. Action must be taken to develop a CSO Code of Conduct.
7.6 Check on Donor’s accountability

To whom is a donor country office accountable? Through what means, then, can CSOs in Malawi hope to influence the agendas of donors providing Budget Support? These were questions that the author of this paper asked. Presumably donor staff are accountable to their home Cabinet and by extension, their home parliament and taxpayers. Given the emphasis given on the donor-government partnership, donor offices claim they also regard themselves as accountable to the Malawi (host) government. But accountability to the country’s civil society – let alone its poor citizens whom donors seek to support - does not seem to enter into the equation. Clearly, the watchdog function donors are encouraging CSOs to fulfill with regard to monitoring government behaviour is supposed to extend to CSOs monitoring donor behaviour in Malawi. To site the DFID example, significantly, the only reference made by DFID’s new paper `Civil Society and Development’ to the role of civil society in influencing British government policy is in relation to British civil society in the UK. By that token, International CSOs with British headquarters, origins or constituencies would appear to have a legitimate prerogative to hold DFID to account. But no such role is envisaged for southern, non-British CSOs. Unless this is checked, CSO impact will be difficult in the years to come.

This paper further recommends that there be established an appropriate forum to enable government, CSOs and donors to discuss the national agenda and obtain political will, consensus and common understanding on issues of national development.’

END NOTES
[1] Currently Mr. Faiti is Cabinet Minister of Economic Planning and Development in the Bingu wa Mutharika administration.
[i] World Bank www.worldbank.org\topics\cso\0
[ii] ibid
[iii] MGDS is Malawi Growth and Development Strategy, a successor of the Mlawi Poverty Reduction Strategy
[iv] World Trade Organisation, Geneva
[v] Early Managers were Tom Kolvin and later Brown Colsby
[vi] Mr. Ted Nandolo was Programme Officer at CSC then and is now the Executive Director of Council of NGOs in Malawi (CONGOMA)
[vii] See ActionAid and Care “From Watchdogs to subcontractors: 2006
[viii] Ref ODI and rapid, ‘Policy Engagement: How Civil Society can be more Effective,” 2006
[ix] Ref IMF Factsheet, `Poverty Reduction Strategy Papers, Sept 2005. www.imf.org/external/np/exr/facts/prsp.htm
[x] Ref: `Joint World Bank and IMF Report on Poverty Reduction Strategy Papers – Progress in Implementation 2005 PRS Review’ Concept Note, Feb 2 2005.
[xi] Ref: `Background briefing: Poverty Reduction Strategies. June 2001 – second edition, DfID website.
[xii] Ref: This is the anecdotal perception of interviewees. Regrettably, figures disaggregating the amount of funding dedicated to different types of CSO activity was not available from any other donors contacted in relation to this paper.
[xiii] Ref: Jeremy Gould, `The New Conditionality’ Zed Books, 2006.
[xiv] WSF Principles 2001
[xv] Lawson M, Ng’ambi F and Magalasi 2001
[xvi] Ref. Trish Silkin of Mokoro Consultants
[xvii] Ref. `Civil Society and Development, p.12.
[xviii] Ref. NORAD `How to Deal with Direct Support to Civil Society’ p.5
[xix] Ref to Gould and Ojanen re latter point

[1] World Bank www.worldbank.org\topics\cso\0
[1] ibid
[1] MGDS is Malawi Growth and Development Strategy, a successor of the Mlawi Poverty Reduction Strategy
[1] World Trade Organisation, Geneva
[1] Early Managers were Tom Kolvin and later Brown Colsby
[1] Mr. Ted Nandolo was Programme Officer at CSC then and is now the Executive Director of Council of NGOs in Malawi (CONGOMA)
[1] See ActionAid and Care “From Watchdogs to subcontractors: 2006
[1] Ref ODI and rapid, ‘Policy Engagement: How Civil Society can be more Effective,” 2006
[1] Ref IMF Factsheet, `Poverty Reduction Strategy Papers, Sept 2005. www.imf.org/external/np/exr/facts/prsp.htm
[1] Ref: `Joint World Bank and IMF Report on Poverty Reduction Strategy Papers – Progress in Implementation 2005 PRS Review’ Concept Note, Feb 2 2005.
[1] Ref: `Background briefing: Poverty Reduction Strategies. June 2001 – second edition, DfID website.
[1] Ref: This is the anecdotal perception of interviewees. Regrettably, figures disaggregating the amount of funding dedicated to different types of CSO activity was not available from any other donors contacted in relation to this paper.
[1] Ref: Jeremy Gould, `The New Conditionality’ Zed Books, 2006.
[1] WSF Principles 2001
[1] Lawson M, Ng’ambi F and Magalasi 2001
[1] Ref. Trish Silkin of Mokoro Consultants
[1] Ref. `Civil Society and Development, p.12.
[1] Ref. NORAD `How to Deal with Direct Support to Civil Society’ p.5
[1] Ref to Gould and Ojanen re latter point

THE EFFECTS OF PRIVATISATION IN MALAWI

2008-08-15T09:57:00.000-07:00

THE EFFECTS OF PRIVATISATION
ON THE PUBLIC SECTOR AND THE ROLE OF THE STATE IN MALAWI

By
Collins Magalasi cmagalasi@gmail.com

December 2006

LIST OF ACRONYMS

1. INTRODUCTION. 4
1.1. Objectives of the Paper 5
1.2. Methodology. 5
1.3. Organisation of the Report 5
2. PRIVATISATION: THEORETICAL FRAMEWORK. 6
2.1. Privatization Trends in Developing Countries. 7
2.1.1. Sub-Saharan Africa. 7
3. PUBLIC SECTOR AND SOES IN MALAWI 9
3.1. Reasons for Public Sector Participation. 9
3.1.1. The Colonial Era. 9
3.1.2. Political Dimension. 10
3.2. Nature and Coverage. 10
4. PRIVATIZATION PROCESS IN MALAWI 14
4.1. Earlier Experiences. 14
4.2. Privatisation Policy. 15
4.3. Why Privatization. 16
4.4. Policy Environment 17
4.5. Consultations. 20
4.6. Malawi's Privatisation Programme (PP) 21
5. CHALLENGES OF PRIVATISATION. 25
5.1. Privatization and Technical Efficiency. 26
5.2. Impact of the Privatization Program.. 27
5.2.1. Treasury Effects. 27
5.2.2. Use of Privatization Proceeds. 28
5.2.3. Malawian participation and Ownership De-concentration. 28
5.2.4. Impact of Listed Companies on Capital Market Development 29
5.2.5. Employment 29
5.3. Discussion. 30
5.4. Solutions / Alternatives. 32
6. CONCLUSION AND RECOMMENDATIONS. 35

APPENDIX 1
LIST OF ACRONYMS

ADMARC Agricultural Development and Marketing Corporation
AIHL ADMARC Investment Holding Limited
CBM Commercial Bank of Malawi
DWASCO Dwangwa Sugar Corporation
DEA Data Envelopment Analysis
DEVPOL Development Policy Plan
DSP Divesture Sequence Plan
ESCOM Electricity Commission of Malawi
GDP Gross Domestic Product
IB Intermediate Buyer
IBRD International Bank for Reconstruction and Development
IDA International Development Aid
IFI International Financial Institutions
IMF International Monetary Fund
IPTAC Industrial Trade Policy Adjustment Credit
MDC Malawi Development Corporation
MIPA Malawi Investment Promotion Agency
MPTC Malawi Post and Tele-Communications Ltd
NICO national Insurance Company
OECD Organisation for Economic Cooperation and Development
PC Privatisation Programme
PCL Press Commission Limited
PIM Packaging Industries (MW) Limited
SAL Structural Adjustment Loan
SAPs Structural Adjustment Programmes
SC Statutory Corporation
SOE State Owned Enterprise
SUCOMA Sugar Corporation of Malawi

1. INTRODUCTION

Privatisation in its simplest sense is the transfer of public enterprise to private ownership. Beginning in the 1970s, there has been a global trend to move away from state ownership and control towards privatisation. State participation, which became common after the Second World War in developed countries and after independence in developing countries, slowly became less popular. Apart from the general fact that several of the State Owned Enterprises (SOEs) were inefficient and poorly managed, the period (1970-1990) was dominated by the growing dominance of neo-liberalism as a model for economic development (Jaunch, 2002). The neo-liberal ideology is driven by the belief in the "free market" as the best regulator and engine of economic growth while the state's developmental role in the economy is to be reduced.

The privatisation trend became common in African developing countries around 1980s to 1990s as part structural adjustment programs (SAPs). Introduced by international Financial Institutions (IFIs), the SAPs were meant to “assist” countries that were going through some economic hardship. The World Bank and International Monetary Fund (IMF) offered loans to these countries, and in return for these loans, African countries were forced to implement neo-liberal economic policies, which included privatization.

The trend of privatization in Africa and some developing countries did not miss Malawi whose [privatization] experience dates back to 1985. Malawi, a landlocked country in Southern Africa, is one of the poorest countries in the world. It is estimated that over 50% of Malawi’s 12million people live below poverty line, and the majority of Malawians derive their livelihood from agriculture sector. Despite all the reliance in agriculture, ironically, the first company to be subjected to privatisation was Agriculture Development Marketing Corporation (ADMARC), an institution that has been providing food support and back-up for rural Malawians, and whose full privatisation still remains a big contention by civil society up to now.

The imposition of privatisation by Bretton Woods[1] institutions, albeit its positive theoretical economic assessments, attracted a lot of critics who have expressed strong reservations about privatisation’s fairness and sometimes its efficiency and impact. Some of the specific arguments are, first, that privatisation causes social dislocation. Second, privatisation leads to layoffs and a worsening in labour conditions, in the short term in the divested firms and in the long run in the economy at large. Third, it has been argued that the bulk of the benefits accrue to a privileged few – shareholders, managers, foreign or domestic investors, those connected to the political elite – whereas the costs are borne by many, particularly tax payers, consumers, and workers, thereby reducing the overall welfare.

As expected, studies on the effects of privatisation show that there is a lot of variation on how privatisation has fared. In some countries, they provided a good solution to companies in infrastructure and network industries; privatisation transferred inefficient public monopolies to become efficient private monopolies; and significant gains have been achieved after privatisation. For example, in Brazil, during the 1981-94, before privatisation, the ratio of profits to net assets was negative, averaging -2.5 and falling to -5.4 percent towards the end; after privatisation most firms became profitable, and investment increased dramatically. Furthermore, higher profits brought more tax revenue to the government, and some companies began paying dividends to their investors (Kikeri and Nellis, 2003).

This paper is a result of quest to inform lobbyists and campaigners in Malawi and beyond on Privatisation and the Public Sector in Malawi. The paper is critical of the objectives and effects of privatisation on the public sector and the role of the state.

1.1. Objectives of the Paper

A number of reports show that privatisation has had considerable effects, both positive and negative. This paper covers a broader initiative to root an alternative development paradigm within the achievements and lessons from earlier experience of state led development. By looking at the nature and role of the “public sector” defined broadly, to cover democratic, accountable to the popular forces and which highlights popular participation, management and control, we try to focus on the appropriate role for the state in advancing development.

1.2. Methodology

The paper contextualises the process of privatisation within a review of the public sector in the period after independence capturing the key role of the state in developing the national resources and industries and advancing the rights and welfare of the people. Most of this is done through secondary data. Primary sources of information is used where there is little or no available documentation. The paper gets down to sectoral levels, where key strategic sectors are chosen to emphasise the above point. The sectors chosen are strategic from the point of view of their importance to the country’s economy and overall national development.

1.3. Organisation of the Paper

The paper is divided into four main parts. The first part is the privatisation theoretical framework which also covers the trends in developing countries. In the second part, the paper looks at the Public Sector and State Owned Enterprises in Malawi. Here the author will be looking at the Public Sector in Malawi and the reasons for going into production, infrastructures and services. The third part analyses the privatisation process in Malawi. The fourth section goes into the challenges of privatisation. And finally, before concluding, the paper looks at solutions and alternatives to privatisation, which could work in poor country like Malawi.

2. PRIVATISATION: THEORETICAL FRAMEWORK

In trying to answer the question of whether privatisation is necessary, most of the literature in the 1990s support privatisation. A good number of the supporters feel that privatisation is necessary, not simply to improve performance of public enterprises, it’s essential contributions are to ‘lock in the gains’ achieved earlier in reforming public ownership or in preparing a firm for sale, to distance the firm from political interference, and to inoculate it against the recurrence of the common and deadly ailment of public enterprises: interference by owners who have more than profit in their minds. (John Nellis, 1994).

The neoclassical reasoning is that there is there is little difference whether a firm is privately or publicly owned as long as it operates in a competitive market without barriers to entry or exit; or the owner instructs management to follow signals provided by the market and gives the autonomy to do so. The modern theory, however, changed this reasoning by attempting to establish a clearer relationship between ownership and efficiency. It is believed that private ownership will produce superior efficiency outcomes because of the following factors:
- establishment of a market for managers, leading to higher quality management
- capital markets subject privately owned firms to greater scrutiny and discipline than they do public enterprises
- private firms are subject to exit much more often than public enterprises
- politicians interfere less in the affairs of private than public firms
- private firms are supervised by self interested board members and shareholders, rather than by disinterested bureaucrats

This reasoning is supported by a trend where most state enterprises went through losses, became inefficient, produced low quality goods and services at high cost especially in developing countries. The general impression on state enterprises was that there were overstaffed, did not compete, and often resulted in bailouts, leading to national financial losses amounting in some cases as much as 5 to 6 percent of gross domestic product annually[2]. Bailouts for most of the state enterprises meant that the government had to finance larger fiscal deficits and increase tax revenues or reduce public spending in other areas, or both.

Privatization is also taken positively by public choice theorists, who look at the bureaucratic approach in which public enterprises are seen as an instrument of enhancing the utility functions of politicians such as maximization of votes and budgets (Niskanen, 1972; Buchanan, 1972; Blankart, 1983; Boycko et al., 1996). Proponents of the public choice theory hold that government departments pursue objectives that do not maximize profits and usually pursue goals such as maximizing budget, risk aversion, employment and investment. Boycko et al. (1996) propose a model of privatization within the framework of public choice theory. The model shows that privatization will lead to effective restructuring of state-owned enterprises that are currently producing at inefficiently high levels to maximize employment, only if both cash flow rights and control rights pass from the government into private hands (particularly managers’ hands). This will make it difficult for the government to bribe managers to produce at inefficient levels by offering them operating subsidies. Therefore, cutting the ‘soft budget constraint’ is vital to improving performance.

2.1. Privatization Trends in Developing Countries
By mid-1990s, privatisation in developing countries, which had started slowly in the 1980s, accelerated. Between 1990 and 1999 global proceeds totalled USD850 billion, growing from $30bn in 1990 to $145 in 1999. The Organisation for Economic Cooperation and Development (OECD) countries dominated throughout. In terms of numbers of countries and transactions developing countries dominated. Between 1990 and 2003, 120 developing countries carried out 7,860 transactions between 1990 and 2003, generating close to $410 billion in privatization proceeds, or 0.5 percent of total developing country GDP during that period.

The analysis of overall developing country trends shows that: (i) privatization activity dropped off after 1997 but picked up, albeit modestly, in recent years; (ii) the average size of a transaction increased over the years as countries moved towards privatizing larger firms; (iii) while a large number of countries are involved in privatisation processes, proceeds are highly concentrated in a handful of countries; and (iv) foreign investment accounted for half of privatization proceeds in the 1990s (Kikeri and Kolo, 2005).

In the early to mid-1990s, privatization proceeds in developing countries averaged between $20 to 30 billion on an annual basis. Proceeds peaked sharply in 1997 to almost $70 billion. The sudden and one-time jump resulted from increased activity in large infrastructure and energy (oil and gas) transactions across virtually all regions, with the largest share coming from three countries in Latin America (Argentina, Brazil, Mexico), Kazakhstan, Russia, and China. Revenues declined thereafter as Argentina’s stock of enterprises dwindled and as activity in Asia and Europe slowed down following the East Asian financial crisis of 1997 and the Russian debt crisis of 1998. By 2001 activity had reached the level of 1990, but starting in 2002 proceeds began a modest pick up and is slowly creeping back up to pre-1997 levels. The recent increases resulted mainly from share sales in telecoms, power, and banking in countries such as China (additional share offering of China Telecom), the Czech Republic (partial sale of Transgas), Slovakia (partial sale of the electricity company), India (telecoms), Pakistan (United Bank), and Saudi Arabia (telecoms).

2.1.1. Sub-Saharan Africa
By 2003 Sub-Saharan Africa—with $11 billion or 3 percent of proceeds and some 960 transactions—had the third highest number of transactions (after Eastern Europe and Latin America), but 70 percent were mostly small, low-value firms in competitive sectors. While 37 countries were engaged in privatization, the bulk of regional revenues in the 1990s was accounted for by a few large transactions in Ghana (Ashanti Goldfields and Consolidated Diamond Mines), South Africa (telecoms, steel, petrochemicals), and Nigeria (selected oil fields). South Africa was by far the biggest contributor to regional proceeds starting in 2000, accounting for nearly half of all regional proceeds, mainly due to additional share sales in Telkom, the sale of South African Airways, and sales in the petrochemicals sector. Other recent large transactions in the region: the partial divestitures of Mauritius Telecom (for $261 million) and the Cotton Company of Zimbabwe ($93 million).

Figure 1: Regional Distribution of Privatization Proceeds: 1990-2003

SAS: South Asia
MENA: Middle East and North America
ECA: Eastern Europe and Central Asia
LAC: Latin America and the Caribbean
EAP: East Asia and Pacific
SSA: Sub-Saharan Africa

Source: World Bank

3. PUBLIC SECTOR AND STATE OWNED ENTERPRISES IN MALAWI

The government of Malawi, from the mid 1960’s to the early 1980s, followed a policy of seeking comprehensive ownership of the means of production and also centralized management of the economy. In a way, this aimed to give the economy a state driven boost that was anticipated to trickle down to the poor masses, hitherto marginalized during colonial rule. This section looks at reasons for public sector participation, nature and coverage, and then looks at some sectoral cases.

3.1. Reasons for Public Sector Participation

State participation in most African countries has been common especially in essential services like utilities, manufacturing, mining, distribution and trade. The reasons for such participation vary a lot depending on the history and development levels of the countries concerned. In some cases, essential services such as utilities required large capital investments which given small market sizes were unattractive to foreign investors. Most utilities were deemed to be “natural monopolies” because provision by more than one provider would be inefficient for the economy because of the duplication of infrastructures (Kaluwa, 1998). Furthermore, there was the problem the absence of an indigenous entrepreneurial base with requisite technical skills and capital in the context of underdeveloped finance markets.
Historically, we also note that most African States inherited poor infrastructure at the time of independence. Actually, in infrastructure development, Africa has lagged behind the western hemisphere for centuries, even trailing Latin America in recent decades (Torero and Showdhury, 2004). During the colonial era, little was done to improve Africa’s infrastructure. The little infrastructure built during the colonial era was just to connect natural/mineral resources to markets. In fact, two thirds of the African railways built during the colonial period connected mines to a coastal harbor (J-P Platteau, 1996). These handicaps made most African States perceive the need to undertake some of the economic activity themselves because few private sector companies would want to invest in places where infrastructure support is unavailable.
Malawi’s public sector participation in economic activity is attributed to high financial barriers that made it almost impossible for private companies to undertake huge investments. The sectors where the state was mainly involved were utilities, covering water boards, the Electricity Supply Commission and the Department of Posts and Telecommunications; manufacturing, real estate, tourism, trade and development. Three main firms: the Malawi Development Corporation, ADMARC and Press Holdings became the major players in the sectors outside the utilities. These were supposed to moderate foreign dominance in industrial and commercial sectors and offer some “degree of economic autonomy without cutting off the flow of foreign investment” (DEVPOL-1, 1971).
3.1.1. The Colonial Era

Apart from the above reasons, Malawi is one country that has not enjoyed the benefit of mineral resources. It is also a landlocked country. With these two factors, the country’s colonial era compounded further labour exploitation without any infrastructure support. When the colonialists came into the country 1897 and realized the little benefits of this country, they started pushing for the Confederation with Zambia and Zimbabwe who had good deposits of some minerals. This came in much later, in 1953, with the Central African Federation or the Federation of Rhodesia and Nyasaland. Rhodesia was divided into two parts: Northern Rhodesia (which is now Zambia) and Southern Rhodesia (the current Zimbabwe).
The federation, when it was approved brought considerable social rupture of Malawi through displacement/ migration of Malawians to the mines in Zambia and Zimbabwe. Malawi effectively became a labour reserve. No industries came to Malawi, and all the investments were transferred to Salisbury (now Harare), the capital of Southern Rhodesia, and which also became the main business hub for the federation. At independence, the State effectively saw that had no choice but to take on the responsibility of certain investments.
3.1.2. Political Dimension

Another aspect for state participation in economic activity is the political dimension. The postcolonial ‘state’ embraced ‘unity’ as the means to evade the previous colonial tactics of divide and rule or any other threat of postcolonial polarization. Therefore design of the ‘state’ tried to take into account national integration, given the potentially dangerous ethnic and social cleavages that pervaded the political and social landscapes in the three regions of the country.

At a political level, the ‘state’ advocated the single party designed to subdue and keep dynamics of a free society under surveillance and also force its various competitive tendencies to occur within a single defined political arena. At the administrative level, the ‘state’ also advocated superiority of bureaucracy as structured machinery for awarding approvals of private activity while the state exercises regulatory control of all activity through central government, regional/provincial and district/local government.

In economic terms, the government postured itself as a benevolent amalgamation of newfound political values and economic authority seeking to provide for the needs of ‘masses’ hitherto marginalized by colonial rule. This practically relegated private enterprise to peripheral significance while public sector was defined along the principles of Stalinist-Marxist philosophy that the state should determine, inter alia, allocation of resources, distribution of income and consumption, levels of saving and investment, and relative prices of goods and services[3].

In this context, private enterprise existed as the preserve of an elite utilising political power to accomplish objectives of political accumulation in a fashion that evoked the term ‘capitalism of the few’. Survival and success for private sector required co-operation with and co-option by the state.

3.2. Nature and Coverage

Comparing with some neighbouring countries, Malawi cannot be characterized as having one of the largest numbers of public enterprises. Tanzania and Mozambique featured higher in the privatisations of the early 1990s. For Tanzania, it is probably more a legacy of her socialist background. Table 3.1 below gives a good indicator of Malawi’s place among the Sub-Saharan countries.

Table 3.1. Comparative Analysis: Malawi and Sub-Saharan Africa, 1986-92
% of enterprises divested
Number of Enterprises before Divesture
0-50
51-100
101-200
>200
0-10
The Gambia
Mauritius
Rwanda
Sierra Leone
Zimbabwe

Burkina Faso
Congo
Uganda
Zambia
Cameroon
Cote d’Ivoire
Malawi
Kenya
Tanzania
11-25
Chad

Burundi
Central African Republic
Madagascar
Ghana
Mozambique
26-40
Niger

Guinea
Nigeria

41-60
Guinea-Bissau
Benin
Mali
Senegal
Togo

Divesture includes partial sales but not management contracts and leases. Malawi had 121 statutory bodies and 18 commercial parastatals. Source: World Bank (1994)
During the 1990s, the SOEs in Malawi accounted for 25% of GDP, 20% of gross fixed capital formation and 8% of total formal sector employment (Economic Report, 1990). The main players, as already stated, were ADMARC, MDC and Press Holdings. This state domination started much earlier than the 1990s. In fact, before the start of the general economic reforms in the 1980s the government directly owned 24 of the 77 commercial statutory and non-statutory SOEs, the rest being either majority owned or minority owned through ADMARC and MDC (Kaluwa, 2000).
In order for one to understand specifically the set up of SOEs and the operations, I have briefly outlined below the three important players, ADMARC and MDC and PCL.
ADMARC: Structure and Purpose

ADMARC, a Malawian parastatal organization was created in 1971 with the mandate to market agricultural produce and inputs, and to assist the development of the smallholder agricultural sector through marketing activities and investments in agro-industry enterprises. In addition, ADMARC was mandated with a food security role in maize markets by acting as a buyer and seller in remote areas, providing grain storage across seasons and supporting a large marketing structure with distribution or market centers located throughout urban and rural areas. This function was especially critical at times of maize scarcity.

The social role was reflected in the pan-territorial and pan-seasonal pricing system for smallholder farmers, particularly maize, and the establishment of markets in non-profitable areas. Until 1987, ADMARC enjoyed a monopoly in buying, importing, marketing and storage of grain.

To fulfil its mandates, ADMARC operated a maize price band that remained in effect until the mid-1990s. Further, it rapidly developed an extensive network and infrastructure of markets across the country comprising of regional offices, divisional offices, area offices, storage depots, parent markets, unit markets and seasonal markets[4]. These markets were used to conduct sales of inputs, purchase commodities from smallholders, and sell food crops to net consumers.

Apart from agricultural marketing activities, ADMARC also invested heavily in equities and loans in various enterprises and is directly involved in estate agriculture. In fact, by the mid-1980s, ADMARC had equity investments in 34 commercial enterprises and owned numerous estates. Until 2002 ADMARC also used to run various subsidiaries (e.g. a cotton ginning company, a bus company, cold storage), many of which were loss making. In 2002, the Ministry of Finance assumed control over its four largest loss-making subsidiaries, in preparation for public sale, and three of the companies have since been privatized. ADMARC also runs many support departments, including printing services, building services, carpentry services, tailoring services, hospital, football clubs, rice mill, groundnut grading factory, guest houses and cottages, and urban housing.

Malawi Development Corporation

The government’s created the Malawi Development Corporation as a publicly funded development bank specialized in establishment of new industries. MDC was mandated to provide long-term financing for investment in projects undertaken through acquisition of shares from foreign enterprises or completely new investments in industry. The rationale for the MDC was defined along the needs for robust financial and project development effort at the country’s early stages of development.

Hence, MDC’s key investments included the labour intensive Portland Cement Company of Malawi, which supplied cement to the local building and construction industry; Packaging Industries, catering largely for cement and industrial carton box packaging as well as investment in Commercial Bank of Malawi, one of the country’s only two banks after independence.

MDC also owned Cold Storage Company, the only approved abattoir and front for development of beef farming in the country; Agrimal, a company involved in production of hoes and farm equipment and Plastic products Ltd, also involved in industrial packaging.

Press Corporation Limited (PCL)

Press Corporation was owned by Dr Kamuzu Banda, then the Life President of Malawi and undertook a number of acquisitions in the strategic areas of the economy. Press Corporation joined ADMARC as co-investor in National Bank of Malawi also raising the stake from the state sector. Press Corporation also joined MDC as investors in National Insurance Company similarly raising the shareholding of the State. Press also undertook joint investments with Carlsberg Denmark in Carlsberg Malawi, ensuring that it maintained a majority stake in the joint venture (Southern Bottlers).

The state’s presence in the agricultural sector was also manifested through Press Corporation Ltd, which owned a large number of tobacco estates under Press Agriculture Limited, andGeneral Farming Co Limited. This was in addition to Khasu, Mudi, Kasonjola and other private estates owned personally by Dr Banda.

PCL, though a personal company, played a huge role in the economy and state domination. For example, in the 1970’s, Life President Banda issued a directive removing all Asian traders from the rural areas to urban and peri-urban centers. This paved the way for expansion of Peoples’ Trading Centre retail shops owned by none other than PCL (Kalonga Stambuli, 2002). In 1984, the Malawi government specifically issued bonds purely for debt recovery replaced bad debts of Press Corporation to Commercial Bank of Malawi amounting to $39 million. Apart from enhancing state domination, the ownership structures reflected strong infusions of politically appointed management.

4. PRIVATIZATION PROCESS IN MALAWI

Government of Malawi finally accepted to undertake privatization in 1987 under the Industrial Trade Policy Adjustment Credit (ITPAC). By this time the government had already undertaken some structural adjustment loans, and there existed no practical economic alternative when this facility came in. The main obstruction to privatization was now political due to the fact that this would deprive government of the means of economic control. Very few studies gave a detailed analysis of any future effects of this program. Nevertheless, things moved slowly, and it was only post 1994, after the change of government, which brought fresh impetus to the public sector reform program. This section looks at privatization process from earlier experiences up to the current situation.

4.1. Earlier Experiences

Privatization process in Malawi started around 1984, though it was a decade later that the Privatization Commission came into existence. During this time the government implemented privatization programs within the framework of expenditure-switching and expenditure-reducing structural adjustment programs of the World Bank and IMF following the poor performance of state enterprises in the early 1980s (Adam et al., 1992; Adam, 1994). The restructuring process of the SOE sector in Malawi began with the parastatal reform programme which was initiated in 1981 and mainly targeted directly owned state enterprises. The establishment of the Department of Statutory Bodies, responsible for monitoring and improving control and resource management in state-owned enterprises marked the first step in enhancing the operational efficiency of SOEs.
The government reform strategies included review of corporate objectives, introduction of performance related incentives, increasing the autonomy of management in recruitment and firing of employees (Malawi Government, 1987). All these strategies were in line with the overall policy objective of improving the efficiency and effectiveness of parastatal institutions including public departments responsible for reviewing, monitoring and regulating the parastatal sector.
Thus, within the framework of restructuring process, privatisation has been implemented in two main phases.

Phase 1
The first phase, which is also in two parts, began in 1984. This overall phase of privatization was supported under the first six structural adjustment loans that the World Bank provided to Malawi. The initial part comprised a “no cash, in-house” asset swap worth MK14 million involving the troika to align their portfolios with their core areas of interest. Alongside the asset swaps between 1984 and 1989, ADMARC and MDC also intensified divesture activity in the form of minority equity sales in associate companies or the sales of minor interests such as farms and other enterprises.

The second part, which went on to 1992, was dominated by heavy financial losses and heavy borrowing from the government and the banking system by the two most problematic parastatals, ADMARC and Malawi Railways, suggesting a need for significant restructuring. There was weak medium- to long-term financial and investment planning which required a stronger input by the Department of Statutory Bodies through its broader responsibilities. Both ADMARC and Malawi Railways underwent restructuring with ADMARC divesting its investment portfolio further although there has been considerable resistance and delays in redefining its function and roles. Nevertheless, several estates, thirteen non-manufacturing enterprises and eleven manufacturing enterprises held by ADMARC and MDC were privatized by the end of 1992 (Chirwa, 2000). The eleven privatized manufacturing enterprises were among the fifty-two state-owned enterprises in the manufacturing sector.

In assessing the initial part of phase 1, one can say that the asset swap benefited PCL (controlled by Dr. Banda) more than it did ADMARC which received PCL’s unprofitable subsidiaries and left ADMARC financially exposed (Harrigan, 1991). Secondly, the divesture programme did not amount to privatization since as development finance institutions, divesture would typically be normal activity especially for farms; ADMARC itself financed the purchases by Malawians through soft loans.

Overall assessment of the early privatization episodes can be summarized as follows:
- privatization in the strict sense was a minor component of the parastatal restructuring programme
- both the privatization and restructuring hardly addressed the main issues usually considered, such as widespread poverty, concentrated ownership, uncompetitive markets (for both productive inputs and outputs) and the demands of globalised markets and accountability dispensation.
- ADMARC and Press still held a dominant position in the banking system and the economy as a whole
- Although the financial performance of the parastatal sector did show some improvement, this was still fragile and mainly attributable to interest-cost reduction.
- Much of the impact of this phase was more notable for the experience it generated than anything else (Adam et al, 1992).

Phase 2
The second phase, which will be covered at length in this part of the paper, began in 1996 under the seventh structural adjustment loan, the Fiscal Restructuring and Deregulation Programme. The scope of privatization in the second phase is much broader and the government identified more than one hundred and fifty state enterprises to be privatised. To have a complete understanding on the background of this phase, we can start by looking at the privatisation policy which laid foundation for the overall program.

4.2. Privatisation Policy

The Privatisation Act and Privatisation Policy[5] came into being in 1996, and paved the way for the establishment of the Privatisation Commission. This second phase of the restructuring program had the major objective of increasing the size and diversity of the private sector while reducing public budgetary and administrative burden. According to the privatisation policy document, the major objectives of the Malawi privatization program are stipulated as:
· to foster increased efficiency in the economy;
· to increase competition and reduce monopoly;
· to promote participation by the Malawi public in enterprises; and
· to raise revenue for the government.
Accordingly, by realizing these objectives, the Government is expected to create an economic environment conducive to private sector development and also free public resources for investment in infrastructure and social programmes.

The first three objectives, it can be noted, have direct welfare implications for the society, in terms of availability of goods and services and their quality, their competitive pricing, and equity in the distribution of income generating assets. The last objective probably not only covers the proceeds of privatization but also expenditure savings from reduced subventions as well as revenue generated from profitable and tax paying enterprises. There are other potential positive aspects effects apart from those that were specifically identified, like the impact on the development of a finance capital market and the upgrading of Malawian participation in the economic activity from predominantly petty service-oriented enterprises to more substantial ones including manufacturing (Kaluwa, 2000).

The institutional arrangement places The Privatisation Commission (PC) with the sole authority in Malawi to implement the privatization of the direct or indirect government ownership of any public enterprise. Its functions include, but are not limited to, the planning, management implementation, and control of the privatization of public enterprises in Malawi. It is also the duty of the Commission to report to the Cabinet the details of the sale of each public enterprise.

Membership of the Commission includes ex-officio representatives of Government, representatives nominated by each political party represented in the National Assembly, a representative nominated by the Malawi Congress of Trade Unions, and members representing professional and commercial business interests.

A Secretariat of The Privatization Commission was established comprising an Executive Director and subordinate employees. The Executive Director of the Privatization Commission is responsible for the effective administration and implementation of the provisions of the privatisation programme.

4.3. Why Privatization

The reason for Malawi to go into privatization at that time was more to do with the performance of the economy during the 1970s and 1980s. After some good performance for almost two decades after independence, Malawi started experiencing significant economic problems. When the Bretton Woods institutions came in to help around 1981, Malawi slowly drifted into “conditionality trap”. It was therefore easy for the international financial institutions to impose privatization as conditionality, just when the privatization fever was spreading globally. This part takes us through the post independence eras and how the country got herself involved deeper and deeper with IFIs and the conditionalities that came forth.

1965-1984 Era

The period soon after independence (1964) to 1979 is one of the best that Malawi experienced economically. The per capita GDP grew fairly rapidly from $158 in 1965 up to $225 in l979, after which there were two years of negative growth rates before a recovery began in 1982. The year 1979 can be treated as a major turning point in the post-Independence economy. Table 4.1 summarizes the trend during this period.

Table 4.1, Growth rates for selected national income aggregates: In real terms (annual growth rates)

1965-84 1965-79 1979-84

Aggregate
1. Real GDP 4.7% 5.5% 2.6%
2. Real GDP per capita 1.9% 2.6% 0.1%

1965-83 1965-79 1979-83
3. Real Total Consumption 0.2% 0.8% -1.5%
per capita,
of which:
(i) Private Sector consumption
per capita 0.2% 0.2% 0.9%
(ii) Public Sector Consumption
per capita 0.4% 4.2% -11.8%
4. Real total investment
per capita,
of which:
(i) Private Sector consumption
per capita 5.6% 12.9% -16.6%
(ii) Public Sector Consumption
per capita 3.2% 4.2% 0.0%

Source: Government data, (Kydd and Hewitt, 1986)

At independence the economy was overwhelmingly agrarian, agriculture accounting for 55% of GDP. By 1984, the share of agriculture in GDP had declined to 37%, while the share of manufacturing had risen moderately to 12%. However, perhaps the most crucial change between l964 and l984 had been within the agricultural sector, in which the estimated share of agricultural production (monetary and non-monetary) of peasant producers (farmers in customary land areas) had declined from 92 to 77% in 1983, recovering slightly to 79% in 1984.” This reflects the fact that the share of estate (i.e. large-scale) agriculture in GDP had risen nearly eightfold over the 20 years from l964. Thus a striking feature of Malawi’s post-Independence economic development has been the rapid development of estate agriculture.

4.4. Policy Environment

Terms of Trade

The terms of trade held up reasonably well through the 1970s but declined sharply in 1979 and 1980. Although the terms of trade recovered somewhat in 1981, both series shown in Figure 4.1 agree that they declined subsequently, but differ on the extent of this decline. The terms of trade estimates permit the conclusions that, up to 1979, the trading environment facing Malawi was supportive of the rapid growth which occurred and also that, from 1979, the sharp deterioration in the trading environment was a major cause both of the decline in per capita GDP in 1980 and 1981 and of the sharp recovery in GDP in 1984. There is, nevertheless, a possibility that other factors could have contributed to these changes.

Responses to the balance-of-payments, 1975-83: Structural Adjustment Loan 1

The current account balance has been negative in every year since Independence. Up to the mid-1970s this negative balance was adequately offset by long-term capital inflows. However, balance-of-payments difficulties began to emerge in 1975, when there was a large deficit on the overall balance, but did not become a critical constraint on growth until 1979. Over 1975 to 1979 the deficit was mainly financed by a reduction of reserves, taking up quotas with the IMF, drawing on the Compensatory Financing Facility and borrowing in the Eurocurrency market, but these methods of financing had been exhausted by the time of the sharp deterioration in the terms of trade in 1980.

From 1980 several instruments were used to deal with the situation. There were some facilities that were available from IMF, and there was also the rescheduling of official and commercial debt. The third and the most important one that helped finance the payment deficits were the World Bank structural Adjustment Loans (SALs). The government requested a SAL in 1980 and, in June 1981, a loan of US $4.5 million at standard IBRD terms was approved, to be disbursed over two years. This “first SAL” was fully disbursed by mid-1982 and was followed by a “second SAL” approved in November 1983, to be disbursed in two tranches, one in 1983 and one in 1984. The second SAL was US $52 million, and was on the much more concessional terms of an IDA credit.

The justification for SALs arose from the need felt within the World Bank for a financing instrument which would be “entirely policy focused” and would not only demonstrate but put into effect the Bank’s “single-minded concern for policy reform.” The main objective implied by the documents was to ensure that the Bank’s mix of projects was relevant to the needs of the country as they evolved. Most of the recommendations made to the government in these documents were project related, but also a few more general recommendations were made (for example on agricultural pricing and general advice against public subsidies). However in the pre-SAL period, these recommendations never became more than that; for example, the government was able to effectively ignore the Bank’s recommendations (and agreements with the Bank) on agricultural prices from 1973 to 1982, without experiencing any interruption in the Bank’s disbursements for projects.

When the preliminary work for the first SAL began in late 1980, the nature of the Bank’s involvement in Malawi changed. Priority was now given to devising a set of policies which would bring about the necessary adjustments to allow the economy to resume growth with a viable balance of payments. What had previously been the Bank’s central concern, questions about projects, were now clearly subsidiary to a search across the whole economy for measures which would assist in adjustment and bring about increased efficiency. Thus the reorientation in the Bank’s work not only drew it into areas of the Malawi economy in which its existing experience was relatively shallow but also required that an agenda of possible policy changes had to be drawn up rather rapidly (Kydd and Hewitt, 1986).

The report for the first SAL argued that, while the primary cause of the crisis was deterioration in the terms of trade, nevertheless this had revealed underlying structural weaknesses. Six areas of weakness were identified. First was the slow growth of peasant produced exports. An issue with which the Bank was very familiar as, since l967, it had been the leading donor to Malawi’s rural development program, the main objective of which had been to increase peasant crop production. Second was what was described as the narrowness of the export base: this was a response to the growing importance over the 1970s of tobacco in Malawi’s earnings and the experience, in 1980, of a sharp fall in export prices for what was then the major estate grown variety, Flue-cured. Third was a concern about energy resources, in particular the country’s overwhelming dependence on dwindling stock of fuelwood supplemented by imported oil products. Fourth was the deterioration which had occurred in the finances of parastatal enterprises. Fifth was increasing budget deficits at the end of the 1970s, caused by expenditure growing much faster than tax revenues. Finally, there was the rigidity and unpredictability caused by the system of administered prices and wages.

Structural Adjustment Loan 2

The second SAL, approved in November 1983, stands in marked contrast to its predecessor. First of all, the economic background was different, because over the two years of the first SAL the problem in the balance of payments and in public finance had become more acute, and it was evident that tougher corrective measures would be necessary. Second, the Bank now had the experience of two years’ engagement with the general problems of the Malawi economy and most of the studies commissioned in conjunction with the first SAL had been completed. Thus the Bank felt that, in dealing with the Malawi economy, it had moved a good way down the learning curve. It now had an agenda of policy changes and institutional reforms which it was prepared to press hard in negotiations with the government.

The financial performance and efficiency of the parastatals and of the Press Group was now a major issue in the dialogue between the Bank and the government. In the case of the parastatals, the main thrust of the Bank’s advice was that tariffs should be raised to a level which eliminated the need for subsidies and/or borrowing to cover operating deficits plus debt repayment.

In reviewing the two SALs to Malawi, there are a number of features that can be noted. The first SAL was characterized by mild conditionality and recognition that structural problems can best be tackled in a medium-term perspective. The Bank did not believe that it knew all the answers, and much of the work of the first SAL was directed towards identifying issues and studying them. The resources provided by the SALs were of a sufficient scale to avert a drastic curtailment of the government’s development program and its recurrent spending. Over the period of the SALs it has been possible to continue to expand the government’s main “poverty focused” program, rural development projects in peasant farming areas. At the same time, the Bank has been discussing with the government measures to improve primary health care and primary education, although significant World Bank investment in these areas has yet to occur, and in some of the proposals the poverty focus is markedly less keen.

The background of the two SALs created a niche for liberalization, and parallel studies, mostly commissioned by the international financial institutions supporting privatization. The World Bank (1989) study on Malawi manufacturing provided the first evidence available to the effect that foreign owned firms were found to be more efficient than locally owned ones and that private firms were more efficient than publicly owned ones. The study was undertaken during a period before trade liberalization reforms and when the economy was characterized by acute foreign exchange rationing.

4.5. Consultations

Prior to 1996, a number of workshops and meetings took place on privatization. The institutions involved were mostly The World Bank and the donor community, Malawi Government and parastatals that were directly related to private sector development. Civil society was hardly involved. Such workshops, seminars and meetings were mostly supported by the World Bank. As sponsoring organization, the Bank used the platform to convince the government on privatization. For example, during one of the workshops (MIPA, 1994), the Deputy Resident Representative of the World Bank Malawi Mission gave a long lecture on the positive aspects of privatization. He emphasized on the development of private sector as paramount importance to the country, as well as a clear hint of more money coming in if the government were to go into such a program. Among other issues he said:

“Properly planned and executed, privatization has the potential to achieve the following:
- Broaden Malawi’s ownership base. In the past, entrepreneurial initiative was dampened by policies that favored, explicitly and implicitly, some businesses and firms over others. The result is a high level of concentration in the economy which has crowded out additional private investment and initiative and has been detrimental to consumer welfare
- Help reduce budgetary burden for the government. In the 1960s and 70s, government budget was able to support infrastructural developments and subvention to the public enterprises. Today, Malawi’s government budget can no longer provide everything it once did. Building and operating of its infrastructure must be privatized to make space for increased social spending with the aim of alleviating poverty. Clearly, the private sector has to and seems to be willing to take up part of the traditional functions that are currently carried out by the public sector
- Increase economic efficiency and thus free resources for growth and development. The 1989 World Bank Industrial Sector Memorandum noted that in terms of resource costs, private sector firms were nearly twice as efficient as parastatals.
- Free-up valuable managerial capacity of Government. Malawi, as we all know, has a large unfulfilled agenda in respect to poverty alleviation, such as schools, medical facilities, etc. Government’s human resource capacity is too limited to implement a broad based poverty alleviation package without compromising in other areas of public of the public sector. Privatisation of selected public enterprises will free up the delay needed resources that are needed in hanging social sector and poverty related issues.
- Lastly, as studies have shown – for Africa as well as for other LDCs – an important benefit of privatization is the inflow of direct investment. Malawi needs to attract such investments and in doing so it is in sharp competition with its neighboring countries. Therefore it is even more important that the country sends the right signals to potential investors and private entrepreneurs about conduciveness of its business environment.”

The most revealing part of his presentation was on World Bank assistance.

“with the limited resource base, Malawi will continue to require substantial amounts of external financing. On its part, the World Bank will continue to support the central areas in Malawi’s development agenda, namely: (a) poverty reduction; (b) liberalization of the environment for private sector investments; (c) enhanced productivity of smallholder farmers; (d) natural resource conservation; and (d) macroeconomic stability.

“The reforms supported by early World Bank-financed structural adjustment operations encompassed public enterprise reform, agricultural pricing and marketing, and fiscal and external policies to support restoration of macroeconomic stability. More recent reforms have focused on underlying issues critical for generating broad-based and equitable participation in the economy, giving smallholders access to key high-value cash crops, and removing policy obstacles to entrepreneurship that continue to constrain physical capital investment and limit access to financial and human capital. The next set of structural issues to be addressed will concern trade and distribution, and aim at reducing obstacles posed by market concentration and promoting ease of entry.”

4.6. Malawi's Privatisation Programme (PP)
With all the push from World Bank, the second government that came in in 1994 made parastatal sector reform a priority. The reasons and arguments for this reform aligned to what the Bank had said during the SALs and in several fora: that the government was spending a lot of money subventing unprofitable SOEs, there was need to increase efficiency in private sector, need to do away with monopolies and increase competition. Department of Statutory Bodies was created and a privatization policy drafted which was passed into law in 1996.
The Act set out four very clearly stated objectives of the programme. The Privatisation Commission (PC) was established to begin the process of privatising SOEs.
The government, not the Commission, devised a Divestiture Sequence Plan. This was essentially a list of 100 SOEs earmarked for privatization. “The government determines who; the Commission only determines when and how”.
Of those original 100 SOEs in the DSP, by 2002 about 50 had been privatized. This started with the small ones and intended to that the "biggies" in the utilities sector - MTL and ESCOM, would come in at a later stage. Most of the utilities are still undertaking preparatory work for the privatisation process, though MTL has recently completed its privatisation (Dec 2005). The actual sequence chosen by the PC has been influenced by many factors, including how much time might be required to find a buyer or to restructure the SOE to make it saleable, and how the sale might affect the Malawian consumer.
There are several methods of privatization: the government can sell all or some of the shares in the entity (as was done with NICO); they can sell the assets as bits and pieces (for example, Malawi Book Service), they can sell it as a going concern (Portland Cement), or they can offer it as a concession (Malawi Railways).
When the government wholly owns (either directly or through Admarc Investment Holdings, or MDC, or MPICO or another holding company) an enterprise, it may first be necessary to change the legal status of the entity to meet the requirements of the Companies Act. This is what happened with MPTC - the telephone side was restructured as a private company, Malawi Telecoms Ltd, while the post office side, which is not being privatized at this time, remains a parastatal.
Many of the enterprises on the DSP list were operating as private sector companies with government ownership. This includes Packaging Industries (government shareholding sold), Encor (management buyout) Chillington Agrimal (sold to Malawi-based investor), Bata Shoe, and Leopard Match. In these cases, there are often pre-emption agreements - if a shareholder wants to sell its shares, they must first be offered to the other shareholders. In some cases the other shareholders ended up as majority or sole shareholders. Nampak, the South African technical partner with PIM, bought a majority shareholding. Chillington of Chillington Agrimal on the other hand, chose to sell its own shares instead of buying government's. Bata and Leopard Match have not yet been privatised although discussions are underway.
Table 4.2 gives a complete list of Divesture Sequence Plan (DSP) as at the end of 2002. This DSP is a list, as approved by Cabinet, of public enterprises categorized according to the sequence in which the whole or part of Government's shares will be disposed of. Cabinet last approved the DSP in 1997.
Table 4.2 Divesture Sequence Plan
COMPLETED TRANSACTIONS

PUBLIC ENTERPRISE
NO. OF UNITS
TRANSACTION CLASSIFICATION

1
Auction Holdings Ltd
1
Local and Private Placement
2
Bain Hogg Insurance Brokers
1
Sale to Shareholders
3
Blantyre Dairy
1
Competitive Sale
4
Blantyre Lodge (formerly Blantyre Rest House)
1
Competitive sale
5
Brick and Tile Company
1
Transfer of shares
6
Capital Hill Dairy Farm
1
Competitive sale
7
Central Tobacco Properties Ltd.
1
Reorganisation
8
Chemicals and Marketing Ltd
1
MBO
9
Chillington Agrimal Ltd
1
Concession
10
Chiphazi Farm
1
Competitive sale
11
Chitipa Inn
1
Competitive sale
12
Chintheche Inn
1
Concession
13
Choma Ranch
1
Concession/ Competitive sale
14
Commercial Bank of Malawi Ltd.
1
Public offer / share sale / MBO
15
Dwangwa Sugar Corporation (DSC)
1
Dept-equity/ sale to shareholders
16
Dzalanyama Ranch
1

17
Encor Products Ltd.
1
Dept-equity/sale to shareholders
18
Finance Corporation Ltd.
1
Competitive sale
19
Forestry Rest Houses
1
Concession
20
Government Hostel
1
Concession
21
I&E
1
Dept-equity/sale to shareholders/comp
22
Kaombe Farm
1
Completed-competitive sale
23
Kasikidzi Farm
1
Distributed to the people
24
Kasungu Inn
2
Concession and purchase
25
Katete Farm
1
Competitive sale
26
Kuti Ranch
2
Competitive sale
27
Likhubula Lodge
1
Concession
28
Luwawa Lodge
1
sale to shareholders
29
Chigumukire Ltd
1

30
Mchenga Coal Mine
1
Competitive sale
31
National Bank of Malawi
2
Public offer/stock exchange transaction
32
National Insurance Co. Ltd.
2
Public offer & MBO
33
New Building Society
1
sale to shareholders
34
VIPCOR
1
liquidation
35
VIPLY Ltd
1
sale to shareholders
36
Zomba Trout Farm
1
Concession
37
Smallholder Coffee Authority
1
Commercialisation
38
Smallholder Sugar Authority
1
Commercialisation
39
Ngabu Inn
1
Concession
40
Optichem (Malawi) Ltd.
1
sale to shareholders
41
Packaging Industries (MW) Ltd.
4
sale to shareholders/IPO/private sale
42
Premier Mining Ltd
1
Sale to shareholders
43
SUCOMA
4
Sale & Public offer
44
Malawi Lake Services Ltd.
1
Concession
45
Malawi Railways (1994) Ltd.
1
Concession
46
Mpwepwe Boatyard Company Limited
1
MBO
47
Mangochi Lodge
1
Concession
48
Mining & Investment Development Corporation
1
liquidation
49
Limbe Rest House
1
Competitive sale
50
Malawi Book Service
1
liquidation
51
Kachere lodge
1
Concession
52
Dzalanyama Lodge
1
Concession
53
Ntchisi Lodge
1
Concession

CURRENT TRANSACTIONS

1
ADMARC
GOVERNMENT
2
Air Cargo
GOVERNMENT
3
Air Malawi Ltd
GOVERNMENT
4
Alexander Forbes (formerly MIBRO)

5
Blantyre Milling Company Limited
Sold competitively
6
Blantyre Water Board
GOVERNMENT
7
Bwemba Dairy Farm
GOVERNMENT
8
Chileka International Airport

9
Cold Storage Co Ltd
ADMARC
10
David Whitehead and Sons (Malawi) Limited
ADMARC
11
ESCOM Limited
GOVERNMENT
12
Grain & Milling Ltd
ADMARC Sold competitively
13
Kasungu Flue Cured Authority
GOVERNMENT
14
Leopard Match Co. Ltd
MDC
15
Lifidzi Farm

16
Lilongwe Water Board
GOVERNMENT
17
Malawi Catering Services
GOVERNMENT
18
Malawi Dairy Industries

19
Malawi Finance Co. Ltd
GOVERNMENT
20
Malawi Rural Finance Company
GOVERNMENT
21
Malawi Tea Factory Co. Ltd
ADMARC
22
Malawi Telecommunications Limited
GOVERNMENT
23
Mchenga Coal Mine

24
Meru Ranch
GOVERNMENT
25
MPICO Ltd
GOVERNMENT
26
National Investment Trust Limited

27
Plastic Products Ltd.
MDC
28
Portland Cement Co. (1974) Ltd
MDC
29
Smallholder Tea Authority
GOVERNMENT

FUTURE TRANSACTIONS

1
ADMARC Investment Holdings Ltd
ADMARC
2
Bata Shoe Co. (Malawi) Ltd
MDC
3
Borehole Construction Fund
GOVERNMENT
4
Capital City Development Fund
GOVERNMENT
5
Government Press
GOVERNMENT
6
Malawi Housing Corporation
GOVERNMENT
7
Shire Buslines Ltd
ADMARC
8
Lilongwe International Airport
GOVERNMENT
9
Malawi Development Corporation (MDC)
ADMARC
10
Stockbrokers Malawi Limited
ADMARC
11
TDIC / Sunbird Tourism
MDC
12
Central Government Stores
GOVERNMENT
13
Central Medical Stores
GOVERNMENT
14
District Rest House Chain
ADMARC
15
Indefund
MDC
16
Indebank
ADMARC
17
Lilongwe Smallholder Poultry Project
GOVERNMENT
18
Manica Freight Services
GOVERNMENT
19
Mzuzu Smallholder Poultry Project
GOVERNMENT
20
National Seed Company
ADMARC
21
UNDP Housing Fund
ADMARC
Source: PC Annual Report

5. CHALLENGES OF PRIVATISATION

Very few studies have attempted the task of undertaking a complete analysis of privatisation in Malawi. Assessing performance of such a complicated venture would not give a good picture if done over a short period. A clearer impression will probably start showing some years (maybe 5-10) after the complete privatisation process. This does not mean that the immediate effects are not important. The controversial water privatisations proposals in Ghana and Tanzania in the past three years show how bitter the issues can become (see Box 5.1 below).

Box 5.1 Tanzania and Ghana Water Experiences

TANZANIA [DAWASA Water Privatisation]

(40-50% of the population have no access to clean water)
[2002]
The International Monetary Fund (IMF) and World Bank in Tanzania included conditions within their aid programs related to the divestiture of Dar es-Salaam Urban Water and sewerage Authority (DAWASA), the semi-autonomous government body previously responsible for running water supply system. This was part of the conditions for having Tanzania on debt relief under HIPC program. But then there was a lack of investor interest. The first bidding process was stopped after two French companies; Saur International and Vivendi were rejected. Donors agreed to waive the privatisation only to push it again through giving a loan (of $145m) which was meant to improve the water system.

GHANA
Current official statistics state that 62-70% of the urban population has access to treated water and 35-40% of the rural population. However, these figures mask the fact that far less has piped water. In urban areas, only 40% of the population (and 25% of the urban poor) have access to running water in their homes.
In July 2001, the World Bank approved a new $110 million structural adjustment loan for Ghana. Before disbursing the loan, however, the Bank forced the government of Ghana to implement seven “prior actions,” including a requirement to “increase electricity and water tariffs by 96 percent and 95 percent, respectively, to cover operating costs.”
(By 2002) A bucket of clean water in Ghana became more expensive than in the UK. This meant that a family making minimum wage had to spend almost half of its daily income for just three buckets of water. As a result, many families could not afford clean drinking water, and women and children bore the burden of collecting water, often from polluted streams and rivers.
The effort to attain “full cost recovery” is a prerequisite to privatization. Private companies want to operate systems where consumers meet the expenses of running the systems and pay enough for company profits, too, so that they earn a return on their investment.
Pressured by the World Bank, the government of Ghana plans to lease the Ghana Water Company to two as yet undetermined multinational water companies to provide urban water service. The World Bank included water privatization as one of many conditions that determined the extent of Ghana’s access to the portfolio of loans in the World Bank’s Country Assistance Strategy (CAS).

5.1. Privatization and Technical Efficiency

A study evaluating the impact of privatization on the technical efficiency of about 15 companies in the manufacturing sector was undertaken around the year 2000 (Chirwa, 2000). This was a very technical evaluation. Enterprise level data was used in the manufacturing sector spanning the period 1970 to 1997, by selecting industries in which privatization took place during the 1984-91 period in Malawi, in which privatized enterprises had been under private ownership for at least five years. The study, therefore, contributed to the limited empirical evidence on the privatization-efficiency hypotheses, particularly in developing countries by taking into account oligopolistic interdependence and the impact of other liberalization measures.

The sample for this paper was drawn from eight privatization activities (excluding asset swaps). Each of the five privatized enterprises was grouped into three-digit industry classification level. Data was obtained for private enterprises and other state-owned enterprises competing in the same industry. The privatized manufacturing industries were three-digit industries in which privatization occurred between 1984 and 1991. The three privatized manufacturing industries were food processing, manufacture of other chemical products and manufacture of transport equipment, and the sample included six privatized state-owned enterprises (PSOEs), three state-owned enterprises (SOEs) which had never been privatized and six private enterprises (PVTs) which had never been under state enterprise during the period of analysis.

After computing technical efficiency scores for firms using Data Envelopment Analysis (DEA) based on industry specific inter-temporal frontiers at three-digit industry level, the statistical results, overall, show that technical efficiency improved among privatized state enterprises, state-owned enterprises and private enterprises. However, there was significant evidence that changes in technical efficiency were higher in privatized enterprises, and that the proportion of the variance in technical efficiency attributed to privatization was also higher among privatized enterprises compared with that among state-owned enterprises and private enterprises.

The approach in this paper had been to study all firms competing in the same industry to discern the industry effects and to control for the many other sources of technical efficiency. The results from the econometric analysis, which accounts for other sources of technical efficiency showed that improvements in technical efficiency could not be attributed to privatization alone. The empirical results, particularly among privatized enterprises, showed that after controlling for the many other sources of technical efficiency, privatization improved technical efficiency and efficiency scores were at least 25 percent points higher in the period after privatization. The positive impact of privatization was also supported by the significant negative relationship between technical efficiency and state ownership in the industry effects model. These findings implied that the technical inefficiency associated with state ownership could be reduced by transferring their ownership to the private sector and partial privatization may not maximize efficiency. Furthermore, technical efficiency is higher in competitive industries, among firms with high capital intensity and among subsidiaries of multinational corporations. The latter implied that foreign participation in the privatization process in Malawi had positive implication on efficient domestic production. Structural adjustment programs by removing market rigidities enhanced the role of the market mechanism and provided further incentives for input allocation to maximize output.

Overall, from a policy point of view, the findings showed that the objective of promoting efficiency materialized in the first phase of privatization in Malawi even when other factors that influence technical efficiency are taken into account. Nonetheless, the competitive environment which was partly reinforced by the sequential implementation of structural adjustment policies played a critical role in facilitating the positive impact of privatization.

5.2. Impact of the Privatization Program

A comprehensive performance evaluation was done in 1998 covering three main indicators, a) the macro-level indicators which measure impact on economy-level variables, b) the meso-level indicators, which deal with the impact on markets, and c) micro-level indicators, which measure results at the enterprise level (Kaluwa, 2000). Often, one may add political level indicators, which might deal with issues like when to privatize, what enterprises, mode of privatization, immediate beneficiaries, reserve price of offer, use of proceeds etc.

5.2.1. Treasury Effects

According to the World Bank, by 1997 there had been 44 privatization transactions including those outside the Privatization Program with total sales of US$56m. By July 1999, the Privatization Programme itself raised around MK850m, which translates to 1% of GDP. These are one-off and short-term treasury effects. However, one may also wish to look at the long term effects like tax revenue and savings on subsidies to formerly government supplied inputs in sectors such as forestry and veterinary services. Table 5.1 summarises available information that facilitates an impressionistic view of treasury effects associated with current financial flows.

Table 5.1: Treasury Effects: Total Flows of Funds, Tax revenue and Net Flow of Funds
Year
Total Flow(1)
Tax: SC (2)
Tax: Major “Divested” Companies
SUCOMA
CBM
NICO
PIM
Total Tax
Net Flows (3)
1993
126.92
0.70
0.02
6.54
2.96
3.57
13.79
112.43
1994
187.85
0.90
0.02
30.80
6.09
1.38
39.19
147.76
1995
593.35
54.87
38.42
79.67
6.49
4.69
184.14
354.34
1996
37.96
2.01
68.42
67.58
12.39
4.03
154.43
-118.48
1997
701.38
29.71
65.20
70.89
10.95
9.60
186.35
485.32
1998
572.84
7.80
26.19
110.22
10.58
25.03
179.82
385.22
Notes:
(1) To Statutory Corporations, (2) Commercial Statutory Corporations, (3) +net of all taxes
Source: B. Kaluwa (1998), Economic Reports, various company Annual Reports

Total financial flows from central government to statutory corporations include “grants and transfers” on the recurrent budget as a large item (representing 99.9% of the total in 1998), and net long term lending on the development budget as a minor item. Return flows to central government include consolidated tax payments from commercial statutory corporations plus tax payments by large corporations “divested’ by central government and its agencies, which have since been listed on the Malawi Stock Exchange.

Although the picture presented in Table 5.1 incorporates trends which are not due to the Privatisation Programme it still allows a number of observations:
- The largest of divested companies (SUCOMA and CBM) have individually been associated with larger tax payments on a consistent year to year basis and cumulatively higher than all the commercial statutory corporations from 1996 although for CBM this trend pre-dates the Privatisation Programme.
- The trend of tax revenues from SCs has been erratic compared to those of the four listed companies and a major culprit is likely to be capital investment costs/revenue structures for the larger infrastructure SOEs such as ESCOM and the Water Boards
- The trend in the total net flows dominated by flows to statutory corporations which still represent large outflows towards that sector despite the large gains made from divested companies implying a persistent fiscal drag from subsidized SOEs.

From the table and accompanying statistics, the average share of flows to SOEs in total government expenditure has gone down since 1996 to 3.02% from 5.26% between 1987 and 1995 and implies a lowered burden on the government. Nevertheless there appear to have been some compensation effect since their share in total domestic credit has gone up from an average of 2.39% in the earlier period to 6.71% after 1996. This represents some sort of switching effect from dependence on government to market dependence which itself may be a sign of inadequate internal revenue generation coupled with heavy investment requirements.

5.2.2. Use of Privatization Proceeds

According to statutory provisions, the proceeds of privatization are held in the Privatisation Revenue Account for use in “funding the direct costs of the Commission and the Privatisation Programme, funding the restructuring public enterprises to be privatized including payment of retrenchment benefits, …” Among the uses of potentially contentious issue has been the pre-empted in the sense that residual revenues from this one-off exercise, after privatization related expenditures, could also be used in one-off development projects, rather than government recurrent expenditures (B Kaluwa, 2000).

5.2.3. Malawian participation and Ownership De-concentration

The overall assessment of the privatization programme shows that there has indeed been a commitment to relinquish government control. According to figures presented by World bank (World bank Reports, 1998/99), by 1997, 86% of privatization transactions involved transfers of the majority ownership to the private sector, 64% of the transaction involved shares while much of the rest involved asset sales.

Malawian participation too has been fulfilled. When we look at statistics of the first 38 transactions, about 50% involved Malawians as new owners, concession holders, or shareholders while 13% involved a mixture of Malawians and foreigners and 37% involved only foreigners.

Politically conscious decisions have been made to affect share-ownership, sales and asset transfers to special interest groups namely: tobacco growers and employees in the case of Auction Holdings Ltd; growers in the case of the former Kasinthula Rice Scheme and the Smallholder Coffee Authority; management buy-outs in cases of Mpwepwe Boatyard and New Capital Dairy (B Kaluwa, 2000). The major problem has been that Malawian participation could not be guaranteed in all cases of privatization despite stated preferences and softer loans. Part of the reason could be thin domestic financial capital base and management capacity, which have in a number cases contributed slow uptake by successful Malawian bidders. These problems have influenced the role of foreign ownership which has been beneficial in terms of providing foreign linkages for investment capital, technology, management and marketing in different available sectors.

5.2.4. Impact of Listed Companies on Capital Market Development

Privatisation has been a big boost to the development of capital markets in Malawi. Malawi has been a capital scarce economy and an obvious outcome of privatization has been a good base for stock exchange activity. This can be a catalyst for foreign investment inflows although so far these have not been large due to small capitalization and an inflationary environment. Privatisation boasts of about MK10 billion of its capitalization in the Malawi Stock Exchange. As can be seen from Table 5.2 below, by 1998, barely three years after the commission was put in place, the firms divested under privatization accounted for 73% of the stocks listed on the Malawi Stock Exchange.
Table 5.2: The Impact of the Privatisation Program (PP) on MSE Capitalisation
Company
Capitalization (MK)
Privatisation Program Companies
Commercial Bank of Malawi
1130.00
NICO
170.00
PIM
174.85
SUCOMA
4054.51
Total PP
5529.36
Other
BL
143.91
PCL
1981.91
OML
378.91
Grand Total
8034.09
PP/Grand Total (%)
73.54
Source: MSE

5.2.5. Employment

Looking at 20 mixed firms that had privatized (and were able to supply the information) by 1998, there was an 11% decline in employment for manufacturing firms (B Kaluwa, 2000). This is however tricky because most proponents of privatization look at this as temporal. It should be noted that post-privatisation employment changes reflect empowerment of management to effect changes that reflect commercial discretion so that from the enterprises perspective cutbacks can be in their best interest. Overall for the 20 firms, there was 55% rationalization of employment.

****

There are several factors this report could go into where privatization has been assessed and impact quantified. These include Import Substitution and Exports, Number of Products / Services changed, Debt/Equity Performance, New Investment and Technology, Staff performance and Staff benefits, Profitability and Efficiency Performance. However all these look at company level performance. The studies that link these micro performances to national socio-economic factors which the World Bank was trying to address when they came up with the initiative are hardly available. The next section attempts to look at these national areas that have been affected by privatization, through a discussion.

5.3. Discussion – has privatisation achieved its objectives?

Did privatization achieve its objective? At firm level there appears to be some indication of an improvement in performance. However, when one looks at national level with the fact that The World Bank’s core mandate is to eradicate poverty, there is some doubt that privatization achieved its goal. Privatisation, a central World Bank policy, should be able to contribute to this goal. Malawi’s indicators have gotten worse since liberalization and privatization came in, though these are not the only factors that impact on poverty indicators. The per capita income has gone down from $210 in the early 1980s to $170 in the late 1990s/early 2000. Obviously, the World Bank’s analytical framework is inconsistent, and damaging outcomes on privatization are still emerging.

ADMARC and Agricultural Sector

Let’s take for example, one of the sensitive areas which have received a lot of criticism from the civil society, that is, the proposed privatization of ADMARC, an agricultural marketing board. The World Bank has been demanding the commercialisation of the Malawian agricultural marketing board as a condition of its latest structural adjustment loan. Actually, the privatization of the state marketing board in Malawi (ADMARC) has been an objective of the World Bank for 10 years. It represents a central element in an approach to agriculture that holds that full liberalization of the sector will be best for poor women and men. This approach has been increasingly questioned in Malawi and other countries in the region, particularly in the context of the recurrent food crises. Many commentators believe the full liberalization of other elements of the agriculture sector under the Bank greatly contributed to the cause of the food crisis and the subsequent deaths in 2002.

Malawi’s economy relies on agriculture. State intervention in the agricultural sector in Malawi dates back to as early as 1926 when the colonial government established the Native Tobacco Board. Two more boards were later established in 1949: the Cotton and Maize Control Boards. In 1956, the three boards were merged to form the Agricultural Production and Marketing Board, which was renamed Farmers Marketing Board in 1962. In 1971, the Agricultural Development and Marketing Corporation (ADMARC) was established to replace the Farmers Marketing Board. Its main mandate was to market agricultural inputs and outputs, but was also allowed to make investments in anything that would contribute to the development of the economy.

Until the late 1970s and early 1980s, ADMARC performed reasonably well (Scarborough 1990) in terms of coverage. In particular, it was able to provide assured and reliable markets for smallholder produce in most remote areas. Further, it paid farmers cash on delivery, subsidized the cost of inputs, and subsidized the consumption of maize and rice. Between 1971 and 1979, ADMARC made about MK181.9 million from its marketing activities in the small-holder sector (Kydd and Christianssen 1982). This money was used to cross-subsidize the cost of inputs to small-holder farmers, consumption of maize and rice by food-deficit and urban households, and making investments in other sectors of the economy.
Towards the late 1970s, ADMARC started facing financial difficulties. The literature identifies a number of factors, both internal as well as external, that were responsible for ADMARC’s problems. Internal factors have included poor management of the corporation, mainly due to its large size and poor investment policies. On the other hand, external factors have included bad weather, poor pricing policies by the government, and increased transportation costs due to civil war in Mozambique that led to the closure of Malawi’s traditional route to the sea. Increased political interference played its part.

As ADMARC was going through financial problems, the economy of Malawi as a whole also found itself in a crisis. When the SALs came in, not surprisingly, ADMARC was one of the targets of reforms. Indeed, since then, the corporation has undergone various changes. These have among other changes, included market liberalization, a phased removal of input subsidies, and rationalization. ADMARC is on the list of current privatisations.
After all the reforms, including partial commercializing ADMARC and closing some of its outlets, several problems have occurred. Oxfam Study (2002) identified some of these as:

(a) Although private traders were allowed to complement the marketing activities of ADMARC, a problem still exists in the sense that these private traders find it difficult to go to some remote areas due to poor roads. Thus, some farmers in areas where ADMARC withdrew have found it difficult to sell their produce and to buy food and inputs. This poses a problem to the government since it has a duty to ensure that these areas have access to markets for produce, food, and inputs. Consequently, ADMARC has found itself being called upon to service such areas. But since government has to support ADMARC's commercialization programme for the benefit of World Bank, one reality it has had to face is that if ADMARC were to make a commercial decision when operating in these areas, the poor would be adversely affected. For example, if ADMARC were to supply maize to food-deficit households in such areas, the commercially viable price would be beyond their reach. The government has therefore entered into memoranda of understanding with ADMARC to the effect that it will undertake to pay ADMARC for the costs it incurs while performing such social roles on its behalf. However, the problem that still remains is that in most cases, the government has not lived up to its obligations and separating the social role is not easy.
(b) Related to the problem discussed in (b) above, is the fact that a cost-effective mechanism is not yet in place for the supply of food to food-deficit areas. For example, sometimes ADMARC moves maize from one corner of the country to another during the buying season, only to be asked to transport it to another far corner of the country during lean months. But as already mentioned, the government usually does not fully reimburse the transport costs that ADMARC incurs in undertaking such operations.
(c) Certain areas of the country, such as Likoma Island, are perpetually food-deficit. But there is no long lasting solution to ensure that such areas have access to food at reasonable prices, but without jeopardising the financial position of ADMARC.
(d) The commercialisation programme that ADMARC is undertaking is in some cases being frustrated by political interference. For example, even when ADMARC feels that the closure of a certain non-viable market will not adversely affect the poor, politicians usually resist the move because they fear that it will be politically costly. A case in point is one where a suggestion by ADMARC to replace a permanent market with a mobile one is resisted simply because of the view that development is non-existent unless one can see a permanent physical structure.

This is one area that gives some true colours to privatization at grassroots levels. A number of factors are not taken into consideration as international institutions give their conditions. Mostly, these have to do with poor understanding of the local and remote situations, knowledge of the infrastructure available and real levels of poverty.

Privatization of Utilities (Water)
Privatization of utilities is another case in point where there have been a lot of blunders in a lot of African countries.

Every day 30,000 children in the Third World die of preventable causes. Many of them could be saved if they had access to safe water. The World Bank argues that governments in impoverished countries have to privatize their water supply and distribution systems if they are to get the efficient delivery of water that is needed.

On the face of it, the argument makes sense. The adequate supply of water and other public services is too often frustrated by inadequate funding, inefficient bureaucracy or lack of political will. Promoters of private ownership say it brings investment and cost-effective service.

Experience and common sense say otherwise. Private investors aren't attracted by poor and rural communities. Any improvements that might come with private ownership are in areas that generate profit. Private water, telecommunications and electricity companies tend to focus on efficiency in collecting tariffs, but not on improving service, though it can be argued otherwise. In most cases, these companies will ignore long term major investments, and any investment is transferred to the customers. Costs of services usually leap up quickly, annoying middle class and wealthy customers but potentially in most cases leaving the poor without service at all.

People in affected communities do not have a voice in how or if they want their services privatized. People in impoverished countries want efficient services, sometimes even if the cost is higher as lack of services can carry hidden costs (especially in utility services). In some, privatization may be the way to go. They need to be allowed to choose if it is appropriate for them.

Looking at number countries in Sub-Saharan Africa, high prices and disconnections must mean that the poorest segments of society are likely to be the main losers from the privatization process. However, the privatisation process can also be helpful if the SOEs are very inefficient and do not provide the services at all to the poor, who cannot afford any alternatives or backup. In certain key sectors, like water, if privatisation leads to increases use of unsafe water sources, the consequences will be disastrous for public health (Kate Bayliss, 2001).

5.4. Solutions / Alternatives

Liberalization era came with a lot of unrealistic proposals in Malawi. For example, in health, user fees were suggested putting the majority of the population in difficult situation because they could hardly afford the services. Deregulation of the health sector too has resulted in deteriorating public healthcare services.

Repercussions due to privatization of water have been obvious in a number of countries. Malawi’s population that has access to clean water is about 50%. The privatization process of water sector led into some problems as early as 2001. In May 2001, 350 water workers were sacked for strike action. Workers were protesting at poor wages (most earned about $50 a month) and working conditions, as the company started implementing “stringent measures” to be more effective. Some employees were subsequently rehired but to regain their jobs, the workers had to sign a letter agreeing not to strike again and accepting their previous pay and working conditions.

Other utilities like telecommunications and electricity equally threaten the countries development goals if they go in private hands. Over 60 percent who do not have access to electricity can forget it should the electricity company go into the wrong hands. Nevertheless, with the current standing, there is very little effort by the SOEs and the government in improving the status.

Indeed private sector has a role in the delivery of public services, in particular, where capacity was lacking for extension of services. However, long-term concessions and splitting up of agencies were not seen as part of the private sector’s role. The state should maintain overall control and ownership for provision of services. In terms of different alternatives, below are some suggestions for some of the important sectors.

Joining Campaigns
Opposition to water privatization has taken place across the globe. Table 5.3 below lists major cases where privatisation was opposed with some definite degree of success. A number of campaigns are continuing, with no final outcome yet visible. However the fact that the campaigns are still going demonstrates a degree of success – Brazil was close to privatising much of its major cities’ water in 1999, for example.

Table 5.3: International campaigns against water privatisation

Country
City
Year
Type
Poland
Lodz
1994
Privatisation prevented
Honduras
Honduras
1995
Privatisation prevented
Hungary
Debrecen
1995
Privatisation prevented
Sweden
Malmo
1995
Privatisation prevented
Argentina
Tucuman
1996
Termination and reversion to public
Germany
Munich
1998
Privatisation prevented
Brazil
Rio
1999
Privatisation prevented
Canada
Montreal
1999
Privatisation prevented
Panama

1999
Privatisation prevented
Trinidad

1999
Termination and reversion to public
Bolivia
Cochabamba
2000
Termination and reversion to public
Brazil
Limeira
2000
Incomplete termination
Germany
Potsdam
2000
Termination and reversion to public
Hungary
Szeged
2000
Incomplete termination
Mauritius

2000
Privatisation prevented
Thailand

2000
Termination and reversion to public
USA
Birmingham
2000
Termination and reversion to public
Argentina
BA Province
2001
Termination and reversion to public
France
Grenoble
2001
Termination and reversion to public
Brazil

current
Continuing campaign
Ghana

current
Continuing campaign
Indonesia
Jakarta
current
Continuing campaign
S Africa

current
Continuing campaign
Uruguay

current
Continuing campaign
Source: David Hall, 2001, South Africa Labour Bulletin

There have also been a number of effective campaigns against water privatisation in sub-Saharan Africa. Two good examples are South Africa and Ghana.
South Africa
Water privatisation has been strongly and effectively opposed in South Africa (see above). These protests had an impact beyond national borders, affecting the privatisation of water in Mozambique. When the water privatisation contract award was first announced in September 1999, it was reported that Mozambican Public Works and Housing Minster, Roberto White, promised that not a single one of the country's current 850 workers will be retrenched or otherwise dismissed. This was described as an attempt to ”head off looming labour union protests” following concerted union protests in South Africa that have held back commercialisation schemes.
Ghana
There has been well-organised and effective widespread protest against the planned privatisation of water in Ghana. This has been dominated by the Integrated Social Development Centre (ISODEC), a Ghanaian NGO. The campaign has been reinforced by research from Christian Aid and benefited from widespread international support from academics and NGOs. Many of these participants have not protested against other water privatisations so the level of support must be a testament to the success of ISODEC in bringing the issue to international attention.

6. CONCLUSION AND RECOMMENDATIONS
Privatization is now widespread in industrialized, developing and transitional economies. The World Bank has played a key role in the implementation of privatization in low-income countries, attaching privatization to aid disbursements and promoting a pro-privatization culture.
The World Bank’s core mandate is to eradicate poverty. Privatization, a central World Bank policy, should therefore contribute to this goal, and is expected to do so by reducing poverty through the development of the private sector. In Malawi, the benefits of privatization mostly exist at company levels. The linkages to the poor and marginalized are weak or absent in some cases. The poor, who are supposed to benefit are getting worst outcomes of privatization, consequently affecting overall development negatively. However, despite all this, privatization is still pushed at the policy level.
According to this paper, however, the status quo has also got several weaknesses. Most SOEs have been performing below standard, with inefficient use of the government subvention that would have benefited the poor. Political factors also come in, where disconnections do not take place when people connected to the government are involved. Furthermore, sometimes the SOEs have been used as channel to siphon funds for the ruling political party’s activities.
Overall, privatization, as currently conceived by policy makers, will not help and may be detrimental to development prospects. Privatization policy goals must be reassessed, based on a more realistic perspective, and in particular there must be examination of what privatization, as opposed to alternative measures for public sector reform, can provide. There is need for proper and detailed cost-benefit analysis to guide restructuring processes, and to determine the public interest. More importantly, this analysis provided the basis for engagement between government and labor. Unfortunately, such studies have not been comprehensive as countries sometimes go into hurried privatization.
Recommendations, therefore, include:
· The government of Malawi should revisit the contracts made with the Bank, and change conditions after proper consultations with different stakeholders including civil society. At the same time, the World Bank and IMF should stop requiring privatisation of public services and utilities as a condition of loans.
· Reform strategies should start with assessing the strengths and a weakness of an enterprise in the context of the specific national and regional circumstances - not with the premise that private is best.
· Governments and donors should look at examples of best practice in public as well as private provision. Advisers and consultants need to be selected from the best performing service providers – not from consultancies who depend on the World Bank for a large proportion of their fees.
· Reform options should always include a plan for restructuring within the public sector. This and other options then need to be evaluated in an open and transparent way, using a fair basis for comparison.
· Effective regulation of private companies requires, first, clear and quantifiable objectives (for example, technology transfer, management and financial systems development, construction etc); second, adequate resources for monitoring and enforcement. If the capacity for this is lacking, then privatisation will only create a new set of problems.
The civil society needs to continue fighting the rights of the consumers in either case: where the SOEs are still in control or privatisation has taken place. We can say no to privatisation, but this may not improve the services. There is need to keep up pressure for improved performance among the service providers.
BIBLIOGRAPHY

Adam, C. (1994) Privatization and Structural adjustment in Africa. In W. van der Geest (ed.) Negotiating Structural Adjustment in Africa, London: James Currey

Ahsan, A., Machinjili, C. and Mkwezalamba, M. M. (1999) The Impact of Adjustment Policy Reforms on Malawi’s Manufacturing Sector, World Bank, Malawi Field Office (Draft paper)

Boubakri, N. and Cosset, J-C. (1998) The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries, Journal of Finance, 53 (3), 1081-1110

Boubakri, N. and Cosset, J-C. (1999) Does Privatization Meet the Expectations? Evidence from African Countries, paper presented at the Plenary Session on Privatization and Corporate Governance African Economic Research Consortium (AERC) Biannual Research Workshop, Nairobi, Kenya, 4-9 December

Boycko, M., Shleifer, A. and Vishny, R. W. (1996) A Theory of Privatisation, Economic Journal, 106 (March), 309-319

Buchanan, J. M. (1972) Theory of Public Choice, Michigan: University of Michigan Press Caves, R. E. (1992a) Determinants of Technical Efficiency in Australia.

Cook, P. and Kirkpatrick, C. (1995) Privatisation Policy and Performance: International Perspective, Hemel Hempstead: Printice Hall/Harvester Wheatsheaf

Davies, D. G. (1981) Property Rights and Economic Behaviour in Private and Government Enterprises: The Case of Australia's Banking System, in R.O. Zerbe (ed) Research in Law and Economics, 3, Greenwich Conn.: JAI Press

De Fraja, G. (1991) Efficiency and Privatisation in Imperfectly Competitive Industries, Journal of Industrial Economics, 39 (3), 311-321

Demsetz, H. (1966) Some Aspects of Property Rights, Journal of Law and Economics, 9 (October), 61-70

Domberger, S. and Piggott, J. (1994) Privatization Policies and Public Enterprise: A Survey, in M. Bishop, J. Kay and C. Mayer (eds.) Privatization and Economic Performance, Oxford: Oxford University Press

Fare, R., Grosskopf, S. and Logan, J. (1985) The Relative Performance of Publicly-Owned and Privately-Owned Electric Utilities, Journal of Public Economics, 26, 89-106

Hall, D. (2001) Water Privatization – Global Problems, Global Resistance. South African Labour Bulletin.

Harrigan, J. (1991) Malawi. In P. Mosley, J Harrigan and J. Toye (eds.), Aid and Power: The World bank and Policy based Lending, Vol 2, Case Studies. Routledge, London.

Hartley, K. and Parker, D. (1991) Privatization: a Conceptual Framework. In A. F. Ott and K. Hartley (eds.) Privatization and Economic Efficiency: A Comparative Analysis of Developed and Developing Countries, Hants: Edward Elgar

Jaunch, H. (2002). The Big Privatisation Debate – African Experience. Labour Resource and Research Institute for Namibia.

Kaluwa, B. (1991), “Study of the Impact of the Liberalisation of Smallholder Agricultural Produce Trade in Malawi,” Food Studies Group, International Development, Queen Elizabeth House, University of Oxford.

Khan, S., Kaluwa, B. and Spooner, N. (1989) Malawi: the Impact of the Industrial Price Decontrol Programme, Washington: World Bank

Kikeri, S., and Kolo, A. (2005), Privatisation: Trends and Recent Developments. World Bank Observer, Vol

Kikeri, Sunita and John Nellis, (2004). An Assessment of Privatization. World Bank Research Observer Vol. 19, No. 1.

Kydd, J. and A. Hewitt (1986), “The Effectiveness of Structural Adjustment Lending: Initial Evidence from Malawi,” World Development, 14 (3), pp. 347-365.

Kydd, J. and Christiansen, R. (1982), “Structural change in Malawi since Independence: Consequences of a Development Strategy based on Large-scale Agriculture,” World Development, 10 (5), pp. 255-375.

La Porta, R. and Lopez-de-Silanes, F. (1999) The Benefits of Privatization - Evidence from Mexico, Quarterly Journal of Economics, 114 (4), 1193-1242

Lawson, C. and Kaluwa, B. (1996) The Efficiency and Effectiveness of Malawian Parastatals, Journal of International Development, 8 (6), 747-765

Lele, U. (1990), “Structural Adjustment, Agricultural Development and the Poor: Some Lessons from the Malawian Experience,” World Development, 18(9) pp.1207-1219

Ministry of Finance (1999), “Commercialization and Privatisation Programme for ADMARC” Consultancy Report Prepared by O & M Associated Ltd for Malawi Government

Magalasi, Collins, (2006), “In the kitchen of Civil Society in Malawi” paper in

Malawi Development Corporation (MDC) (Various) Annual Report, Blantyre: Malawi
Development Corporation Malawi Government (1961) First Development Plans, 1961 - 1964, Zomba: Government Printer

Malawi Government (1971) Statement of Development Policies 1971 - 1979, Zomba:
Government Printer Malawi Government (1987) Statement of Development Policies 1987 - 1996, Zomba: Government Printer

Mayes, D. G. and Green, A. (1992) Technical Inefficiency in UK Manufacturing Industry, in R. E. Caves (ed.) Industrial Inefficiency in Six Nations, Cambridge, MA: MIT Press

Mayes, D., Harris, C. and Lansbury, M. (1994) Inefficiency in Industry, New York: Harvester Wheatsheaf

Megginson, W. L., Nash, R. C. and Randenborgh, M. Van (1994) The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis, Journal of Finance, 49 (2), 403-452

MIPA (1994) Privatisation: Issues and Experiences. Workshop Proceedings Report, Lilongwe

Mulaga, G. (1995) Trade Policy and Manufacturing Sector Performance in Malawi, 1970-1991, Bradford: University of Bradford (Ph.D thesis)

Mulaga, G. and Weiss, J. (1996) Trade Policy and Manufacturing Sector Performance in Malawi, 1970-91, World Development, 24 (7), 1267-1278

National Statistical Office (NSO) (various) Annual Economic Survey, Zomba: National
Statistical Office Nickell, S. J (1996) Competition and Corporate Performance, Journal of Political Economy, 104 (4), 724-746

Nellis, John, (2003). “Privatization in Latin America.” Center for Global Development. Working Paper 31. 2003.

Nellis, John, (1994). Is Privatisation Necessary, The World Bank, Public Policy for the Private Sector, FPD Note No 7.

Nthara, K. (2002). What Needs to Be Done to Improve the Impact of ADMARC on
the Poor, Phase II Final Report prepared for the Joint Oxfam Programme in Malawi,
Blantyre.

Privatization Commission (1997) Accounts for the Period from 17th April 1996 to 31st March 1997, Blantyre: Privatization Commission

Privatization Commission (1998) Privatization Newsletter, Blantyre: Privatization Commission

Privatisation Commission, Annual Reports, Various

Seiford, L. M. and Thrall, R. A. (1990) Recent Developments in DEA - The Mathematical Programming Approach to Frontier Analysis, Journal of Econometrics, 46, 7-38

Stambuli, K. (2002). State Hegemony, Macro Effects and Private Enterprise in Malawi, Sigere Working Paper, Surrey Institute of Global Economics Research.

Tittenbrun, J. (1996) Private Versus Public Enterprise: In Search of the Economic Rationale for Privatisation, London: Janus Publishing Company

Torero, M. and Chowdhury, S (2004). Africa: Increasing Access to Infrastructure for Africa’s Rural Poor, International Food Policy Research Institute, Washington DC.

Torii, A. (1992) Technical Efficiency in Japanese Industries, in R. E. Caves (ed.) Industrial Efficiency in Six Nations, Cambridge, MA: MIT Press

United Nations Conference on Trade and Development (UNCTAD) (1997) World Investment Report 1997: Transinational Corporations, Market Structure and Competition Policy, Geneva: United Nations

Vickers, J. and Yarrow, G. (1988) Privatization: An Economic Analysis, Cambridge, Mass.: MIT Press

Williamson, O. E. (1970) Corporate Control and Business Behaviour, Englewood Cliffs, NJ: Prentice-Hall

White, M. D. (1996) Mixed Oligopoly, Privatization and Subsidization, Economics Letters, 53, 189-195

White, O. C. and Bhatia, A. (1998) Privatization in Africa, Washington DC: World Bank

World Bank (1989) Malawi: Industrial Sector Memorandum, Washington: World Bank

World Bank (1994) Africa’s Development Strategy Revisited: An Overview, World Bank Africa Region

World Bank (1994) Adjustment in Africa: Reforms, Results and the Road Ahead, Oxford University Press: New York

World Bank. (2004). Economies in Transition: An OED Evaluation of World Bank
Assistance. World Bank Washington D.C.

Appendix 1

PRIVATISATION POLICY

Introduction

In this policy document commercial public enterprises are defined as those entities owned directly or indirectly by Government which by the nature of their activity are commercially oriented and have or should have financial autonomy. These encompass statutory corporations, trusts, authorities, treasury funds and limited liability companies in which the Government directly or indirectly has a shareholding.

It is recognised that efforts to promote agricultural and industrial development and increase the standard of living of the indigenous population through market intervention and establishment of public enterprises have not met with expectations. The Government of Malawi, taking into account the legacy of past inefficient interventions, has adopted a policy of liberalization of the economy and move to market based incentives and allocation of resources. In accordance with this policy, the Government has decided to divest its interests in commercial public enterprises and encourage and promote the private sector. Ultimately, the Government will seek no role in the competitive market beyond that of neutral arbiter.

Objectives of Privatisation

The declared policy of the Government of Malawi is to diminish the size of the public enterprise sector through privatisation with a view to:

Foster increased efficiency in the economy;
Increase competition and reduce monopoly in the economy;
Promote participation by the Malawian public in enterprises; and
Raise revenue for the Government.

By realizing these objectives, the Government will create an economic environment conducive to private sector development and also free public resources for investment in infrastructure and social programmes.

Institutional Arrangements

A "Public Enterprises (Privatization) Act" was passed by Parliament in March 1996 and it was assented to by His Excellency the State President on 17th April 1996. The Act which sets out the objectives and guidelines for the privatization programme also establishes the institutional set-up for the execution of the privatization programme.

The Privatization Commission shall be the sole authority in Malawi to implement the privatization of the direct or indirect government ownership of any public enterprise. Its functions include, but are not limited to, the planning, management implementation, and control of the privatisation of public enterprises in Malawi. It will also be the duty of the Commission to report to the Cabinet the details of the sale of each public enterprise.

Membership of the Commission includes ex-officio representatives of Government, representatives nominated by each political party represented in the National Assembly, a representative nominated by the Malawi Congress of Trade Unions, and members representing professional and commercial business interests.

A Secretariat of The Privatization Commission has been established comprising an Executive Director and subordinate employees. The Executive Director of the privatisation Commission is responsible for the effective administration and implementation of the provisions of the privatization programme.

Scope of Privatisation

Approximately one hundred and forty public enterprises exist to which should be added some thirty other assets managed by various ministries such as ranches, farms, fish farms and rest-houses.

In excess of one hundred of these enterprises or assets have a commercial orientation and have or should have financial autonomy. These entities will all fall within the scope of the privatization programme, and be included in a divestiture sequence plan prepared by the Privatisation Commission and submitted to the Cabinet for their approval. Some of these entities will need to undergo a 'commercialization' process with a view to preparing them for privatisation and ensuring greater operating efficiency in the interim period leading up to their eventual privatization.

This will entail changing their status to that of limited liability companies and granting them greater autonomy in their day to day management.

Remaining public enterprises, which are not presently considered to have a commercial orientation, will revert to the control of the appropriate ministry. In those cases where there is no apparent need for financial autonomy the enterprise will be absorbed directly into the relevant line ministry. A number of entities which are dormant will be liquidated and any surplus assets sold to private buyers.

Principles of Privatization

The privatisation programme will be carried out in accordance with certain guiding principles. To the extent possible, subject only to limitations imposed by existing rights conferred by shareholders' agreement, for example, pre-emption rights, etc., the following fundamental principles will apply:

Each transaction will be fully transparent to the public at large. In this regard thePrivatisation Commission will publicise details of all completed activities of the privatisation programme.
All investors, irrespective of ethnic group or source of capital (foreign or local) are free to participate in the privatization programme. In order to achieve the objective of increased participation by the Malawian public at large, shares in or assets of certain enterprises may be made available at a discount to citizens of Malawi. Where discounts are available, this fact and the quantum of the discount will be publicized in the invitation for competitive bids and a precondition of the discount being granted is that the shares or assets are subsequently retained for a period of not less than two years.
The privatization process will be fair and efficient. An independent opinion of value will be obtained for each enterprise to be privatised. Full disclosure of the details of the enterprise will be available to the investing public and fair and equitable bidding procedures and criteria for ranking bids will be established and published.
Sales will be primarily on a cash basis. However, mechanisms will be developed to facilitate broader participation by Malawian citizens in the privatisation process.
It is the intention of Government to sell all of its interest in public enterprises and not to maintain a minority position or set any conditions concerning the future operations of a privatised enterprise. In certain exceptional circumstances, where the existing regulatory framework is considered inadequate, Government may with the agreement of parties to the sale of an enterprise, retain a shareholding conferring special rights to, in the national interest; intervene in the operations of the privatized enterprise.
To the greatest extent possible, privatization transactions will be designed to reduce concentration of ownership and avoid creation or maintenance of consumer market monopolies. To this end, Government will not divest unregulated monopolies or grant any privileges or guarantees to purchasers of privatised enterprises.

The Commission may elect to privatise public enterprises in various ways including, but not limited to, a public offering of shares, sales by competitive tender of the shares or assets and business of a public enterprise, management or employee buy-out or, where pre-emption rights exist, negotiated private sale of shares. The Commission may also create and offer for sale additional shares in a public enterprise in order to dilute Government's existing shareholding in that enterprise.

Retrenchment

One of the principles of the privatisation programme is that Government will not set any conditions regarding the future operations of a privatised enterprise including requirements as to number of employees. In privatised enterprises where the number of employees is high, some level of retrenchment may be a prerequisite to being able to operate efficiently in a competitive market.
Where employees are made redundant as the result of privatisation or commercialisation of a public enterprise, retrenchment benefit will be promptly paid to all retrenched employees in addition to any other entitlements (excluding redundancy pay entitlements) provided for in their conditions of service or the rules of the enterprise's staff pension or provident fund.

To protect employees who are retained in the employ of a privatised or commercialised enterprise and therefore not entitled to retrenchment benefit, the newly privatised or commercialized enterprise will be required to give a legally binding undertaking to incorporate in their conditions of service provisions to provide for retrenchment benefits at least equal to those of staff retrenched during privatisation.

Proceeds Of Privatisation

A fund entitled the Privatisation Revenue Account will be established and placed under the control of the Ministry of Finance. The proceeds of the sale of all direct Government interest in public enterprises will be paid into this fund.

In the case of indirect Government interests, a public enterprise selling its interest in another public enterprise may be permitted by the Minister, on the advice of the Commission, to retain all or part of the proceeds of sale with the balance being paid into the Privatisation Revenue Account.

The funds being held on the Privatisation Revenue Account may with the approval of the Minister of Finance, be used for a limited number of purposes, namely, funding the direct costs of the Commission and the privatisation programme, funding the restructuring of public enterprises to be privatised including payment of retrenchment benefits, the remainder of the fund will be applied to projects included within the Government development budget.

End:

For Comments and Questions, please contact:

Collins Magalasi
Head of Policy Malawi &
International Financial Institutions Team Coordinator

ActionAid International Malawi
Tel: +265 1 757500 Fax: +265 1 757330
Mobiles Malawi: +265 8 826092 / +265 9 866092
Roaming Mobile : +44 774 077 1250
Emails: collins.magalasi@actionaid.org, cmagalasi@gmail.com

End poverty. Together.

ActionAid is an international anti-poverty
agency working in over 40 countries, taking
sides with poor people to end poverty and
injustice together.

[1] Bretton Woods is the term commonly used to mean the International Financial Institutions (IFI) formed at the Bretton Woods meeting after the Second World War. In this report this term is used interchangeably with IFI or IMF and World Bank.
[2] This is more applicable in developing economies and in infrastructure and network industries. See Sunita Kikeri and John Nellis, An Assessment of Privatisation, The World Bank Observer, Vol 19, No 1. 2004.
[3] See Kalonga Stambuli, State Hegemony, Macro Effects and Private Enterprise in Malawi, SIGERE Working Paper 2002/34/pub Econ. Surrey Institute of Global Economics Research. 2002
[4] Seasonal markets are satellite markets of unit markets. They are mobile selling points that can be opened on demand with a temporary sales force. They operate mainly in the harvesting seasons and are mainly used to purchase produce from farmers. Unit markets have permanent structures such as small storage facility and office, with staff. They generally operate throughout the year and buy produce, sell produce and inputs. Parent markets combine permanent storage facilities with an administrative office that oversees unit and seasonal markets.

[5] The full text of the Privatisation Policy is in Annex 1.

WHY DID THE CHICKEN CROSS THE ROAD? joke

2008-04-13T21:50:00.000-07:00

WHY DID THE CHICKEN CROSS THE ROAD ? Source: unknown

* KINDERGARTEN TEACHER: To get to the other side.

* PLATO : For the greater good.

* THE POPE: God knows.

* POLICEMAN: Give me ten minutes with the chicken and I’ll know why.

* ARISTOTLE: It is the nature of chickens to cross roads.

* SADDAM HUSSEIN : This was an unprovoked act of rebellion and we were justified in dropping 50 tons of nerve gas on it.

* CAPTAIN JAMES T. KIRK : To boldly go where no chicken has gone before.

* MARTIN LUTHER KING, JR: I envision a world where all chickens will be free to cross roads without having their motives being called into question.

* MACHIAVELLI : The point is that the chicken crossed the road. Who cares why? The end of crossing the road justifies whatever motive there was.

* FREUD : The fact that you are at all concerned that the chicken crossed the road reveals your underlying sexual insecurity.

* GEORGE W. BUSH (2): We don't really care why the chicken crossed the road. We just want to know if the chicken is on our side of the road or not. The chicken is either with us or it is against us. There is no middle ground here.

* DARWIN : Chickens, over great periods of time, have been naturally selected in such a way that they are now genetically disposed to cross roads.

* EINSTEIN : Whether the chicken crossed the road or the road moved beneath the chicken depends upon your frame of reference.

* NELSON MANDELA : Never again, will the chicken be questioned for crossing the road. This is an ideal for which I am prepared to die.

* THABO MBEKI : We need to establish if really there is a connection between the chicken and the road.

* MUGABE : For all of these years the road has been owned by the white farmers, the poor underprivileged chicken has waited too long for that road to be given to him and now he is crossing it in force with his fellow war veteran chickens. We intend taking over this road and giving it to the roadless chickens so that they can cross it without fear of retribution from Britain who promised money to institute road reform.
We will not stop until all roadless chickens have roads to cross and the freedom to cross them.

* ISAAC NEWTON : Any chicken in the universe shall always cross a road perpendicularly to the side of the road, and in an infinitely long straight line at uniform speed, unless the chicken stops due to an unbalanced reactive force in the opposite direction of the chicken's motion.

* ZANU (PF) Spokesman: The chicken did not cross the road. This is a complete fabrication. We don't even have a single chicken in our country as the whole world knows. All the chickens were bought and consumed by the long-suffering masses at give-away prices when we sent out our comrades to enforce what our enemies are now unpatriotically and maliciously referring to as the largest closing down sale in the world.

* JACOB ZUMA: I am gravely suspicious that this question is being asked with a malicious intention to trap me, send the Scorpions to raid my chicken run, haul me before the courts and charge me for sodomizing the chicken that walked across the road towards me as it was running away from an advancing light shower! Awuleth’ umshini wam’ ……..!!!

Funny Lawyer Jokes - Employment Interview

2008-04-13T21:43:00.000-07:00

There was a job opening in the country's most prestigious law firm and it finally comes down to Robert and Paul.

Both graduated magna cum laude from law school. Both come from good families. Both are equally attractive and well spoken. It's up to the senior partner to choose one, so he takes each aside and asks, 'Why did you become a lawyer?' In seconds, he chooses Paul.

Baffled, Robert takes Paul aside. 'I don't understand why I was rejected. When Mr. Armstrong asked me why I became a lawyer, I said that I had the greatest respect for the law, that I'd lay down my life for the Constitution and that all I wanted was to do right by my clients. What in the world did you tell him?''

I said I became a lawyer because of my hands, ' Robert replies.

'Your hands? What do you mean?

''Well, I took a look one day and there wasn't any money in either of them!'

Cry my Zimbabwe

2008-04-13T21:38:00.000-07:00

Our governments in Africa have failed us, and they will prove their failure further on Zimbabwe. In this case I see the citizens and civil society as the only hope.

Civil society organisations in Zimbabwe represented by a Working Group composed of thirteen umbrella organisations from all sectors met on 6 April to map out a strategy for civil society to respond to the ongoing election challenges. The meeting raised concerns over the incomprehensible explanations about the delay in announcing the results and perceived these explanations as intolerable, insofar as they have precipitated socio-economic paralysis. The organisations therefore unequivocally reiterated the demand for the immediate release of the presidential election results and for tangible displays of commitment by the ruling elites to respect the will of the people.

It is worrisome that ZANU-PF as an interested party continues to unduly interfere with the timely release of the results by the Zimbabwe Electoral Commission [ZEC]. The call for the ZEC to assert itself as an independent and impartial election management body was therefore re-emphasised.

Noting that the ongoing anxiety and uncertainty around election results is a breeding ground for civil unrest, Civil Society has launched a massive national campaign to call for peace and respect for the voices of the people. Communities from all over the country will from now on be encouraged to converge in their local areas to conduct different non violent social actions such as marches, prayer meetings and public meetings. The colour white will be used as a show of support for the campaign and citizens are encouraged to wear white ribbons, scarves and apparel as a sign of support for peace in Zimbabwe.

The 18th of April being Zimbabwe’s Day of Independence from colonial rule, has also been identified as an opportunity for all Zimbabweans to collectively speak out in support of peace, fundamental freedoms and respect for the people’s will.

In the event of a Presidential election run off Civil Society has put in place mechanisms for a coordinated and grassroots based civic campaign to make the peoples’ votes larger, to make the peoples’ votes count and to make the peoples’ votes last.

This intended action has gone beyond the borders of Zimbabwe. Across countries in Southern Africa, civil society are in advanced stage of planning to act; yes going beyond prayers they have been offering in order to make Bob Mugabe understand peace and sanity. For example in Malawi there will be a demonstration at the Zimbabwe High Commission on the delay of the Pres results, and intimidation taking place.

The situation in Zimbabwe has already impacted on the SADC. What picture is Mugabe giving, why should we have elections and when we loose we don’t want to admit defeat, this is very bad for Africa because all other leaders can follow Bob's way. If Bob can manage his way out why not the Levi Mwanawasa’s (Zambia), Bingu Wa Mutharika’s (Malawi), Jakaya's, Gebuza's (Mozambique) and others. Kibaki (Kenya) already managed to manipulate the results and Africa is setting a bad trend, bad for democracy
As young leaders we cannot just leave this go untapped – but we do not have a member in Zimbabwe.

Rights Based Programming in Malawi

2008-04-13T21:28:00.000-07:00

RIGHTS BASED PROGRAMMING IN MALAWI: THE CASE OF ACTIONAID INTERNATIONAL MALAWI
By Collins Magalasi
In spite of over four decades of political independence, poverty in Malawi remains one of the highest in the world. Since ActionAid opened its operational doors in Malawi in 1991, it has spent millions of pounds providing goods and services to the poor in the country, yet poverty eradication remains an elusive objective (including in development areas that ActionAid was/is working). Reflections and related lessons from practice have led the organisation to resolve to end poverty through rights based approach (RBA).
Implementing RBA in Malawi requires us to be innovative. Despite the fact that there is no single, universally agreed rights based approach, there are basic constituent elements of RBA that we will ensure our programmes incorporate. These include (a) Accountability on the part of the state to fulfil people’s rights and the communities to communicate their needs, (b) empowerment of poor women, girls, boys and girls and ensuring their participation in contributing to, claiming and enjoying civil, economic, social and cultural rights and political development, (c) indivisibility and interdependence of rights whereby no right will be addressed at the cost of another, (d) equality and non-discrimination where there is no exclusion based on gender, ethnicity, age, colour, physical etc differences, yet paying special attention to vulnerable and marginalised groups; and (d) linkage to national and international human rights norms and standards
To ensure that our RBA efforts have great potential as a tool to engage policy makers and public managers in continuous improvement of basic services, we will ensure that we set realistic expectations; engage stakeholders at various level in defining problems and solutions; incorporate capacity building of our staff, partners and government and donor officials about the process; and create systems for eliminating unnecessary barriers and for facilitating innovation.
Implementation of RBA in Malawi does not come without challenges. Care will be taken in implementing RBA because often the approach can be seen very easily as holding the government and duty bearers accountable for results over which they have no control, and this may breed sour relations with the government. Government of Malawi often claims that they do not have enough funds to fulfil all people’s basic needs. To prevent this, we will ensure that our RBA system analysis has data indicating who is responsible for achieving results and listing factors beyond the control of the duty bearers that could affect results. We will also be on the lookout for increased fragmentation of partners because different players – staff, partners and communities alike – have differing requirements, opinions and expectations of development. The history of ActionAid as a direct service delivery relief agency contributes to this. In this vein we will civic educate the communities and partners on the ‘new’ approach that ActionAid is taking. Our staff in the field may also become frustrated with RBA when charged with identifying solutions to problems that they cannot implement due to constraints of imbedded community belief that ActionAid gives them better services than the government. To reach its potential as a tool for continuous improvement, RBA must be used as an incentive for innovation rather than as a punitive measure to staff and poor communities.
In applying rights based approach, ActionAid will transform from usurping of government responsibility of supplying goods and services to the role of facilitating the relationship between authorities and the communities to realise sustainable development priorities.
To do this, in our day-to-day work in the DAs and through partners, we will facilitate programmes that lead to government, partners and communities understanding human rights and their subsequent duties and responsibilities to respect, protect and fulfil them (through civic education, technical capacity building and resource transfer). We will also work with vulnerable, marginalised and women communities to ensure that they recognise the responsibilities of government and have the capacity to negotiate with the duty bearers to provide services and freedoms in an equitable and transparent manner. The objective of this rights based approach is to move beyond meeting specific needs to reinforcing local structures and capacities to meet human rights standards over time, as set out in the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights.
Additionally, we will work with affected communities to monitor process and results of government and duty bearers meeting of development priorities. We will monitor donors too in their ensuring that government has the means and freedom to realise the development priorities provided by human rights.
Rights-based approaches to development emphasize non-discrimination, attention to vulnerability and empowerment. Women and girls are among the first victims of discrimination. They are the most vulnerable and the least empowered in many of our societies. As such all our work will be designed, implemented and evaluated with the lens of women and girls. At national level, we will measure our progress against standards set in the UN Convention on the Elimination of All Forms of Discrimination against Women and monitoring standards of the Committee on the Elimination of Discrimination against Women (CEDAW). Women and girls’ concerns will be reflected in the conceptualization, implementation and evaluation of human rights policies, strategic planning, and the setting of priorities and objectives. Our programme work will thus focus comprehensively on availability, accessibility, acceptability and adaptability of needed services for all poor and vulnerable communities.
On the government front, our national programmes will pursue rights based approach in our relationship with the government and other duty bearers, by working on results based accountability of the government. In this case the objective will be to ensure that the government facilitates collaboration among stakeholders on common goals; empowers frontline workers; reduces regulation – resulting in greater local decision making; engages the public in defining solutions to society’s problems; demonstrates the results of public investments, thereby increasing public trust in the government, and budgets for results.

ends

Collins Magalasi

Implications for Business and the Industry in Government’s Efforts to Meet the MDGs?

2008-04-13T21:23:00.001-07:00

Implications for Business and the Industry in Government’s Efforts to Meet the MDGs?

By Collins Magalasi[1]

Introduction

Responding to the world’s main development challenges and to the calls of civil society, 147 Heads of State and Governments and 189 nations, including Malawi, signed onto the Millennium Declaration at the Millennium Summit in New York in September 2000. The Declaration is a synchronisation of a set of time-bound, inter-related and mutually reinforcing goals and targets into a global agenda of fighting poverty, hunger, disease, illiteracy, environmental degradation and discrimination against women. These are called Millennium Development Goals (MDGs) and are as follows:

• MDG 1: Reduce Extreme Poverty And Hunger
• MDG 2: Achieve Universal Primary Education
• MDG 3: Promote Gender Equality and Empowerment of Women
• MDG 4: Minimise Child Mortality
• MDG 5: Improve Maternal Health
• MDG 6: Combat HIV/AIDS, Malaria and Other Diseases
• MDG 7: Ensure Environmental sustainability
• MDG 8: Organise a Global Partnership for Development

Set for the year 2015, the Eight Goals can only be achieved if all actors work together and do their part correctly. Governments of poor countries pledged to govern better, and invest in their people, while rich countries pledged to support them, through aid, debt relief, and fair trade. Silent was the direct role of the private sector, which was assumed perhaps to be within the responsibility of the governments.

“The Millennium Development Goals have galvanised unprecedented efforts to meet the needs of the world’s poorest, becoming globally accepted benchmarks of broader progress embraced by donors, developing countries, civil society and major development institutions alike.” Kofi Annan, former UN Secretary General.

There has been talk of polarity between governments and private businesses in delivering services to the poor. The later is often listed as anti-poor. But is this correct? How can the corporate sector play a more effective part in tackling poverty? Can we assume that encouraging the corporate sector to invest in poor regions results in greater access to employment for the poor and greater tax revenues directed towards social programmes? Is it practicable to position the corporate sector as an agent in the delivery of the international Millennium Development Goals and the poverty reduction strategies of national governments? Conversely, are we right to believe that progress towards poverty reduction reinforces economic and political stability, helps markets to grow, and provides a platform for private sector development? What implications do government policies and actions on delivering on MDGs commitments have on businesses?

Businesses and Poverty Reduction

The positive contribution that private enterprises can make to development and poverty reduction is likely to be obvious to most people. They would agree that, in the long term, economic development cannot occur without dynamic private companies. They would also agree that good government and efficient public administration are equally necessary.

The growing debate over implications of government’s delivery of social services on businesses presents a paradox. It is an opportunity to make business’ business, but it can also lead to stifling of businesses. The seemingly lack of fulfilment of expectations of business have also contributed to the sceptism that ‘non-business’ actors have generally on role of businesses in poverty reduction.

The growing debate over the impacts of business on poverty reduction presents yet another paradox. Big businesses have demonstrated their ability to create wealth around the world, but the benefits of the capabilities of these firms and of the global market system do not yet reach most of the 12 billion people (who include the 6.5 million from Malawi) that live in poverty. It seems clear that the world’s prosperity and security, and perhaps even the growth and legitimacy of global corporations, are linked to our ability to remedy this disconnect.

In the quest for sustainable development, eliminating poverty is the key challenge facing not only governments and civil society, but also business. Traditionally, business has played a crucial role in providing routes from poverty to prosperity of shareholders, pursuing profit and in the process generating wealth, products and services, innovation and technical advances, jobs and tax revenues. Businesses of all sizes relate to the poor as consumers, staff, suppliers and distributors, and in some cases as neighbours.

However, such a business-as-usual approach is clearly not lifting the majority of the people out of poverty: nearly 6.5 million people survive on less than US$1 per day in Malawi. The formal sector barely serves the poorest of these people, who must rely on the informal sector and their own production as their main sources for products, services and income. Furthermore, many of the poor are suffering from the negative impacts of business activities, from environmental pollution to human rights abuses. While the primary role of business is to provide the “engine of growth”, recognition is growing that the private sector can and should do more to combat poverty, and that this unrealised potential offers both a commercial and a social opportunity.

Measuring Business Contribution

There has been a lot of conference talk and coverage of business and the MDGs in recent years. Yet it has been hard to move beyond anecdotes to analytical data on private sector impacts on poverty reduction

Should your business make you feel guilty? We are not talking of what is does to consumers, but its poverty impact. The Dutch Sustainability Research (DSR) developed an MDG Scan (see annex 1 for details), that advises institutional clients on socially responsible investments. It split the eight MDGs, which originally apply to governments, into 77 measurable and comparable indicators relevant to multinational companies with significant activity in middle or low income countries.

The score for the first MDG on halving the number of people living in extreme poverty by 2015, depends on stimulating community development by measures such as promoting local entrepreneurship and providing essential products and services, provision of employment and salaries, stimulating local agricultural production, and fighting malnutrition.

The second MDG on universal primary education depends on company guidelines and programmes, its efforts to combat child labour, and promoting private education.

The scores for each indicator are weighted and aggregated to a score between 0 and 100 for each MDG. At this stage, the scan does not add up the scores for each of the eight MDGs to a final score on all MDGs. Why is this so? Ronald Lubberts, Director of DSR says "It is questionable if high performance on one of the MDGs should compensate for a relatively low performance on another.” Moreover, each industry can contribute to the MDGs in a different way. "A pharmaceutical company can diminish child mortality, stimulate maternal health and can halt the spread of HIV and AIDS solely by the nature of its products and services," Lubberts said. "A mining company cannot, but it can contribute to local community development in remote areas by improving local medical care and education opportunities."

Heineken is one of the first firms to go though the new MDG Scan.

The new scan is another step forward, although only six firms - mostly Dutch - have so far undergone the scan and it tends to emphasize the positive. The challenge is to make sure it covers the range of operational impacts given that it is time and cost intensive to measure business impacts effectively.

Getting back home, there is nothing like this. Much as there are a few businesses involved in Corporate Social Responsibility (CSR), it has been said too generally that this will bring about poverty reduction. It is a fallacy, for, some CSRs are for public relations purposes of the company that have no additional value to the day to day lives of the poor.

Why must Businesses support and align their activities to MDGs

Businesses engage in poverty elimination for a multitude of reasons; as a result, talking about a single business case is difficult. Nevertheless, we can usefully look at the justification for business action on three levels, as shown below.

Innovation can unlock commercial opportunities while meeting the needs of the poor
Ensuring good governance, a strong economy and a competent workforce can help companies and the poor to prosper.
Action on poverty can contribute to profitability for individual companies
Market Development
Bottom-Line benefits
Secure Business Environment

At the base of the business case is the recognition that poverty attacks the foundations for healthy business. Tackling poverty can help businesses to build the local spending power, skilled workforce and stable environment necessary for business development. However, the benefits are spread across the local economy and no individual company can capture all of them. Therefore, the second level of the business case looks at the balance of costs and benefits of business action on poverty for an individual enterprise.

Within the second level, a growing body of evidence shows that companies that take account of the interests of their stakeholders, that respect human rights and environmental standards, and that give back to the community in the form of social investment are able to improve their financial performance. While poverty is not the only issue of concern, many of the areas increasingly considered as part of the wider responsibility of business – such as child labour, involvement in human rights abuse and environmental destruction – cannot be addressed without understanding their links with poverty.

The top level of the business case represents an opportunity for those businesses smart enough, fast enough and innovative enough to develop business models that engage with the poor as consumers, workers and entrepreneurs. Such businesses find ways to profitably address the poor’s unmet needs for basic products and services, jobs and market access, as well as enabling services such as education, credit and ICTs (information communication technologies). This is what the MDGs are there for. To achieve this companies will need to move beyond incremental change and accepted business models to fundamentally alter the way they produce and deliver value.

So what should government – business interventions be in delivering MDGs?

A comprehensive approach to poverty elimination is needed, one in which public, private and civil sectors attack the multiple dimensions and causes of poverty. Government needs to support business interventions that would bring the following outcomes:
Increased equity, with wider distribution of productive assets and increasing returns on these assets
Enhanced opportunity to access jobs, credit, roads, electricity, markets, schools, water, sanitation and health services
Participation in the processes that control access to market opportunities and public sector services, regardless of gender, ethnicity and social status
Peace and security, and reduced vulnerability to economic, political and environmental crisis, which will enable people to invest in higher-risk, higher-return activities
A sustainable future in which people conserve natural capital and use finite resources more sustainably, from the local to the global level.
Businesses also contribute to development in other ways that are crucial to economic development and poverty reduction:
They generate a large portion of government tax revenues, without which there would be no sustainable base for funding public health care, education, social safety nets, agricultural research, and other critical expenditures.
In countries with competitive economies, leading private firms will constantly seek out information that has practical local uses; to remain competitive, other firms will emulate their behavior. In the process, executives and employees upgrade their human capital, productivity, and incomes, contributing to the diffusion of useful knowledge and techniques.
Over time, competitive firms improve the quality of products and make them more affordable, thereby boosting the purchasing power of consumers, including poor consumers. Indeed, in countries such as India and Brazil, some private companies have begun to focus on the poorer segments of the population as promising new markets.
Not all private enterprises in all environments generate jobs, investment, and human capital, however. Monopolies and oligopolies, high protection against competing imports, and government subsidies all undermine the ability of private firms to reduce poverty. Government measures that encourage competition are the best way to attack the concentration of power, oligarchy, monopoly, corruption, and other distortions that make efforts to help poor people ineffective. Government’s establishment of the Competition and Fair Trading Commission (CFTC) must be commended and we must all support the Commission.
The weakening of favoritism, the elimination of excessive red tape, the regulation of natural monopolies, and the encouragement of liberalization all work to defeat the entrenched forces of privilege that perpetuate poverty. Widening markets through regional trade and currency arrangements, and increasing internationalization and the attendant liberalization underline inviting arrangements.
So what should government do inorder to have the private sector contribute to the attainment of MDGs? - Business environment
What can governments do to support the creation and expansion of companies that are financially, economically, socially, and environmentally supporting MDGs? Besides improving health care, education, and macroeconomic conditions, and encouraging competition, governments can undertake institutional reforms that, over time, lower the costs of doing business and thus create a more favorable business environment. Such reforms encourage activities not only by foreign investors but also—and more important—by the thousands of local entrepreneurs who want to start or expand small businesses in agriculture, services, and manufacturing.
A number of enterprise surveys and other analytical work linking institutional factors and economic performance have been carried out in recent years. These analyses pinpoint areas in which reform is urgently needed in this country. Among the findings are the following:
A strong relationship exists between the quality of the business environment and long-term national economic performance, including the pace of poverty reduction.
Enforcement of the rule of law—in particular, the extent to which government enforces contracts between private parties (and between private parties and the state)—is crucial to long-term development and, as already noted, affects the poor as well as affluent members of society.
Respect for property rights (especially those of the poor) is highly correlated with long-term economic and social progress.
The efficiency of government in delivering services is also associated with economic progress.
In particular, a worldwide survey of 10,000 enterprises carried out during 1999 and 2000 under the leadership of the World Bank Group points to the leading obstacles to doing business identified by business managers and owners in developing countries. Constraints were ranked in order of perceived seriousness on a scale of 1 ("no obstacle") to 4 ("major obstacle"). The average score for perceived obstacles is, unsurprisingly, higher in developing countries (2.6) than in industrial countries (1.95). The developing country list of obstacles is topped by four items scoring an average of 2.9: taxes and regulations, financing difficulties, inflation, and political instability or uncertainty. The next most serious perceived obstacles—corruption, exchange rate problems, and "street crime, disorder, and theft"—score an average of 2.6.

Analysis of these survey data for all countries suggests that investment and economic growth are related to certain key indicators of the quality of the investment climate. For example, foreign direct investment flows are positively associated with economic predictability and predictability of changes in law and legislation, and negatively associated with constraints imposed by taxes and regulations and exchange rate instability. Likewise, GDP growth within each of the regional groupings of countries is negatively associated with the severity of constraints imposed by taxes and regulations in general and, specifically, high tax rates, tax administration, and business-registration procedures.

Conclusion: Government, Businesses and Poverty Eradication

Describing the ‘proper role of government,’ the Honorable Ezra Taft Benson, Former US Secretary of Agriculture [The Eisenhower Administration - ed.] wrote in 1968 that it is generally agreed that the most important single function of government is to “secure the rights and freedoms of individual citizens.” But, what are those rights? And what is their source? He asked. Until year 2000, these questions were not answered in universally agreed language and targets. As such the answering of these questions through the MDGs raised the likelihood that we can correctly determine how government can best secure them, in partnership with private businesses and citizenry.
Indeed, as Thomas Paine, back in the days of the American Revolution, explained that:
"Rights are not gifts from one man to another, nor from one class of men to another... It is impossible to discover any origin of rights otherwise than in the origin of man; it consequently follows that rights appertain to man in right of his existence, and must therefore be equal to every man." (P.P.N.S., p. 134)

Government should therefore never abrogate its responsibility on MDGs to any person, whether human or corporate.
The great Thomas Jefferson asked: "Can the liberties of a nation be thought secure when we have removed their only firm basis, a conviction in the minds of the people that these liberties are of the gift of God? That they are not to be violated but with his wrath?" (Works 8:404; P.P.N.S., p.141)
The Alabama State (USA) Constitution provides an interesting basis for government investment in eradication of poverty. It provides in Art1.sec 35
"That the sole object and only legitimate end of government is to protect the citizen in the enjoyment of life, liberty, and property, and when the government assumes other functions it is usurpation and oppression."

Therefore, government needs to facilitate environment where businesses will further the citizens’ “enjoyment of life, liberty, and property.” Anything less that the purpose mention here-before, must never be supported. In the delivery of the MDG commitments, businesses find opportunity to provide goods and services. Businesses must therefore encourage government to stick to the MDG agenda. As it has been stated earlier on, we must recognise that poverty attacks the foundations for healthy business. Implementing the MDGs commitments will help businesses to build the local spending power, skilled workforce and stable environment necessary for business development. Together we stand, divided we fall.
Ends
Annex 1: the MDG Scan

In September 2000, the United Nations member countries made a commitment to reaching eight MDGs by 2015, such as halving the proportion of people suffering extreme poverty and hunger, achieving universal primary education, and promoting gender equality and the empowerment of women.
The Dutch Commission on Sustainable Research (NCDO) has now financed the MDG Scan as a tool to raise awareness of the MDGs in the private sector. The scan allows for detailed comparisons between companies within the same sector and evaluation of the progress of a company over time. It split the eight MDGs, which originally apply to governments, into 77 measurable and comparable indicators relevant to multinational companies with significant activity in middle or low income countries. The score for the first MDG on halving the number of people living in extreme poverty by 2015, depends on stimulating community development by measures such as promoting local entrepreneurship and providing essential products and services, provision of employment and salaries, stimulating local agricultural production, and fighting malnutrition. The second MDG on universal primary education depends on company guidelines and programmes, its efforts to combat child labour, and promoting private education. "The quantitative approach will make the discussion on private sector contribution to the MDGs less speculative and anecdotal," the NCDO states. It wants to benchmark sufficient companies to be able to launch an index and a 'Millennium Development Fund' with stocks of companies with the best MDG performance. The scores for each indicator are weighted and aggregated to a score between 0 and 100 for each MDG. At this stage, the scan does not add up the scores for each of the eight MDGs to a final score on all MDGs. "It is questionable if high performance on one of the MDGs should compensate for a relatively low performance on another," says DSR director Ronald Lubberts. Moreover, each industry can contribute to the MDGs in a different way. "A pharmaceutical company can diminish child mortality, stimulate maternal health and can halt the spread of HIV and AIDS solely by the nature of its products and services," Lubberts said. "A mining company cannot, but it can contribute to local community development in remote areas by improving local medical care and education opportunities." Six multinational companies have so far passed the MDG Scan: ABN Amro (banking), Heineken (beer brewer), Philips (electronics), Akzo Nobel (chemicals), BHP Billiton (mining) and TNT (logistics). The results indicate that all six companies contribute positively to each one of the eight Millennium goals. The MDG scan takes into account positive as well as negative contributions to the MDGs. But judged by the number of indicators, the MDG Scan currently stresses indicators that measure positive contributions. Generally speaking, companies get more chances to win than to lose points. However, the indicators that measure negative contributions are weighted substantially in order to outweigh positive indicators. Companies receive scores for negative contributions if evidence is found that the company is involved in a controversy related to the MDGs. BHP Billiton for instance had points deducted because of its involvement in controversies related to its impact on the environment. "The negative indicator in this model has been kept simple," Lubberts told IPS. "This version is meant to gain experience and needs some fine-tuning." Lubberts says more companies need to be assessed with the MDG Scan before the results of a benchmark can be properly interpreted. Only when several beer brewers have gone through the evaluation process, will it become clear if Heineken's score of 44 on MDG3 (gender) should be qualified as "average" or "good". First and foremost, MDGs are structural and long-term goals for governments, who need to levy taxes to finance these efforts. Companies are constantly looking for ways to pay as little tax as possible. Sometimes they optimise profits by shifting them from a local branch to the seat of the mother company. In this way, locally produced extra value gets lost. The United Nations Development and the Global Compact, the UN's voluntary corporate responsibility initiative, have already shown interest in the MDG Scan. The MDG Scan will be made available online later this year as a self-assessment tool in a slightly modified version. "Companies and stakeholders have asked us to attribute more weight to performance indicators that measure real impact results," Lubberts said. "That is important to them from a communications perspective".

(Mattias Creffier /2007)
[1] Collins Magalasi is Ag. Country Director for ActionAid International South Africa, Lesotho and Swaziland and is based in Johannesburg. He can be contacted on email collins.magalasi@actionaid.org.

Letter to the Malawi State President Dr. Bingu Wa Mutharika

2008-04-13T21:18:00.001-07:00

H.E. The State President Dr. Bingu Wa Mutharika
Office of President and Cabinet
Capital Hill
Lilongwe

15 December 2007

ECONOMIC PARTNERSHIP AGREEMENTS

Your Excellency, allow us to submit our views on the Economic Partnership Agreements under negotiation.

Your Excellency, we realize that the approach of end of December 2007 which has been declared ‘end of the ‘honeymoon’ for the Africa, Caribbean and Pacific (ACP) poor countries’ calls on Malawi to make difficult decisions to sign (or not to sign) the Interim EPAs. These interim EPAs lack the important ingredients that the ACP countries need as they are negotiated in a hurry and only a handful of their provisions were actually negotiated. The EC continued to ignore both suggestions for alternatives and calls for more negotiating time, and instead threatened to raise tariffs on January 1st 2008 on exports from any ACP country that has not initialed an Interim EPA. Surely this is arm-twisting and places immoral pressure on ACP negotiators and governments. It therefore comes without surprise that more and more ACP countries with larger trade with the EU are giving in to the force to lower their expectations regarding what EPAs could deliver and have been pressed to secure any agreement that will provide continued market access.

In early December 2007, the Malawi civil society submitted their position on EPAs for Malawi. In their well researched assessment, they submitted that the EPAs in their current form and process are not going to benefit Malawians nor add value to their ability to get out of poverty and integrate into the global economy. To this effect, they joined hands with the leadership of Africa, which attended the EU-Africa Summit that took place in Lisbon, Portugal from the 8th-9th December 2007, in condemning this Partnership Agreement together.

The African leaders, Your Excellency, in their discussions on trade with the EU underlined the importance of trade and development cooperation to the partnership they share with the EU. They stated that now more than ever, Africa needs economic partnerships that will see its people grow in economic power, and live at a standard commensurate to their dignity as human beings. The leaders were very eloquent in stating that the current Economic Partnership Agreement being negotiated between the EU and African and Caribbean Pacific Countries does not represent an agreement that can benefit their people economically and socially. Specifically they confirmed that

The negotiations as they stand will cause further de-industrialization on the continent as our countries are expected to open to EU exports deeply and broadly.
The EU wants to tie the poor countries into an agreement that reduces the latter’s policy space to consider other perhaps more profitable agreements with other regions like Asia.
Impact assessments are clear on the fact that the EPAs will bring with them a lot of adjustment and economic costs (like loss of revenue) to which the EU is non-committal to support entirely.

What is wrong with the proposed interim EPAs?

The current EPAs have many flaws. Among them:

a) Opening of Markets by ACP countries

The EC agreed in principle to accept offers of tariff liberalisation from ACP countries of 80% over 25 years. However, in these Interim agreements, tariff elimination starts from the entry into force of the agreement (2008) and the elimination of other barriers (export taxes) is not always gradual, and may have to be implemented as early as 2008. Moreover, only a marginal share of trade volume is subject to long implementation periods for tariff elimination. Even for least developed countries the pace of liberalization is very fast.

We also find the EC insisting on the inclusion of a standstill clause which is not required by WTO rules. In the ESA text which Malawi is party to, it is even stricter than the other configurations (SADC and EAC) as it freezes tariffs on all trade between the parties, whether or not these products are subject to liberalization. As a result, even if a product is on the ‘exclusion list’, the tariff on this product cannot be raised after the entry into force of the agreement.

Malawi has been asked to liberalise 80% of all trade with the EU. Our assessment shows that this is too much for Malawi. We are a small and emerging economy with a lot of potential. History tells us that for the EU to reach it’s current scale of economic muscle, it was a combination of policies aimed at boosting local production and local industries and one of such policies is the protection of local industries against unfair foreign competition. At this time the EPAs are eroding our policy and developmental space in this area.

b) There are inadequate safeguard clauses for ACP countries
We just ended another 25 year trade and development agreement with the EU that lasted from 1975 to 2000. In this partnership our exports to the EU dwindled; and supply side constraints remain an issue of our industries. What has changed to make us believe that these next 25 years with EPAs will be any different?
In the absence of tariffs, effective safeguards are the main policy instrument that can be used to protect the agricultural sector and existing industries from import surges, ensure food security, and nurture the development of new ‘infant’ industries. As currently structured in EPAs, the safeguards will not provide adequate protection for ACP producers.

The safeguard clauses in the ESA EPA text are limited by a number of onerous procedures that have impeded their effective use in the context of other trade agreements. In addition, safeguards are of limited duration and any safeguards exceeding one year 'shall contain clear elements progressively leading to their elimination at the end of the set period, at the latest.'

c) Coverage Of EU Market Opening
The commercial gains arising from the Duty Free Quota Free offer itself are limited because of the failure of the EU to substantially improve rules of origin, the retention of transition periods on two key products (sugar and rice) and strict safeguards that limit ACP access to EU markets.

The latest EU offer on Rules Of Origin (Regulation COM (2007) 717 final, November 13 2007), which will be applied until a ‘Full EPA’ comes into force, contains only minor improvements to existing rules but even these are still disputed by several EU Member States. However, cumulation is restricted to those ACP countries that have signed an EPA, potentially destroying production processes that span ACP countries that have not signed. Looking at specific sectors in details, we find that:

Significant improvements are made for textiles and clothing (Product level RoO) but these are partly undermined by provisions on value tolerance (Article 4) which are stricter than under Cotonou.
The requirements for fish (Product level Rules of Origin) remain largely unchanged and continue to form a significant barrier. There are some minor improvements only applicable to the export of fish from the Pacific but in order to benefit, countries are subject to a range of administrative and reporting requirements (Article 4)
No industrial products other than textiles and clothing have seen any change
Unlike Cotonou, the only ACP countries that will benefit from cumulation are those that have concluded a free trade agreement (Article 2 of Title II), potentially destroying exports that rely on inputs from ACP countries that will have not initialled Interim EPAs.
Such an approach could also undermine capacities to add value between countries that are party to and those not party to an EPA, since no cumulation is allowed on rules of origin for exports under different EU preferential regimes

d) Benefits to Malawi?

The Ministry of Trade and Industry and stakeholders in the negotiations through the National Trade and Development Policy Forum (NDTPF) estimated that Malawi would need a capital injection of 5.7 Billion Euros to take care of supply side constraints and other adjustment costs if it could stand a chance of benefiting from the proposed EPA trading framework. Without such an injection, Malawi would remain an exporter of primary commodities with little or no diversification. In other words Malawi would remain the way it is with full exposure to shocks that take place in the commodity market from time to time. The EU’s response to this assessment is a mere 12 million euro donation. Not that we are suggesting the government should beg the EU to sort our problems, but that we are asking them not to cause further problems to the country.

Legality of EPAs in Malawi

Legally, EPAs pose a threat to poor Malawians. Following is excerpt of legal opinion we got on whether the laws of Malawi are conducive for EPAs:

Whether or not the laws of Malawi are conducive for the EPAs to strive is not clear. In Malawi there is the Competition and Fair Trading Act 43 of 1998 (hereinafter referred to as Competition Act) which provide for standards for trading within Malawi and for doing business. Any violation of the competition law for instance will mean that the competition commission will have to investigate and fine any party involved in uncompetitive practices and may also constitute a crime. The Section 32 (2) Competition Act prohibits the following practices
(a) The use of cost pricing to damage, hinder or eliminate competition
(b) Overcharging or undercharging for goods or services purchased or supplied as compared with prices for similar or comparable transactions
These practices are relevant to issues such as the importation of subsidized goods. The import and sell of a subsidized good could amount to undercharging as the cost of the good is lower than its production price. However it would seem that such an importer would not be liable under the Competition Act because section 3 (e) states:
Nothing in this Act shall apply to activities expressly approved or required under a treaty or agreement to which Malawi is a party;
The above section specifically excludes the application of the Competition Act to the EPAs since the EPAs are a treaty.

Another law that could exclude the application of the Competition Act is Article 28 of the Vienna Convention which states that a party cannot refuse to perform its obligations under a Treaty simply because its internal laws do not prohibit it. This article therefore means that even if the EPAs where in conflict with the Competition Act, a State would be prohibited from suing the importer who is undercharging.

The mere fact that the Competition Act does not apply to international trade agreements means that Malawi has to have a law that specifically deals with importation of goods such as an Antidumping and Safeguard Measures law. This law is important to protect the Malawian market from dumping of goods from not just the EU once the EPAs are signed, but from other countries due to liberalization in general. Dumping occurs if a company sells at a lower price in an export market than in its domestic market. If such dumping injures the domestic producers in the importing country, under certain circumstances the importing country authorities may impose anti-dumping duties to offset the effects of the dumping.

The liberalization that will occur from signing an EPA as well as all other trade agreements is bound to lead to an influx of goods within Malawi which could displace local manufacturers. A safeguard measures law also protects local manufacturers by providing that where this influx occurs, Malawi can impose certain restrictions in order to slow down these imports and protect its manufacturers. Protection can be in the form of imposition of higher tariffs on goods that are being dumped onto the Malawian market or for goods which have been entering the Malawian market in such large numbers that they distort the market. A good example is the importation of second hand clothes in Malawi which affected textile clothing manufacturers to the extent that some of them had shut down. If there was a safeguard measures law, these manufacturers would have been protected.

The lack of an Antidumping and Safeguard measures law within Malawi is not per se a problem when it comes to EPAs because the EPA agreements provide for these safety valves. For instance Article 20 of the interim agreement of the 15th of November 2007 provides that
(1) Subject to the provisions of this Article, nothing in this Agreement shall prevent the Signatory ESA States and the EC Party from adopting measures in accordance with Article XIX of the General Agreement on Tariffs and Trade 1994, the Agreement on Safeguards, and Article 5 of the Agreement on Agriculture annexed to the Marrakech Agreement Establishing the World Trade Organization. For the purpose of this Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.
(2) Notwithstanding paragraph 1, the EC Party shall, in the light of the overall development objectives of this Agreement and the small size of the economies of the ESA States, exclude imports from any ESA State from any measures taken pursuant to Article XIX of the GATT 1994, the WTO Agreement on Safeguards and Article 5 of the Agreement on Agriculture.
Article 21 of the same agreement also states that
2. Safeguard measures referred to in paragraph 1 above may be taken where a product originating in one Party is being imported into the territory of the other Party in such increased quantities and under such conditions as to cause or threaten to cause:
(a) serious injury to the domestic industry producing like or directly competitive products in the territory of the importing Party;
(b) disturbances in a sector of the economy, particularly where these disturbances produce major social problems, or difficulties which could bring about serious deterioration in the economic situation of the importing Party; or
(c) disturbances in the markets of agricultural like or directly competitive products or mechanisms regulating those markets.
As far as dumping is concerned Article 19 of the Interim Agreement states
(1) Subject to the provisions of this Article, nothing in this Agreement shall prevent the EC Party or Signatory ESA States, whether individually or collectively, from adopting anti-dumping or countervailing measures in accordance with the relevant WTO agreements. For the purpose of this Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.

From these provisions it is clear that measures to protect the Malawian market from an influx of goods from EU countries are in place. What is required is first that the public is made aware of these provisions so that the public could notify government about any negative consequences and so that government can take the necessary steps to check these problems.

Secondly, in the absence of an Antidumping and Safeguard Measures law, parliament will have to ratify the EPAs so that there isn’t uncertainty as to whether or not a court within Malawi can apply the antidumping and safeguard clauses of the EPAs in protecting the Malawian market. This will also take away the uncertainty of whether or not the safeguard measures apply. Furthermore by ratifying the EPAs, an individual or entity that has been affected by the importation of goods could sue on its own and will not have to wait for government to actually institute the claim.

In conclusion, the legal opinion states that “though there are laws that make it conducive for EPAs to operate, and even if there aren’t such laws, the EPAs have in built mechanisms that will make them work. However these mechanisms can only be implemented if the institutions tasked with implementing them have the proper capacity as well as the right funding. This will be the main obstacle in implementing the EPAs. If government institutions are not well funded and do not have the right capacity, then it will be hard for the safety measures incorporated in the EPAs to take effect. In these circumstances, it would be best to have additional legislation in our laws that provide that the private sector itself can take these measures on their own and at a court. We could learn from South Africa which has an Anti-dumping legislation which has been applied successfully to protect the South African market.

What options does Malawi have?

1. Malawi already has duty and quota free market access to the EU market under the Everything But Arms (EBA) Agreement without being requested to open up its markets in return.
2. Even without an EPA, Malawi continues to receive development support from our brothers and sisters from the EU through the European Development Fund (EDF) under the Cotonou Partnership Agreement. This is evidenced by the recent signing of the MK90 billion between the two parties.
3. Malawi is now going to sign an EPA with the EU as a single country rather than a bloc of countries as was originally envisaged. The EPAs now are putting Malawian market in direct competition with the European market unnecessarily at a time when we are slowly on the up, with Malawians hopeful of building up the jobs, industries and livelihoods that had been lost in the past through initiatives such as the Structural Adjustment programmes (SAPs) similar to this one.
Consequently the government of Malawi
1. Can ask the WTO members for a waiver allowing the EU to continue granting Malawi duty free access.
2. Needs to consider all alternatives other than having this Free Trade Agreement with a Union whose industry and agriculture sector is far more advanced and heavily subsidised than our own.
3. Conduct a review of Malawi’s position in the negotiations and the EPA process as a whole (as was agreed during the African Union meeting in Ghana).
4. Prioritise in the negotiations the hard working Malawians for their tireless efforts to secure a livelihood through agri-business or entrepreneurship by looking beyond the European Community.

Conclusion: What if the government goes ahead signing the EPAs (interim inclusive)?

If the government goes ahead signing EPAs in this non-developmental agreement, it will be demonstrating that it does not care about the rights of its people. In an ideal situation, as citizens, we could be compelled to challenge the government in court for violating our rights and possibly seeking compensation. But we realise however, that the mere fact that the EPA violates the right to development does not make them invalid and poses irrevocable challenge to the government. The EPA is a Treaty and under Article 27 of the Vienna Convention on The Law of Treaties, Malawi if it signs as party may not invoke the provisions of its internal law as justification for its failure to perform a treaty. Thus, once the EPA is signed Malawi cannot use its internal laws as reason not to comply with the EPA. Hence the government needs to demonstrate it Is prioritising the people, who under no constitution can challenge the EPAs even where the EPAs violate the right to development. Thus the Malawi Government will have to ensure that its acts are not detrimental to the objectives of the EPA that it signs.

Thus by signing on to the EPAs in their current form, the government of Malawi may be tying the citizens into 25 years of acrimony. We, therefore, call on you NOT to sign the agreement in its current form.

Finally, your Excellency, we wish you a Merry 2007 Christmas and Happy and Progressive 2008.

Submitted today 15 December 2007, by

Collins Magalasi
Under the endorsement of

· ActionAid International Malawi (AAIM)
· Malawi Economic Justice Network (MEJN)
· Malawi Health Equity Network (MHEN)
· Maphunziro Foundation
· Manerela
· Institute for Policy Interaction (IPI)
· Centre for Human Rights and Rehabilitation (CHRR)
· National Smallholder Farmers Association of Malawi (NASFAM)
· Joint Oxfam Programme in Malawi
· Youth and Children Shield

2006 BUCERIUS SUMMER SCHOOL ON GLOBAL GOVERNANCE

2007-01-11T07:23:00.000-08:00

2006 BUCERIUS SUMMER SCHOOL ON GLOBAL GOVERNANCE
PARTICOPATION REPORT

Introduction

The 2006 Bucerius Summer School took place from 13 – 27 August 2006 in Germany. With my nomination by the AAI Chief Executive, Mr. Ramesh Singh, I was among the 54 participants selected from 30 countries across the globe. Participants were from different walks of life: from the EU representative on financial markets in the US, to the Marketing Manager of Siemens International based in China, from the Israel Foreign Policy Adviser to the Communications Director of International Atomic Energy (IAE), from Head of Policy of ActionAid International Malawi to Representative of the World Bank in EU. The course was held in Hamburg, Berlin and Paderborn.

This year’s summer school was held under the theme “The World Ahead: Challenges and Opportunities – Problems and Prospects”

Bucerius Summer School

The Bucerius Summer School aims at fostering leadership qualities in young professionals by involving them in an international dialogue on current political, economic, social and legal questions. It provides a forum for cross-cultural exchange between up-and-coming young leaders from around the world who, during a two-week session, learn from and are inspired by well known public figures in politics, business, academia, and the NGO sphere. Supported by the ZEIT-Stiftung Ebelin und Gerd Bucerius since 2001 (and later joined by the Heinz Nixdorf Stiftun in 2004), the 'Bucerius Summer School on Global Governance' is held annually.

The summer school runs on very high levels of mission as evidenced in the world of the Patron of Bucerius Summer School, Helmut Schmidt: “Anybody who favours more powerful institutions for global governance ought to be aware of the lurking leviathan, namely the ever growing selfish and tyrannical but de facto uncontrollable bureaucracy.” Helmut Schmidt is Former German Chancellor.

2006 Content

In Hamburg

The course started on 13th August with opening and welcome remarks by Prof. Michael Göring, Director of the Executive Board, Prof. Theo Sommer, Dean and Editor-at-Large, DIE ZEIT, Hamburg, and Dr. Oliver Gnad, Project Director, ZEIT-Stiftung. After introductions of participants, Prof. John Ruggie, Kirkpatrick Professor of International Affairs, Kennedy School of Government, Harvard University gave first paper on Global Governance – Concept and Reality? He was followed by Prof. Timothy Garton Ash who gave talk on “what chance for a Free World”

Prof Ruggle is the architect of the Millennium Campaign. In his talk, Ruggle sighted examples of showed b=how
In Hamburg:

· The Matrix of Global Governance I: the United Nations and the European Union
· The Matrix of Global Governance II: the Private Sector – Business Without Boundaries
· The Matrix of Global Governance III: Civil Society and Non-Governmental Organisations (NGOs)

In Berlin
· The Security of States: Traditional Concepts
· Societal Security I: Energy Security and the Environment
· Societal Security II: managing Global Public Goods

In Paderborn
· Regional Realities and the Global Power Pattern (I): the Rise of China

Back in Hamburg
· Regional Realities and the Global Power Pattern (II): the Rise of India
· Regional Realities and the Global Power Pattern (II): Capacity Building in Africa

· Governance Beyond Governments: Social Capital and Global Public Networks

· Risk Management: AIDS, Avian Flu and Other Pandemics
· Risk Management: Tsunamis, Earthquakes, Global Warming and Other Catastrophes

· The Future of the West: Global Governance and Global Leadership

Conclusion

The world is changing at an unprecedented pace. This observation is easy to make, and yet few would agree on how to manage this change. Indeed we are in the midst of a fundamental debate about how to govern individual lives, for the benefit of many. Traditional political institutions, anchored in the nation state, have lost influence. On the other hand, other players, like International Financial Institutions, multinational Corporations and civil society organizations, have gained influence. With this reality, the course helped rethink our ways of formulating and implementing policy in ActionAid International. It raises essential questions about the legitimacy, enforceability, and accountability of policy in the so called globalized world. Governance – like government – cannot take place in a political vacuum. Governance needs guidelines, rules, a normative basis. Ours is duty to ensure these do uplift the lives of the poor. Global Governance needs universally accepted and applicable rules – principles which serve as a compass to find our way through the social, political, and economic terra incognita lying ahead. ActionAid International is well placed to be the lead in such alternatives.

Now that I have gone through the course, I am set to confront the challenges to come. I will write a comprehensive report and consider sharing and conductive similar discussions with the staff.

German Chancellor needs to follow example of her President and deliver on Africa

2007-01-11T07:21:00.000-08:00

German Chancellor needs to follow example of her President and deliver on Africa, says ActionAid.

German Chancellor Angela Merkel needs to follow the example of her president who is in Ghana this week talking to African heads of state and representatives of civil society, and deliver on Africa at the G8, says ActionAid.

“We welcome President Koehler’s initiative and hope that Chancellor Merkel follows his example, taking a real interest in issues that go beyond the economic interests of rich countries”, said Anne Jellema, Head of Policy at ActionAid International.

In less than 150 days, Chancellor Merkel welcomes Heads of State to the G8 Summit in Heiligendamm, Germany. The agenda focuses on growth and responsibility with a special emphasis on Africa. But up until now, Merkel has never visited the continent.

“If Merkel wants to send a ‘positive message of trust in the future of Africa’ as she stated in the G8 agenda, she should listen to her African counterparts and take their needs into consideration,” said Jellema.

“Merkel could deliver a positive message by ensuring there is a proper funding plan for universal access to anti-retrovirals and she could deliver that at the G8 Summit” said Jellema. “Only 20% of those who need antiretroviral therapy currently have access to it. We are about $10 billion short per year to meet the Universal Access target by 2010 and we can’t afford to wait any longer for a positive message”.

Interim South Africa Country Director for ActionAid International, Collins Magalasi, added:
“If the G8 really cares about Africa it will support country-led processes rather than pushing reforms designed in Heiligendamm.”
“Koehler acknowledges that good conditions for private investment are insufficient and African companies need better access to European and American markets whereas Merkel’s G8 agenda favours rich countries’ interests, bypassing the development needs of Africa,” he added

7 Presidents crack heads with Young Leaders, Accra Ghana.

2007-01-11T07:16:00.000-08:00

7 Presidents crack heads with Young Leaders, Accra Ghana.

150 days and counting to 2007 G8 meet in Germany

From January 11 to 14 2007, a high profiled conference is taking place in Accra, Ghana. I arrived yesterday on 10th January, to represent ActionAid International and Malawi. We will be in meeting with the following leaders to discuss the future of the German ‘Partnership with Africa.’

1. President Horst Kohler – President of the Republic of Germany
2. President John Kufor – President of the Republic of Ghana
3. President Olusegun Obasanjo – President of the federal Republic of Nigeria
4. President Ellen Johnson-Sirleaf, President of the Republic of Liberia
5. President Festus Mogae, President of the Republic of Botswana
6. President Alpha Oumar Konare – President of the Commission of the African Union
7. President Thomas Yayi Boni – President of the Republic of Benin

The theme of the meeting is “Two Generations, One Future – Today’s Challenges and Way Forward”

In 150 days Chancellor Merkel of Germany will welcome Heads of State to the G8 Summit in Heiligendamm. The agenda will focus on growth and responsibility with a special emphasis on Africa.

Merkel has up until now never visited the continent while President Koehler is this week meeting young leaders from Africa and Germany together with Presidents from Ghana, Nigeria, Liberia, Botswana, Benin and the African Union in Kohler’s “Partnership for Africa” initiative to discuss political and social participation, education and employment, war and violence and environment and the natural habitat. The conference comes at the time most G8 members have not implemented measures to combat climate change, including recommendations of the UN Decade for Education for Sustainable Development; are known to have fuelled and supported armed conflicts in Africa, and have not left policy space for the African states.

Koehler has shown a keen interest in political dialogue with African counterparts and citizens – but on an equal basis. The G8 agenda currently attaches importance to an expansion of G8 relations with Africa but in the form of reforms for Africa.

In the past, the language of ‘reform’ has too often been used to impose policies on Africa, such as privatising services and opening up markets for the benefit of G8 investors. But if the G8 really cares about democracy in Africa it will support country-led processes rather than pushing reforms designed in Heiligendamm.

Koehler acknowledges already that good conditions for private investment are insufficient and African companies need better access to European and American markets whereas Merkel’s G8 agenda favours rich countries’ interests, bypassing the development needs of Africa.
Koehler is already on his way to Ghana to discuss the way forward and learn from African experiences and analysis; he is way ahead of Chancellor Merkel in terms of process and content. I look forward to meeting him! More so is my interest to talk and debate with African leaders!

Collins Magalasi
Accra, Ghana
11 January 2007