Dalitoso Kabambe, a former central bank governor in Malawi and now a candidate for the country's September presidential election, has no illusions about the enormous work he is looking for. “The situation in Malawi is unstable. It's very awful,” he tells African businesses in a definitive way. The evidence for this claim is easily found. The extension of bad weather has had a major impact on agriculture, the country's major economic driver. The economy grew at just 1.8% last year, and is expected to provide 3.5% this year, according to the IMF.
In May, the International Monetary Fund ended its $175 million program that it entered the country in November 2023. Only $35 million was paid.
Kabambe argues that excessive reliance on agriculture is the main perpetrator. Since independence, he says the country's economy is based on exports of corn, tobacco, tea and sugar and remains vulnerable to price shocks. Not only that, domestic agriculture is mainly raining and is done primarily through basic tools.
“These two factors — our farming methods and our inability to improve climate change — had a significant impact on our production,” he points out. The sector's issues have had a major impact on the wider economy as agriculture is so dominant. “When agriculture sneezes, all other sectors sneeze too.”
In its July update, the IMF points out that inflation has accelerated, foreign exchange reserves are declining, and financial imbalances are becoming “more pronounced.” Over 20% of the population has faced high levels of food insecurity, rising by 5% points over 2023.
The only problem Kabanbe is concerned about is not just relying on agriculture. More generally, he argues that the country is running badly and that the oversized public sector is causing finances. The country's unsustainable debt is spent on consumption rather than investment, and therefore has not led to growth.
Furthermore, that means that while the country's private sector is hunger for funds, the country is forced to pay off its debts. Plus, he says, demand for public services is on the rise, despite the government not investing in expansion and improvement.
“Overall, I think the country is really struggling economically because it's inability to improve and transform our economy, the corruption challenges, the inability to do the right thing. All of this is leading us where we are today,” he concludes.
An economic overhaul has been planned
If he succeeds in the bid, Kabanbe suggests a complete overhaul of the country's economic structure. The main tenet of the prospectus he offers is to spread the country's economic eggs into various baskets. First of all, he wants Malawi to grow high value crops, in addition to the traditional options it has relied on.
“For example, cotton can also develop things like production, ginning, spinning and fabric making, pasta, soybeans, grinding, beans, and more,” he continues. Another option is fish and cattle farming. “We can do this through targeted investments. This is a roadmap that shows what we want to do and how we intend it,” he emphasizes.
Mining is another prospect on his radar. “South Africa developed from mining when they only had gold. Botswana developed from diamonds. Saudi Arabia, Kuwait and Dubai developed from oil and gas. All of these are available here. We have oil and gas under Lake Malawi. Here we have gold. The minerals and the amount needed to develop them.
“The amount isn't that important. It's easy to manage. The problem is the approach to things. We don't diversify the economy to include mining as one of the important sectors of the economy.”
Manufacturing and tourism are still other options in Kabanbe's transformational programme, and its central plan is that expanding the country's economic options is the only way to achieve meaningful growth. And as it grows, he says, there will be headroom for investing in education, health and public services. Malawi says it has a primarily youthful population. “Half of the population is under the age of 20, with 75% below 35” – these investments are important for the country's future. His plans will also create jobs for young people and take them “from the streets to offices and factories,” he says. If it all sounds difficult then that's because. But I am sure Kabanbe has a record that should guarantee voters. Kabambe led the central bank from 2017 to 2020, claiming many victories during his tenure.
“The policy rates improved, the interest rates improved, and it was negative when I was in the bank, and it was practically positive and had grown quite a bit by the time I left,” he argues.
Encourages for investors
Kabambe says he has committed himself and his party to the difficult and perhaps painful decisions needed to turn the Malawia economy around. “The only UTM (United Transformation Movement) is ready to take these harsh economic measures to ensure that macroeconomic stability can be restored quickly. With appropriate fiscal, financial and exchange rate policies, it has been shown that it takes about 9-18 months to restore macroeconomic stability.
“So the first three years are about restoring macroeconomic stability, getting things right, and investing appropriately in mining, manufacturing, agriculture transformation and other regions.”
He also promises a robust, audit-driven approach to tackling corruption and disrupting current top-down governance approach by sending more money to local authorities and moving away from the central government.
But he must win first, but he must win first, not just in the current position, but also in areas that include Peter Mutarika, the Democrats' Progressive Party who served from 2014 to 2020, and Joyce Banda, the People's Party who served between 2011 and 2014.
He shows that the internal vote has a chance to be one of the last two with a putative spill. “I'm here to fight here. We're here to fight as a party. And we can win this election,” he says.
