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Annual report on poverty in Malawi

December 1999

Contact Person: Dr Milton Kutengule
Director of Development Policy
National Economic Council
PO Box 30136, Lilongwe3
Please note that this document was only published in 2001
The Government of Malawi launched and started the implementation of the Poverty Alleviation Programme (PAP) in 1994 as a process of economic and social development in which people are directly involved and empowered, right from the community level to the national level, to improve their livelihoods. This is in reaction to the rampant poverty in the country which has affected a large proportion (three-fifths) of the population.
As part of the operationalisation of the Poverty Alleviation Programme, a Poverty Monitoring System (PMS) was established in November, 1996 as mechanism to monitor the implementation of the Programme in terms of its impact and its administration. The system is there basically to monitor the implementation of policies and programmes that Government has put in place in order to alleviate the suffering of the poor in the country.
Among the major aspects of the PMS is the Annual Report on Poverty, of which this is the first edition. The report aims at disseminating poverty related information to the general public and assessing or reviewing the implementation of the sectoral policies and programmes, as well as analysing their impact on poverty. The report will also enable the identification of gaps and constraints in the implementation process as well as the identification of new priority areas that may have positive bearing on poverty alleviation. Policy recommendations will also be made to the Government and its partners in development.
This edition, being the first, looks at the socio-economic situation of the country, not only in the present year, but also the trend of affairs, with more focus on the early 1990s to date, in the face of the policies and programmes that have been or are being implemented by the Government and other stakeholders. The report basically acknowledges the fact that, with a per capita income of about US$200 in much of the 1990s, Malawi is one of the poorest countries in the world. The population is predominantly rural, with an estimated 60% living below an old poverty line of US$40 per capita per annum (using a food equivalence measure). Income distribution in Malawi is amongst the most inequitable in Africa1. The situation in the rural areas is even worse where the bottom half of the smallholder households receive 15% of the income, while the top ten per cent receive 35%.
The report also indicates that the country's macro-economic performance has in some cases been satisfactory For instance, the economic growth improved steadily from 0.5% in 1987 to 7.8% in 1991. This was a considerably higher average growth rate than for other Sub-Saharan African countries. However, studies supporting this report have shown that this growth performance has not contributed to improving income distribution nor to improvements in the socio-economic indicators during and after the period of growth. To date, the social indicators still reflect low living standards because policies have not been consistent between promoting economic growth and translating the benefits of growth into tangible socio-economic progress for poverty reduction in Malawi.
In view of this situation, the Government is attempting to stabilise and restructure the economy and achieve sustainable growth through a number of macro-economic and social policies and programmes. Fiscal policy has aimed at improving the country's tax base and enhancing tax revenues and its administration. Monetary policy has focused on the management/liberalisation of input and output prices, exchange rates and interest rates. A number of currency devaluations have taken place. In 1994, a cash budget system was introduced in a move to reduce public expenditure in order to instil fiscal discipline.
There has also been removal of subsidies and a reduction in public transfers such as subsidies on fertiliser. In agriculture, the report looks at policies on land tenure and utilisation, output marketing and pricing, input (fertiliser) pricing, and food security.
The report also looks at health policy, which aims at improving the health of all Malawians by reducing the incidence of illness and death, and the education policy which focuses on developing an efficient and high quality system of education at all levels namely primary, secondary and tertiary.
Transport policy aims at improving the mobility and accessibility of households to goods and socio-economic services, while water and sanitation policy recognises the need to have safe and clean water for drinking and good sanitary facilities within reach. This latter policy is in realisation of the fact that presently only 37 per cent of the population has access to adequate sanitation facilities within 50 metres. Other policies relate to community and social services, micro and small enterprise as well as the informal sector.
The report also looks at the major sectoral development policies programmes, and projects that are being implemented. These policies and programmes are then analysed for their impact on poverty and constraints and gaps in their implementation are identified. The report then makes a number of conclusions and recommendations based on its own analysis and the analyses done and factual findings made by the various researchers. The next step is to pass on these recommendations to policy makers in order to influence policy.
In terms of the way forward and, as part of the operationalisation of the PAP, the report underlines the need to come up with sectoral action plans and to conduct Information, Education and Communication (IEC) campaigns to sensitise the general public to the goals and objectives of the PAP and their role in the poverty reduction strategies.
The World Bank's 1995 publication "Malawi: Human Resources and Poverty" indicates that Gini Coefficient , a measure of inequality, is 0.62 "the highest level of inequality for any of the thirteen African countries for which data is available". Annual Report on Poverty " 1999
Due to the existence of the gaps and constraints, the following have been identified as critical issues that need to be addressed as priorities in order to reduce poverty in Malawi.
  • Maintain low inflation rate and stable but realistic exchange rate;
  • Set priorities right, by allocating resources to most important sectors;
  • Improve the quality and efficiency of the civil service;
  • Address issues of equity and distribution;
  • Ensure (proper) co-ordination among donors;
  • Strengthen NGO co-ordination;
  • Integrate poverty issues in all economic instruments like Vision 2020, PFP, etc.
  • Ensure and facilitate land distribution to smallholders;
  • Establish efficient markets for pricing and marketing of inputs and outputs;
  • Improve adoption and utilisation of appropriate technologies;
  • Improve extension services.
  • Reduce child and infant mortality rates/malnutrition rates;
  • Intensify the fight against the spread of HIV/AIDS;
  • Reduce maternal deaths and malnutrition rates;
  • Recruit skilled human personnel;
  • Train the existing personnel;
  • Maintain an efficient health delivery system;
  • Establish an efficient drug programme;
  • Implement a segmented cost recovery system.
  • Increase access and overage;
  • Improve quality of education;
  • Mainstream gender into the education system.
  • Review the curriculum to include issues related to preparation for employment and ensuring that the school system aims at producing more employers than employees.
  • More jobs need to be created (since about 400 new job seekers are entering the labour market daily);
  • The youths need to be prepared and trained properly when they are about to enter the labour market, and this implies that
  • vocational schools need to be supported and promoted.
More resources need to be put in the police reform programme in order to curb the rising crime in the country.
  • Government should create a more conducive environment for the participation of the private sector, donors, and NGOs in the development process.
  • With the facilitation of Government, there is need to improve the co-ordination among and between all Government's partners in development: Donors, NGOs, and the private sector;
  • Must aim at complementing and not competing with government efforts;
  • There is need to design new and more effective interventions for the poor in line with government's policies.
  • Improve targeting mechanisms
  • Promote participation of the poor in development activities
  • Integrate cross-cutting issues such as gender and environment in the development activities
There is need for the Poverty Alleviation Programme to be operationalised in terms of coming up with sectoral plans and targets/milestones. In this regard, the recommendations of the small policy studies implemented both under the Poverty Monitoring System and outside it will be vital to policy and decision-makers as these recommendations are emerging time and again.
The prominent issues ensuing from the analysis include:-
  1. The structure of the economy has not changed much in the years since independence and the 1970s in particular. Agriculture is still the dominant activity and remains the mainstay of the economy with 80% of the people receiving their livelihoods from it either directly or indirectly. Basically, agricultural exports account for almost 90% of all foreign exchange earnings. This implies that the economy is very fragile and susceptible to shocks, such as weather conditions and international terms of trade. Alternatively, irrigation must be promoted. Further, processing of primary produces must be supported.
  2. The formal sector of the economy only employs twelve per cent of the labour force which is either in the private or public sector. This means that employment creation must be at the top of the agenda on labour market issues.
  3. Studies have shown that the growth achieved by the economy in the past has not contributed to improving the distribution of income and an improvement in the socio-economic indicators during and after the period of growth. To date, the social indicators still reflect low living standards because policies have not been consistent between promoting economic growth and translating the benefits of growth into tangible socio-economic progress for poverty reduction in Malawi.
  4. The issue of land shortage amongst smallholder farmers has been raised in a number of studies. Government should therefore seriously consider implementing the various recommendations from the land utilisation study which has been undertaken.
  5. There should be a further review of the land tax to ensure it contributes to the efficient utilisation of land. The intention behind it being that a tax on idle and unused estate land would make it economically unviable for estate owners to hold on to the land unless they felt they were receiving, or expected to receive, a return on it.
  6. Government should continue to encourage diversification and transformation in the smallholder agricultural sector.
  7. Investigate problems facing the estate sector and come up with solutions for promoting the sector.
  8. Government should intensify information provision and educational efforts using multi- channel communication
  9. Government must strive at reducing crime (notably armed robbery)
  10. Government should overcome the shortcomings of the Free Primary School Education Policy and then consider the introduction of quality (compulsory) Free Primary Education.
  11. Government should now prepare for the increased demand for secondary and tertiary education which the future large numbers of graduates from free (compulsory) primary education will provide.
  12. Government should review the design and delivery of its agricultural extension services to make them more effective.
  13. Effective and accessible Credit Facilities should be made available to smallholder farmers in order to enhance their ability to use fertiliser and other inputs. Government should create an enabling environment for a competitive credit market.
  14. Government should reconsider targeted subsidies for vulnerable households
  15. The minimum Wage Act should be reviewed to take into account issues related to welfare and ensure that it is enforced. While minimum wage legislation is in place, what this is intended to cover is not made clear and would appear to provide only for bare minimum for survival. It should be reviewed, at least annually, in an attempt to maintain a positive welfare index particularly considering that basic needs tend to change from time to time.
  16. Government, in collaboration with its partners in development, should facilitate and encourage effective participation of local communities to ensure ownership and sustainability of programmes e.g. in MASAF.
  17. Government should continue to prioritise the allocation and orientation of its funds towards the social sectors for poverty alleviation.
  18. To successfully achieve the national development goal of poverty reduction in the country, there is need for full commitment by all levels in the country: political, technical, and grass-root. This commitment further needs to be translated into action. All stakeholders in development need to understand and feel the need to play their maximum role towards the alleviation of poverty in the country.
The recommendations that have been made in this report are based on the analyses done and factual findings made by the various research works. The next step is to pass on these recommendations to policy makers in order to influence policy.

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