Assurances by President Bingu wa Mutharika's government that it has adopted a zero-tolerance approach to corruption have not altered the view of a leading international monitoring body that graft in Malawi is worsening.
Transparency International (TI), the global corruption watchdog, said in its latest Corruption Perception Index (CPI) that Malawi had dropped 28 places from 90 in 2004 to 118 this year, a three-year time-frame mirroring Mutharika's assumption of the presidency in 2004 on an electoral ticket that promised to clean up the administration.
As a recipient of donor funding, Malawi's slide down the CPI in 2007 does not augur well. In 2001 the International Monetary Fund (IMF), the World Bank and other major donors suspended aid to Malawi, citing corruption, over-expenditure by the state and poor governance.
In 2001 the International Monetary Fund, the World Bank and other major donors suspended aid to Malawi, citing corruption, over-expenditure by the state and poor governance
The 2007 CPI looks at perceptions of public-sector corruption in 180 countries, covering more nations than any other CPI; this year it ranked Myanmar (Burma) and Somalia as the world's most corrupt nations.
Minister of Energy and Mining Henry Chimunthu Banda, the country's acting president while Mutharika attends the United Nations summit in New York, said although there was political will to combat corruption, the high level of public service graft was a consequence of the government being the biggest employer, so there was a greater likelihood of corrupt officials in the public service than the numerically smaller private sector.
An ineffective corruption fight
Mavuto Bamusi, national coordinator of the Human Rights Consultative Committee (HRCC), a grouping of local human rights organisations, told IRIN that the Anti-Corruption Bureau (ACB), which is responsible for tackling graft, had become a political football, and was toothless because parliament had yet to appoint anyone to its leadership post.
"Such a scenario has reversed any gains that the ACB could have made in curbing corruption. Parliament rejected the man who was nominated by the president to head the ACB, and that meant crippling the functions of the body because certain decisions are made by the director only," Bamusi said.
He also attributed Malawi's poor ranking in the fight against corruption to poverty: more than 70 percent of the about 12 million population lives on less than US$2 a day.
"The gap between the rich and the poor, measured by Gini coefficient, is still yawning. Remuneration for civil servants is still pitifully disproportionate to the cost of living, and public-sector reforms like privatisation are leading to retrenchment and other forms of marginalisation," he noted.
The Gini coefficient varies between 0 and 1 - the closer to 1, the more unequal a society; the closer to 0, the more equal a society.
Malawi's is particularly high at 0.62, meaning that the country suffers from one of the world's worst income disparities.
"These factors, coupled with a tax regime that is more responsive to the private sector (producers) and burdensome to the majority poor (consumers), tills a fertile ground for breeding and incubating corruption and more corruption," Bamusi said.
Charles Kumbatira, executive director of Malawi Economic Justice Network (MEJN), a coalition of civil society organisations concerned with economic governance, said government had started numerous corruption cases but had not concluded them.
"This has an effect on the corruption perception by TI. Government has set the political tone to deal with corruption, but it is failing to match it with action. The ACB itself has not come out clearly on what cases it has dealt with," he commented.
Political will was a "crucial matter", Kumbatira said, and both government and the opposition should cooperate to end "this kind of ridicule of Malawi being perceived as one of the most corrupt countries, while in actual sense the country is better off."
Monday, 1 October 2007
Malawi struggling to reduce poverty
Malawi, one of Africa's poorest nations, said on Monday, that despite recent efforts to grow the economy, it would be unable to meet the United Nations (UN) target date of halving poverty by 2015.
A welfare monitoring survey conducted by the ministry of economic planning and development indicated that poverty dropped to 45 percent in Malawi in 2006, from 53.9 percent in 1998, Ben Botolo, a director in the ministry of economic planning and development, told AFP.
But despite this drop, "poverty levels still remain very high".
Malawi will not meet the UN Millenium Development Goals (MDG) target of "halving the proportion of people living below the poverty line by 2015," he said in an interview.
"There has not been a significant economic growth over the years to help eradicate extreme poverty and hunger," Botolo said.
He said economic growth has stagnated at two percent per annum over the past decade.
The World Bank, one of the major sponsors of Malawi's economic reforms, wants the agriculture-powered economy to grow by six percent annually to create wealth and jobs.
The common feature of the Malawi poor is their inability to meet their minimum nutritional requirements and essential non-food needs equivalent to $40 per capita per annum, an official report says.
Botolo said Malawi had also made "little progress" in slashing the mortality rate, currently at 984 per 100 000 live births. It was 1 120 deaths per 100 000 seven years ago.
In July, Malawi launched its economic blueprint aimed at accelerating economic growth and reducing poverty with a focus on improving agriculture.
A welfare monitoring survey conducted by the ministry of economic planning and development indicated that poverty dropped to 45 percent in Malawi in 2006, from 53.9 percent in 1998, Ben Botolo, a director in the ministry of economic planning and development, told AFP.
But despite this drop, "poverty levels still remain very high".
Malawi will not meet the UN Millenium Development Goals (MDG) target of "halving the proportion of people living below the poverty line by 2015," he said in an interview.
"There has not been a significant economic growth over the years to help eradicate extreme poverty and hunger," Botolo said.
He said economic growth has stagnated at two percent per annum over the past decade.
The World Bank, one of the major sponsors of Malawi's economic reforms, wants the agriculture-powered economy to grow by six percent annually to create wealth and jobs.
The common feature of the Malawi poor is their inability to meet their minimum nutritional requirements and essential non-food needs equivalent to $40 per capita per annum, an official report says.
Botolo said Malawi had also made "little progress" in slashing the mortality rate, currently at 984 per 100 000 live births. It was 1 120 deaths per 100 000 seven years ago.
In July, Malawi launched its economic blueprint aimed at accelerating economic growth and reducing poverty with a focus on improving agriculture.
Malawi says unable to meet UN poverty reduction targets
Malawi, one of Africa's poorest nations, said Monday that despite recent efforts to grow the economy, it will be unable to meet a United Nations set target date of halving poverty by 2015.
"Poverty levels still remain very high" and Malawi will not meet the UN Millenium Development Goals (MDG) target of "halving the proportion of people living below the poverty line by 2015," Ben Botolo, a director in the ministry of economic planning and development, told AFP.
"There has not been significant economic growth over the years to help eradicate extreme poverty and hunger," he said, putting the gain over the past decade at just two percent per year.
The World Bank, one of the major sponsors of Malawi's reform efforts, says the agriculture-dependent economy needs to grow six percent annually to begin reducing poverty levels.
Botolo said Malawi had also made "little progress" in slashing its infant mortality rate, currently at 984 per 100,000 live births, compared with 1,120 deaths seven years ago.
In July, Malawi, one of the world's most impoverished countries, launched a plan to accelerate economic growth to six percent.
Doing Business in Malawi: Ufulu Gardens
MALAWI, October 1, 2007 --In 1996, the Gondwes were facing a huge spread of land in Area 43 of Malawi’s capital Lilongwe. It belonged to them but consisted solely of bush. In their heads, a vision: houses to rent for passing businessmen and their families. In her hand, a drawing of homes neatly aligned around a cul-de-sac, the way suburbs are in the United States. In his hand: a hoe.
As Victor Gondwe was clearing the bush, many people around thought that the computer analyst just back from Seattle had lost his mind, but when he promised them a few American sardine boxes in exchange for back-breaking work, they accepted. Three years later, Ufulu Gardens was opening.
“It just started with the idea of going back to Malawi, but wanting to build something there,” said Ivy Gondwe. “One day, at the dinner table, we talked about buying land and building. A friend drew a sketch, a typical American neighborhood in the suburbs. Now I am managing the business.”
Challenges to Starting Their Dream
Back then in 1996, it was not easy for the Gondwes to start their business. They were venturing into the tourism industry armed only with a will to actualize a dream they had while in the diaspora.
“Nobody understood what we were trying to do,” said Ivy Gondwe. “Neither my husband nor I had any experience in the hotel industry. We didn’t know enough people. It was hard.”
Gondwe said they knocked on doors of many government officials with no luck. They had neither guidance nor information on government regulations on setting-up such a business.
The estimated cost of their project was US$350,000 and they had no funds beyond their savings. Getting credit was a major problem. No local bank was willing to finance them. Then, one day, they had a stroke of luck which changed their fortune.
“We were in a hotel and my husband saw a man drinking on his own at the bar. He sat down and said ‘I’ll drink a beer with you.’ They started talking. The day after, on the way to the airport, the business man stopped by the construction site and was impressed. He was working with the IFC, which was incredibly supportive in the first years and allowed us to finish this project. We opened in 1999,” she said.
The Gondwes have since paid off their International Finance Corporation loan. Despite this good record with the IFC, they still have problems getting credit. They are now expanding their cul-de-sac premises of 17 semi-detached, one to three-bedroom apartments, with a 25-room hotel, restaurant, bar and conference room. The expansion is estimated to cost US$1.6 million. The construction started several years ago, but funding is stalling: Malawian banks still have high interest rates at an average of 23 percent, which is actually low compared to 60 percent in 1996 when the Gondwes started their business. In the 2008 Doing Business Report, Malawi ranks 84/178 on ease of getting credit compared to 2007 where Malawi ranked 65 out of 175.
Foreign banks have better rates but have been reluctant to invest such a big sum in Ufulu Gardens especially since it is a family-run operation. One Nordic bank has agreed to finance the Gondwes on condition that they hire a professional hotel manager.
Another challenge was finding well-trained hotel staff. Over the years, they have invested in training employees and now have skilled staff that has contributed to the 100 percent occupancy rate that Ufulu Gardens enjoys. Ivy Gondwe added: “We built our clientele very slowly, through word-of-mouth mostly, and some advertising. Now some people tell us that if we don’t have vacancies, they will postpone their trips!”
Things are getting better
Overall, Malawi’s government is taking steps to improve the doing business environment.
Back in the late 90’s, the Gondwes had to knock on many doors to ask for duty free waivers – waivers that allowed them to import certain goods to be used by the business duty free, and that others seemingly received freely. Time and time again, according to Ivy Gondwe, she would return home empty-handed.
At that time, getting a waiver was a ministerial discretion. But in the past two years, sectors that can get waivers have been clearly spelt out, and the tourism sector is one of them. Even some imported materials for the expansion of Ufulu Gardens will qualify for waivers under the new regulations.
In addition, at the national strategic level, the Malawi Growth and Development Strategy (2006-2011) emphasizes private-sector-led growth. In the regulatory environment, legislation is being reviewed to ease doing business. For example, introducing a single business license would significantly reduce costs and encourage businesses to enter the formal sector. In the latest Doing Business Report (2008), Malawi is ranked 127 out of 178 on the ease of dealing with licenses. In 2007, Malawi ranked 110 out of 175 countries. In May 2007, Malawi’s Commercial Courts started functioning. These courts are important for enforcing contracts and settling commercial disputes.
“It is easier now to do business in Malawi, although we still cannot find investors,” said Ivy Gondwe. “People understand the vision better. I know we will find the funds. I know we will finish the expansion, but it takes time.”
As Victor Gondwe was clearing the bush, many people around thought that the computer analyst just back from Seattle had lost his mind, but when he promised them a few American sardine boxes in exchange for back-breaking work, they accepted. Three years later, Ufulu Gardens was opening.
“It just started with the idea of going back to Malawi, but wanting to build something there,” said Ivy Gondwe. “One day, at the dinner table, we talked about buying land and building. A friend drew a sketch, a typical American neighborhood in the suburbs. Now I am managing the business.”
Challenges to Starting Their Dream
Back then in 1996, it was not easy for the Gondwes to start their business. They were venturing into the tourism industry armed only with a will to actualize a dream they had while in the diaspora.
“Nobody understood what we were trying to do,” said Ivy Gondwe. “Neither my husband nor I had any experience in the hotel industry. We didn’t know enough people. It was hard.”
Gondwe said they knocked on doors of many government officials with no luck. They had neither guidance nor information on government regulations on setting-up such a business.
The estimated cost of their project was US$350,000 and they had no funds beyond their savings. Getting credit was a major problem. No local bank was willing to finance them. Then, one day, they had a stroke of luck which changed their fortune.
“We were in a hotel and my husband saw a man drinking on his own at the bar. He sat down and said ‘I’ll drink a beer with you.’ They started talking. The day after, on the way to the airport, the business man stopped by the construction site and was impressed. He was working with the IFC, which was incredibly supportive in the first years and allowed us to finish this project. We opened in 1999,” she said.
The Gondwes have since paid off their International Finance Corporation loan. Despite this good record with the IFC, they still have problems getting credit. They are now expanding their cul-de-sac premises of 17 semi-detached, one to three-bedroom apartments, with a 25-room hotel, restaurant, bar and conference room. The expansion is estimated to cost US$1.6 million. The construction started several years ago, but funding is stalling: Malawian banks still have high interest rates at an average of 23 percent, which is actually low compared to 60 percent in 1996 when the Gondwes started their business. In the 2008 Doing Business Report, Malawi ranks 84/178 on ease of getting credit compared to 2007 where Malawi ranked 65 out of 175.
Foreign banks have better rates but have been reluctant to invest such a big sum in Ufulu Gardens especially since it is a family-run operation. One Nordic bank has agreed to finance the Gondwes on condition that they hire a professional hotel manager.
Another challenge was finding well-trained hotel staff. Over the years, they have invested in training employees and now have skilled staff that has contributed to the 100 percent occupancy rate that Ufulu Gardens enjoys. Ivy Gondwe added: “We built our clientele very slowly, through word-of-mouth mostly, and some advertising. Now some people tell us that if we don’t have vacancies, they will postpone their trips!”
Things are getting better
Overall, Malawi’s government is taking steps to improve the doing business environment.
Back in the late 90’s, the Gondwes had to knock on many doors to ask for duty free waivers – waivers that allowed them to import certain goods to be used by the business duty free, and that others seemingly received freely. Time and time again, according to Ivy Gondwe, she would return home empty-handed.
At that time, getting a waiver was a ministerial discretion. But in the past two years, sectors that can get waivers have been clearly spelt out, and the tourism sector is one of them. Even some imported materials for the expansion of Ufulu Gardens will qualify for waivers under the new regulations.
In addition, at the national strategic level, the Malawi Growth and Development Strategy (2006-2011) emphasizes private-sector-led growth. In the regulatory environment, legislation is being reviewed to ease doing business. For example, introducing a single business license would significantly reduce costs and encourage businesses to enter the formal sector. In the latest Doing Business Report (2008), Malawi is ranked 127 out of 178 on the ease of dealing with licenses. In 2007, Malawi ranked 110 out of 175 countries. In May 2007, Malawi’s Commercial Courts started functioning. These courts are important for enforcing contracts and settling commercial disputes.
“It is easier now to do business in Malawi, although we still cannot find investors,” said Ivy Gondwe. “People understand the vision better. I know we will find the funds. I know we will finish the expansion, but it takes time.”
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