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Country Profile: Malawi

There was jubilation and ululation on the streets of Malawi’s capital Lilongwe when news broke out that President Bingu wa Mutharika had died following a heart attack in his office. This was in April 2012, three years into his second term of office. Many blamed him for turning his back on 18 years of democracy in a country fondly described as the ‘Warm Heart of Africa’. Mutharika had come to power in 2004 and presided over a seven-year economic boom – underpinned by a successful fertilizer subsidy programme and increased foreign aid – that had given Malawi one of the world’s fastest-growing economies.

The boom ended in 2011 after Mutharika squabbled with Britain – the former colonial power (independence came in 1964) and the country’s biggest aid donor. This led to tit-for-tat diplomatic expulsions and the freezing of aid; which, aside from agriculture exports, is the country’s key driver. The cause of the row was a leaked diplomatic assessment that labelled Mutharika ‘autocratic and intolerant of criticism’. What followed was an acute dollar crunch that hampered imports of fuel and medicines.

The economic plight worsened in July 2011 when the US suspended a $350-million grant to rehabilitate the faltering power grid after police killed 20 people in a crackdown on an unprecedented wave of anti-government protests. So when Mutharika died, many, including donors, had cause to celebrate.Malawians placed all their hopes in Vice-President Joyce Banda – a women’s rights activist and no relation to Hastings Banda, who led the country from independence until 1994 (nor indeed to this reporter). When Joyce Banda was sworn in, she became the first female President in southern Africa and only the second on the continent after Liberia’s Ellen Johnson Sirleaf.

A market in the capital

Mabvuto Banda

With a groundswell of support, Banda embarked on a range of reforms that her mercurial predecessor had refused to implement. She stopped the kwacha being pegged to the US dollar, triggering a 49-per-cent devaluation, in an attempt to right a sputtering economy. She also announced a 30-per-cent pay cut and that she was selling the fleet of 60 Mercedes limousines used by ministers and the presidential jet bought by Mutharika when he was chair of the African Union. The good news is that measures such as these have managed to restore aid flows.

The bad news, however, is that her popularity is waning as food and commodity prices soar – inflation reached 38 per cent in February. The latest data focusing on the cost of living in urban Malawi says that a family of six now needs an average of $200 per month to meet basic food demands – bad news in a country where the minimum monthly wage is about $20. Backed by the IMF, Banda is optimistic that the country is at a tipping point, that inflation will soon start dropping and prompt the central bank to revisit the base lending rate. There are, however, unlikely to be any quick fixes for Malawi’s economy and this is Banda’s achilles heel as she gears up for an election in May 2014. Her party is in a minority in government and this may weaken her resolve to continue with the new reform agenda.

In such circumstances it is hardly surprising that Banda has in recent months refused to increase the price of fuel. She faces another challenge in the dispute between Malawi and Tanzania over the ownership of Lake Malawi. This may threaten peace, regional integration and trade if it remains unresolved. In a country where gender inequality is high and many cultural attitudes are entrenched, it remains to be seen how far Banda can go.