Rich Warm Heart of Africa

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Visionary exposition into a developmental template for a Planned Economy for third-world countries that depend on foreign aid such as Malawi.

Visionary exposition into a developmental template for a Planned Economy for third-world countries that depend on foreign aid such as Malawi.

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  • 1. Rich Warm Heart: A Vision and organisational template for creating Sustainable Economic Growth in Malawi Part 1 15th December 2012,©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 1
  • 2. When injustice becomes law, resistance becomes duty. - Thomas Jefferson “Consume less; share better.” ― Hervé Kempf This article is written in a non-academic accessible format primarily to provide as much information as possible. For the “cleaner” peer-reviewed version with standard citation format, references and supplementary resources please visit www.malawiace.com Front page Photo © European Union.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 2
  • 3. Almost every Malawian I know agrees that Malawi’s economy cannot continue to rely onforeign aid for much longer. That by expecting others to help us run our country, we hadeffectively given up our sovereignty, and any incentive to make our own choices. But it’smuch harder to find consensus on what the country must actually do to wean itself ofdevelopmental aid. Some Malawians think the answer is in Agriculture. Others thinkManufacturing is the way while another group think Information Technology and the nextFacebook. Scores more think exporting Sugar, Kachasu, Chibukhu or even Nkhotakota Goldmay be the way.With tobacco exports declining in industrialised countries (see extensive report here:http://healthland.time.com/2012/08/17/largest-ever-survey-on-global-tobacco-use-issues-dire-warnings/), and a determined anti-smoking lobby, tobacco will soon (if it hasn’talready) cease to be to a reliable export crop which Malawi can lean on.Presently, around 40% of Malawi’s annual budget comes from donors including the AfricanDevelopment Bank, Britain, Germany, Norway, the European Union and the World Bank. Agreater proportion of the rest is raised from tax revenue. Such monies are primarily spent©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 3
  • 4. on general government expenditure including salaries of civil servants, food, fuel and “firefighting” one crisis or another, with few resources allocated to creating developmentalprojects with a potential to generate large Forex for the government.Inevitably, this has created a situation where some donors have used this state of affairs toexercise influence over public policy, including erecting somewhat unreasonable demandslike devaluation of the local currency.When their demands have been challenged or are not fully met, they have threatened towithdraw, or have actually withdrawn budgetary support, which has led to economicinstability.The recent example of this came when former president late Bingu Wa Mutharika probablywith good reason refused to devalue the Malawian Kwacha, citing the cataclysmic effectsuch an action would have on the fledgling Malawian economy, and the suffering it wouldcause. The donors pulled out, pushing the Malawian economy to the brink of collapse andcausing a massive fuel and Forex shortages, and exponential rise in prices and commodities.There were sugar and water shortages, crippling businesses, including some well-established companies (http://www.malawitoday.com/news/125269-unilever-malawi-suspends-production-20-million-debt-accrued-parent-company). Some businessesthreatened to leave Malawi, thousands of jobs were lost, and at least one internationalairline suspended flights. In a comical twist, hundreds of motorists began leaving their carsparked in queues at gas stations for days on end, walking home instead, to wait for whenpetrol would arrive. Even the police force, having been unpaid for months, was allegedlycharged to fend for itself, with disastrous consequences.Since then, a lot has changed. Malawi has a new president, Her Excellency Joyce Banda, whois Malawi’s first female president and only second female president in the history of Africa.The local currency, the kwacha has been devalued by around 40%, donors have returnedand emergency funds pumped into the economy. But numerous problems remain(http://www.guardian.co.uk/global-development/poverty-matters/2012/dec/17/pumps-prices-politics-joyce-banda-malawi ). The economy has not responded as expected and thecost of living has risen sharply. Many commodities are now twice as expensive as they were©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 4
  • 5. a year ago, and nobody can say for sure whether given similar circumstances in the futuresuch a scenario would not repeat itself, causing further suffering.With sudden changes has come an increasing number of Malawians who are justifiablyunhappy with what is being viewed as unreasonable, insensitive, intrusive and somewhattyrannical carrot and stick demands. In social media and online articles, there have beenreferences to “economic slavery”, “neo-colonialism”, "donor dictatorship", “and predatoryaid” and the new president has been called a “donor puppet”.Others have taken a more pragmatic view, seeing the government’s acceptance of thedonor funding conditions as a choice between a rock and a hard place and not necessarily apunishment to poor Malawians. But one couldn’t help sense a grudging acquiescence,fuelled perhaps by desperation. (Child Labour, South Carolina, 1908)It has been correctly pointed out that most countries from which the donors originate havehad their own uncertain histories where extreme violence and repressive©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 5
  • 6. policies/conditions (like fiefdoms, child / orphan labour [http://www.powerinthelandscape.co.uk/education/index.html], forced annexation of land,ban on alcohol, slavery, etc.) by monarchies, land owners, industrialists and other leaders,were implemented, adversely affecting minorities and millions others; that it has taken apainstakingly slow process and hundreds of years of activism and mistakes for desirablechange to happen. That in some donor countries, age old problems (racism, socialinequality and sexism) are still widespread. Yet certain donors appeared to be puttingexcessive pressure on countries such as Malawi to effect similar types of changes overnight,in a country that was barely fifty years old.Some of those enraged also correctly point out that most donors do not fully appreciateMalawian culture and most will never be adversely affected (in some cases – they would infact benefit) by the negative effects their demands have (or are likely to have) on theMalawian economy.Naturally, one conclusion to draw from this is that Malawi could probably be governedmuch more effectively if it was neither influenced by donors nor their financial support; if itgenerated its own income and acted in the interests of Malawians. In any case, how doesone justify implementing unpopular policies when it is the people who elect you to office(not the donors) who will suffer disproportionately as a result?This view is not unique to Malawi alone; others far afield have expressed similar concernsagainst some of the institutions that make up the donor bloc(http://www.independent.co.uk/voices/commentators/johann-hari/johann-hari-its-not-just-dominique-strausskahn-the-imf-itself-should-be-on-trial-2292270.html) citing examplesof countries like Botswana, that have made admirable progress in economic developmentby ignoring the very same Machiavellian advice they were prescribed.But putting aside this causative and divisive rhetoric for a moment, the elephant in the roomhas always been what policies should the Malawian government urgently implement togenerate its own money, which it can spend according to the needs of its population, sincetax revenue isn’t currently raising enough income?©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 6
  • 7. In my view, the difficult in answering such a question is partly because there are many formsdevelopmental policies could take, making the job of policy maker slightly difficult, so muchso that the question then becomes, which policies within the ‘pool of viable policies’, can beimplemented in a relatively short space of time, at a reasonable cost, and to achieve asignificant economic return? A return that will see hundreds of jobs created, that willperpetually generate sufficient foreign currency for the government and private enterprise,which will ensure the longevity of the policies and sustainability / environmentalpreservationAnswering such a question is the first step towards finding an answer to the donor aiddependency problem. A further problem is the constraints current donors have placed onthe Malawian government. But surely, if such constraints are disproportionately negativelyaffecting people’s lives, and have been known to have produced negative or undesirableresults elsewhere; surely their effectiveness must be questioned?So, taking a simplistic view, in terms of job creation, obviously in a nutshell you will require askilled or unskilled workforce performing certain functions that will ultimately lead to thedevelopment of a product (such as Chilli Sauce, Blankets or Electric Scooter), or provision ofa service (such as a Call Centre, Security or Carpet Cleaning) which can be marketed. Bothtypes of organisations will depend on how much capital investment is available, availabilityof raw materials, the skillset on the ground and the size of the target market itself. Butgenerally, the bigger your investment budget and the available skills pool, the more likelyyou will be able to employ large numbers of people to fulfil your function.However, classical capitalist theory dictates that for an investment opportunity (other thanone for purely charitable purposes) to be beneficial, the profit, or potential profit must beattractive enough to justify the initial investment (which for big projects can run intomillions of dollars). So even though you may want to employ hundreds of people, you areconstrained in that essentially, there must be an return on investment(ROI), otherwisethere’s little point in investing if you will only be losing money. But how much profit isenough profit?©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 7
  • 8. For a developing economy which currently relies heavily on donor support to function, I’minclined to apply and translate this hypothesis such that when the government awardscontracts to foreign investors, the underlying assumptions as to the opportunity (at leastfrom the government’s point of view) is that it is “…attractive enough to provide a reasonable profit and incentive to the investor, while ensuring that the investor’s ethical obligations to the country in terms of paying adequate amounts of tax, creating employment amongst the local population and development of infrastructure, are proportional to the actual (not perceived /anticipated) profit they generate from their investment”But such a viewpoint may not be shared by investors, and in any case what is the definitionof a proportional corporate social responsibility? Spending $1 million annually on the localpopulation in developmental initiatives? $10 million annually? Or $100 million?Furthermore, it is a common practice for many international companies to pursue taxefficiency schemes, declaring losses where perhaps a profit could have been made, oroffsetting a loss in one region with a profit in another, and if you inquire from anyaccountant worth their salt, you will be surprised to learn how creatively a profit can be“converted” into a loss.Admittedly, it’s a tricky balance since when attracting investment, a government also has totake note of what its neighbours (in this case Zambia, Zimbabwe, Tanzania andMozambique) are offering in comparison to its own offering, because if an offer is not ascompetitive, an investor may end up basking in the neighbour’s back garden, instead ofyours.This state of play concentrates the bargaining power squarely in the hands of investors, andhas been known to lead to the signing of grossly unfair contracts which disproportionatelyand exponentially favour the investor far more than it benefits the local population.But as you will see below, this is an artificial problem that can be rectified, especially whenthe attractant bringing the investor to your country happens to be a natural resource. But©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 8
  • 9. only if personal agendas are set aside and officials begin to act in the country’s bestinterests.In terms of Forex and the closely related issue of raising venture capital, there are no easyanswers because for a country such as Malawi, there’s not much money floating around andyou have to give others a good reason to want to invest in your country. But some things aremore obvious than others.So, in an industry such as oil extraction or mining, and considering that Malawi hascomparatively fewer resources than other larger African countries, and few Malawianindustrialists have the capital to invest in large projects, then instead of granting a tender toa foreign based company to establish mining operations (which may well be the easy wayout), a wiser decision (at least in the long term) would be for the Malawian governmentitself to enter the business of mining/ oil extraction. In the information age in which we livein where one can easily recruit skilled professionals from all around the world, in industriesas diverse as nuclear physics aeronautics to marine science and nanotechnology, Malawiwouldn’t be universally refused assistance/ technical support in creating and running itsown heavy industry. Assistance sought from the Arab Countries, South America and Asiawould not be refused.Therefore, in my view, the government would be best advised to create a planned economyfirstly, before ushering in measures that work only in a market economy. By forming and co-own an organisation they would be doing just that. The state would hold between 48 - 51%equity, and offer the remaining stock to the public through a venture capitalist fundinground. It is important to stress that this organisation will differ from “parastatals” in that itwill not be governed, managed nor influenced by government/ ministries in any way. Tohave a greater chance of success it will need to be run like a private company, with enoughchecks and balances to prevent abuse.Suppose it did this, issuing 4,900,000 (four million nine hundred thousand) shares at saybetween US$10 - US$17 per share, in respect of 49% of the shares; that alone would have apotential to raise between US$49 million to US$83 million three hundred thousand for theundertaking, a decent amount of capital.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 9
  • 10. Depending on the subscription levels to the stock and in order to achieve some kind ofspread on ownership, no single person /family or undertaking (other than Malawianregistered cooperatives) would be allowed to own more than 15% of the stock. In addition,nine of the biggest shareholders would be invited to become members of the board ofdirectors, together with eleven other non-political appointments, appointed by governmentas its representatives, from across the country.Once the stock goes live, the public would be given a 2 – 3 weeks advantage window topurchase shares before corporate entities were invited to buy. In order to expand the reachof such a scheme, publicity could be generated using various methods including online, localand foreign radio and TV advertising. There would be fund raising events at all MalawianConsulates across the world; using Malawian Associations in the diaspora; in Malawian faithgatherings (for example Churches) and celebratory gatherings in the diaspora, events atwhich the virtues of the scheme would be triumphed, and details of the opportunity, growthplans, brokers would be communicated; Mining companies (in particular VALE), AfricanDevelopment organisations (i.e. African Development Bank, or pro African organisationssuch as the Mo Ibrahim Foundation) and others would all be invited to invest. So wouldSovereign Wealth or Pensions Funds respectively such as the Fundo Soberano do Brasil,Investment Corporation of Dubai, Abu Dhabi Investment Authority, Hassanna InvestmentCompany of Saudi Arabia, South Africa’s Public Investment Corporation (PIC), NorwegianGovernment Pension Fund, China’s Africa Development Fund, Russian National Wealth Fund,Korea Investment Corporation, National Development Fund of Iran, Khazanah NasionalBerhad, Kuwait Investment Authority, State Capital Investment Corporation of Vietnam,Government of Singapore Investment Corporation Private Limited, Qatar InvestmentAuthority and several such investment houses. Alternatively, or additionally, theorganisation could issue a standard IPO, although the 15% stock rule would still have to beenforced.Admittedly, setting up such an organisation would be a daunting task, requiring anexperienced, dedicated, progressive, well-informed and energetic team that has hadexposure to fresh ideas that have worked elsewhere around the world. However, as you willsee below, the net benefit of such an organisation to Malawi (or indeed any African country©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 10
  • 11. struggling with the development aid problem) would far outweigh initial headaches (andcosts), and would have a much higher chance of ending dependency on donor aid than mostendeavours that are currently taking place.There would be many concerns and hurdles, and setting up would not be easy. But by farthe largest concern would probably be that of accountability, in that strict money controlswould need to be implemented to ensure that the capital raised, and revenue generatedwould be used for growth of the organisation and social purposes such as revampinghospitals, buying essential medicines, building infrastructure developmental, and not forpersonal gain. To this effect, it would be mandatory for all senior officials, including thosewith access to the organisation’s finances to declare all their assets before taking up office,and to be independently audited bi-annually by external and independent auditors. Noexecutive would be allowed to sign for transfer of funds of more than $15,000, as decisionson transfer of funds over $15,000 would be made collectively by the senior managementteam. Further, the government would need to issue a guarantee to secure against eachinvestment in the event of fraud.In addition, from the onset, an organisational culture of nurture (complete with anEnvironmental Preservation Programme and a Corporate Social Responsibility programmewhich would include volunteering to charities, schools, hospitals and suchlike) would needto be established to nail this message that employees of the organisation are hired to serve.To safeguard the longevity of the organisation, it would also be essential that the companybe run as a meritocracy, independently of the government or any other political institutions.This would call for a military style discipline in that while the organisation would beanswerable only to its management board, it would also be answerable to a non-executiveboard of directors made up of officers from nine of the largest shareholders and eleven non-ministerial, non-political state representatives from across the country. Members of thenon-executive board would have a fixed, non-extensible tenure of 2 years, and itsmanagement board would be contracted to a thrice renewable 4 year contract. Specialistadvice would be sought from members of management boards of companies in other partsof the world, such as in Brazil for example, where their state run enterprises©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 11
  • 12. (http://en.wikipedia.org/wiki/List_of_Brazilian_government_enterprises) , some of whomhave now been nationalised, have proved to be commercially successful.Addressing Red TapeAsk any entrepreneur who has worked in Malawi and they’ll tell you that the bureaucracy isridiculous. There are delays and lengthy procedures over everything. Delays inincorporation, delays in getting consent or a signature over one aspect or another, delays ingetting import licenses, delays unless you pay a bribe, delays! In buying land and getting thepurchase officiated, delays imbedded deep in the system.The effect of red tape is that it tarnishes the country’s reputation, hampers businessoperations, repels investment and causes frustrations to investors who would otherwisehelp fix our economy.So the government would be best advised to introduce a sui generis instrument thattransformed the way businesses incorporate in Malawi by allowing an acceleratedincorporation of a business within a week. Everything regarding incorporation, taxation andissues such as exemptions on capital equipment would be dealt with by a dedicated teamoccupying a central computerised system, firstly located in each of the major cities, andsubsequently gradually rolled out across the country. The system would allow anentrepreneur to make an appointment, pay a fee, show all the required documents, get theincorporation documents and exemption certificates printed that same day, and if he needsland, show proof of purchase and get a bill of rights to the land by the end of the week. Bythe next week he can open a bank account, collect his machinery from customs and beginemploying locals and commence operations for the building of his factory, having securedeverything he required within a week.The effect of such speedy processing times would be phenomenal and would greatlystimulate Malawi’s industry. In any case, if we look at the small country of Singapore (whosesize is just larger than the size of Lilongwe), it’s no surprise that it is ranked as being theeasiest place to do business in the world because according to a Report by the accountantsGrant Thornton, it also has the least red-tape:©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 12
  • 13. http://www.grantthornton.com.sg/press/press_280607IBRConstraints.html . In factSingapore is so successful in this regard, it has been voted as the easiest country to dobusiness in 7 times (http://www.straitstimes.com/breaking-news/money/story/singapore-named-best-country-do-business-again-20121023 ).To cement a culture of nurture, the organisation’s chief executive would be answerable toParliament, and would be under an obligation to appear before a Parliamentary committee,once a year, to present an annual report on the organisations progress, direction, challengesand dealings.Since the organisation’s aim would be primarily to develop Malawi’s economy, its structure,aims, functions, operations and investments and such like would need to be clearlyarticulated from the outset. It would have to maintain total impartiality in politics and therewould be a need for strict checks and balances, and stringent hiring procedures, tosafeguard for example against political influence, tribalism, regionalism, nepotism, ageism,or any other cancerous bias common in African countries.A long–term management plan (at least > 10 years) that would include growth forecasts anda diversification plan to spread financial risk would be implemented, mapping theorganisations goals and ambitions and providing a back-up plan. Fraud, mismanagementand corruption would be dealt with swiftly, uncompromisingly and decisively, and withoutpolitical interference. In the event of a particularly acute crisis, or mismanagement, the CEOcan be summoned and questioned before parliament, although he can only be forced toresign, if his position becomes untenable, by a two thirds majority vote of both itsmanagement board and Non-executive board of directors.Such an approach would be crucial in terms of efficiency, transparency and would helpestablish investor confidence. It would also avoid some of the mistakes and problemsdocumented elsewhere, for example those that have plagued Malawian parastatals(http://www.bnltimes.com/index.php/daily-times/headlines/comment/2851-parastatals-have-failed-malawians) or South African state ownedenterprises(http://mg.co.za/article/2012-11-02-agent-provocateur-hands-off-our-parastatals) & (http://mg.co.za/article/2012-03-14-no-more-easy-money-for-parastatal-©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 13
  • 14. bosses). Further, if such an organisation does not lay a clean, responsible and credibleexample, and does not pre-emptively act against known inefficiencies common inparastatals, prospective investors are unlikely to purchase shares in any subsequentofferings under any similar state co-owned corporations. Already there are credible reportsthat suggest that the performance of State owned enterprises can be significantly improved,leading to profitable organisations (Arief Budiman, Diaan-Yi Lin, and Seelan Singham , 2009,Mckinsey Quarterly:https://www.mckinseyquarterly.com/Improving_performance_at_state-owned_enterprises_2357 ) In any case, with the benefit of hindsight, such organisations canbe managed with the knowledge and expertise that will ensure that they steer clear of theplagues that thwarted State run companies of the 1970’s to 1990’s(http://www.stwr.org/multinational-corporations/the-return-of-state-owned-enterprises-should-we-be-afraid.html).Thus, if Malawi had established four or five such corporations, then once the companieswere on course to declare a profit, and while adopting a strict cost control strategy, thefunds would be sufficient to purchase capital equipment (oil drilling equipment, miningequipment, agricultural equipment [ploughers, combine harvesters, planters, trucks, pumps,generators] , pharmaceutical equipment, manufacturing equipment [for industries including©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 14
  • 15. fertiliser making, cement making, steel refinery, juice extraction, sugar processing, motorvehicle / railway carriage assembly, petroleum refinery] and any other necessary rawmaterials or equipment for industries the organisation was considering to diversify into.The funds would be sufficient for the development and upgrade of infrastructure such asflats, houses, shops, a hospital, a police station, schools, a post office, banks, an airfield,libraries, markets, sporting and health facilities and roads to cater for the new workforcethat would be required to work in the new mines / factories, all of which would createmassive employment and would stimulate the Malawian economy like never before.It would be sufficient to cover investment in alternative sources of energy such as wind,solar(http://www.forbes.com/sites/uciliawang/2011/11/18/out-of-africa-big-solar-farms/),tidal wave or novel hydro/ underwater turbines (http://www.treehugger.com/renewable-energy/hydro-power-without-the-dams-ontario-invests-in-free-flow-underwater-©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 15
  • 16. turbines.html) & (http://www.life-size-media.com/blog/2012/all-energy-2012-scotlands-marine-energy-potential/) generation, to ensure that the new extraction / manufacturingfacilities (and subsequently the new towns or settlements) are as environmentally friendlyas possible, generating as much of their own energy as possible. It would be sufficient tocover employment costs for the organisation, including hundreds of miners and salaries ofspecialists from around the world to provide training and assistance in construction of themines/ factories, conducting geological scans, using, servicing and maintenance ofequipment, etc.To aid in understanding the workings of such an organisation, say one focussed on mining/oil extraction, a hypothetical picture of its staff and annual financial commitment may bemost helpful. Thus, I’m inclined to include this rough, sketchy and extremely simplified draftof what the financial commitment at its very bare bones would look like. Obviously, thefigures although lower in comparison to the levels in the developed world, can be adjustedaccordingly in view of national salary levels / trends, performance targets, generatedrevenue, market forces (food / fuel prices and inflation, etc.) and to attract some of the besttalent to the organisation:- Annual Costs & Financial Compensation Structure. (in US$) Chairman & President $72k + benefits -Executive Secretary $30k + benefits CEO $70k + benefits -Executive Secretary $30k + benefits | Senior Adviser to CEO $39k + benefits CMO CTO COO CFO General Counsel $61k + $63k + $60k + benefits $65k + benefits $64k + benefits benefits benefits©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 16
  • 17. Global VP Global VP Global VP Global VP Global VP- Risk Mgmt. & Engineering Construction Legal affairs Environ. affairsMarketing Media $56k + Director $55k + $54 + $53k + $56k + benefits benefits benefits benefits benefits $52k +benefits Import/ Chief Press Export Investment Managing Director(Africa) Officer Manager Director $52k + benefits $51k + $48k+ $56K + benefits benefits benefits Board of Directors x 20 ** $15.5k = $310,000 Executive Secretary to MD Deputy Manager $29k + benefits $45k + benefits Operations Managers x 2 $42k + bonus $84,000 Requisitions & Cost Control Manager x 3 $35k + bonus $105,000 Metallurgical Engineers + Geologists x 4 $46k+ bonus $184,000 Business Development Executives x 3 $35k + bonus $105,000 Engineering Associates x 3 $38k + bonus $114,000 Quality Engineers x 2 $35k+bonus $70,000 Legal Associates / In house Lawyers x 3 $32k + bonus $96,000 Accounts Manager x 2 $36K + bonus $72,000 Accountants x 5 $29k + bonus $145,000 Electronic & Electrical Engineers x 6 $30K + bonus $180,000©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 17
  • 18. Research Analysts x3 $25k+bonus $75,000 Senior IT Systems Manager $35.5k + bonus $35,500 IT Manager x 2 $32k + bonus $64,000 Technical Specialists x 3 $30K+ bonus $90,000 Web Designers & IT Technicians x 3 $23k + bonus $69,000 Press & Media Executives x2 $24k + bonus $48,000 Human Resources Managers x 2 $25k+ bonus $50,000 Human Resources officer x 4 $19k+ bonus $76,000 Field & Training officers x2 $19k +bonus $38,000 Logistics Superintendents x 2 $21k + bonus $42,000 Sales & Marketing officers X 3 $22k + bonus $66,000 Electricians X 7 $10k + bonus $70,000 Secretaries x 10 $10k + bonus $100,000 Administrators & Typists x 5 $7k+ bonus $35,000 Messengers, Clerks & Cleaners x 10 $5.5K + bonus $55,000 Executive Drivers X 13 $6k + bonus $78,500 Drivers x 20 $5k+ bonus $100,000 Plant Managers X 3 $12k + bonus $36,000 Site Managers X 4 $11.5k + bonus $46,000 Machine Operators x 10 $10k + bonus $100,000©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 18
  • 19. Supervisors X 10 $9.5K+bonus $105,000 Miners x 400 $8.71k + bonus $3,484,000 Security staff X 16 $6k + bonus $96,000 Builders, Plumbers, Labourers and other handymen x 20 $6k + bonus $120,000 Graduate Program x 50 $9k + bonus $450,000Apprentices, Interns(students)& Work Experience staff x 100 $4.52k $452,000 Temp staff, Maternity /illness / Holiday Cover + overtime $400,000 Buildings, Construction, Subcontracting, Infrastructure & $9,000,000 Training, Outsourcing & International Advisers. Capital Equipment (Plant, Heavy Machinery, IT equipment, Trucks, Vehicles, etc.) + Raw Materials costs; Insurance, $7,000,000 Utilities & Fuel, Working capital, etc. Contingency, Charitable donations, Subsidies to Hospitals, $2,000,000 Schools, Bonuses, etc. Total Permanent staff >= 744 ~ US$26,903,000 st Total Annual costs (1 Year)** Not included in total permanent staffNote that in the subsequent years after the first, the capital equipment or buildings budgetwill be significantly lower, since funds for infrastructure will already have been allocated andcosts such as heavy machinery or motor vehicles maintenance will be minimal incomparison. Thus, while the above figures may at first sight appear indulgent for a smallAfrican economy, its structure would be designed with hindsight regarding diversificationand future growth into other industries in national and international markets.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 19
  • 20. If the company generated US$300 million in sales of its ore in its first year of full operation(let’s assume this occurs after total sales in 2nd year from commencement), then deductingthe operational costs [US$26,903,000(1st year ); $8.9 million (2nd year: this is estimated bydeducting first fiscal year costs minus the sum of contingency, infrastructure & capitalequipment costs – giving $35.8 million) leaves US$264 million operating profit. [Note thatthese calculations do not take into account any “losses” carried forward from the previousyear(s) before full operation, nor does it fully consider that employees would not be hiredall at once]. For the purposes of this article, for simplicity and assuming there are no taxincentives, if we levy a flat Corporation Tax rate of 30% (US$79.26 million), the net profitbecomes be US$184.74million.Thus, at 51% government ownership, and subject to other considerations/ deductions, thegovernment % share of the profit would be a not insubstantial US$94.2 million, roughlyabout 7% of the 2012 Malawi National budget.But even if the management board decided that only two thirds of this $184.74 million (~$123.16 million) would be paid out to investors in dividends in the third year, while onethird would be kept as reserves (a part of which would be re-invested into developmentalprogrammes, acquisitions, growth / expansion, operating capital, shares buy-backprogrammes and other purposes), 51% of $123.15 million is still a substantial US$62.8million, which would be a considerable contribution to the Malawian government over andabove the US$79.26 million already paid in corporation tax. There is then income tax paidby the employees, which would further generate tax revenue for the government.And Investors would make a fortune. Since 4.9 million shares for 49% means that 1% stakein the business is equivalent to 100,000 shares, then at US$17 per share, it means that 1%stake is worth $1.7 million in investment. Thus, if $123.16 million of the profit will be paid individends, then 49% would be worth $60.34 million, valuing each percentage (1%) at$1.231million. Theoretically, this means that if the company maintains or improves itsperformance for the next few years, then within 3 – 6 years of making an investment, aninvestor would have recouped or even doubled all of their initial investment in dividends.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 20
  • 21. But suppose instead of US$300 million in its first year of full operation, only half, or even aquarter is generated in sales. Even then, taking a similar approach, the organisation couldstill be managed to remain profitable.And what if instead of the 4.9 million shares, only 2 million shares are issued at $17 - $19per share in the funding round, raising between $34 million - $38 million. I believe withsome creative adjustments and a lean approach (for example, ‘thirding’ / halving thesalaries of the top quartile, reducing size of middle management, and salaries of middlemanagement by say $4k -$7k; reducing the expenditure on capital goods & buildings), theventure would arguably still be commercially viable, more so because after the first year,the capital expenditure (buildings, infrastructure, Plant) would be much less.Obviously, in practice there would be far many more considerations, and the figures wouldprobably not look as optimistic, but the above provides a plausible and realistic picture ofthe financial commitment and nature of such an organisation. With such a framework, anddepending on the amount of ore deposits, the miner workforce can be increased, short-term internships provided to hundreds or even thousands of low income earners fromacross the country, know-how sought from international experts and the company couldstill generate a profit, meet its tax obligations, and issue an attractive dividend.Contrast this to the common arrangement where the government only owns few or noshares in its country’s largest heavy industry, what you will find is that corporation taxrevenues or dividends are often miniscule in comparison; disproportionate by any scale, andthe government loses out on hundreds of millions of dollars, just another repetition, dare Isay, of the age old adage that everybody except Africans themselves benefit from Africa’smineral wealth.And you see it everywhere; recently a Fortune Global 500 Italian oil company, ENI (which isthe largest industrial company in Italy with 30% government ownership) has acquired a 70%shareholding for Natural Gas reserves off the coast of Mozambique, one of the biggest findsof its kind with potential for over $15 billion.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 21
  • 22. Think about it, with the expertise Mozambique and Southern Africa currently has, was itnecessary to give away such a large stake to a rich European company when your owncountry is littered with massive problems caused by poverty? Doesn’t this clearly add to theimbalance of trade between Africa and Europe? And even if the companies that will developthe reserves are to invest $1 billion. Yet if $10 billion (which is 70% of $15 billion) is the netbenefit to the Italian company, say over 15 years, clearly Mozambique will not have gainedproportionally? Or would it have done so? How?In any case, when was the last time you heard an African based mining company had beenawarded a 70% interest /contract in North America or off the coast of Italy?In my view such decision making from African leaders showed incompetence and left muchto be desired. When European legislators had used every trick in the book to protect theirmarkets, it was wasteful, short-sighted and negligent and couldn’t possibly represent thetrue position of the majority of Mozambicans. Mozambique, which faces similar problems asMalawi needed the benefit of such resources a lot more than ENI, whose 2012 3rd quarterprofits (4th Quarter to be announced in February 2013) stood at €14.80 billion, a 13.9%increase from 2011. (http://www.eni.com/en_IT/media/press-releases/2012/10/2012-10-30-third-quarter-results.shtml)The Younger generation ought to take note of such crippling anomalies and rectify themwhen their turn in public office arrives because this trend where the net movement ofresources is only from South to North, or South to West, is precisely what got Africa into amess in the first place. In particular, according to British historian Dr. Hakim Adi,“From the middle of the 15th century, Africa entered into a unique relationship with Europethat led to the devastation and depopulation of Africa, but contributed to the wealth anddevelopment of Europe…..”He follows to state that:-“The forced removal of up to 25 million people from the continent obviously had a majoreffect on the growth of the population in Africa. It is now estimated that in the period from1500 to 1900, the population of Africa remained stagnant or declined. Africa was the only©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 22
  • 23. continent to be affected in this way, and this loss of population and potential population wasa major factor leading to its economic underdevelopment.”(http://www.bbc.co.uk/history/british/abolition/africa_article_01.shtml)So, if things have indeed changed from the exploitative days of slavery, wouldn’t you thinkthat the economic imbalances that remain would be squarely addressed? That Africanleaders would be alert in negotiations and minimally demand a proportional shares of theirresources?This is probably one of the drivers which influenced South Africa to finally open its first stateowned mine (http://www.gcis.gov.za/category/image-galleries/pres-zuma-launch-first-state-owned-mine-ogies). The implications must never be understated. For a start, howmuch potential revenue in taxes and dividends has the South Africa’s government lost inincome from diamonds and gold since the end of apartheid as a result of lack of ownershipof a proportional share of the country’s mining industry? Funds which because of privateownership were wired out of the country, or concentrated in the control of a small richminority, instead of being used for developmental purposes within the country, liftingmillions of ordinary South Africans out of poverty, building quality hospitals, developingmedicines and raising the standard of the poorest and such like.By owning a majority stake in most of its country’s major industry, and having an informedmanagement strategy, the net benefit from the proceeds of its natural resources can besignificantly increased. This is what Park Chung-hee(http://en.wikipedia.org/wiki/Park_Chung-hee) the South Korean general who is creditedwith the industrialisation and rapid economic growth of South Korea) practiced [see export-oriented industrialization here http://en.wikipedia.org/wiki/Export-oriented_industrialization] practised. While he had a darker side to him, and while therewere other contributory factors at play (for example American money - Chung-hees supportof the US in the Vietnam war is said to have attracted substantial financial rewards to thetune of $3 billion, between 1964 to 1972, in exchange for sending 300,000 Korean soldiersto Vietnam), his policies including creation of economic agencies, ownership of banks,soliciting technology and investment from Japan, encouraging the creation of efficient but©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 23
  • 24. cheap products and expanding Korean exports helped create and strengthen the industrythat now defines South Korea.It’s what Botswana has done (http://maravipost.com/national/society/2745-is-floatation-the-right-prescription-for-malawi.html) whereby Debswana, their sole mining company is50% owned by Botswana and 50% by DeBeers (http://en.wikipedia.org/wiki/Debswana).[Also see recent Revenues of Debswana here:http://www.diamondintelligence.com/magazine/magazine.aspx?id=11155 ].These types of policies are especially important where private individuals struggle to tapinto capital markets, and while there has been criticisms against them, even countries suchas the US, and the UK developed partly on the back of such policies.In discussions with scores of western trained colleagues (most of whom are African - manynow working in Africa, including Malawi), there were many different views exchanged.Among them were concerns that certain donor officials (not only in Malawi) werediscouraging African governments from ownership of industry (in one instance advising theMalawian government not to buy tractors for agriculture “because it was bad for the soil”).Such thinking was unhelpful, as highlighted by one Rick Rowden on Foreign Policy.comwhere he states that: Today many African countries need to use industrial policies, such as temporary trade protection, subsidized credit, and publically supported R&D with technology and innovation policies, if they are ever to get their manufacturing sectors off the ground. This is true for all the same reasons that it was true for the U.K. and other nations that have industrialized successfully. According to todays ideology of free trade and free markets, however, many of these key policies are condemned as "bad government intervention." Bilateral and multilateral aid donors advise against them (and structure loan conditions accordingly). WTO agreements and new regional free trade agreements (FTAs), as well as bilateral investment treaties (BITs) between rich and poor countries, frequently outlaw them.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 24
  • 25. (http://www.foreignpolicy.com/articles/2013/01/04/the_myth_of_africa_s_rise?page=full&wp_login_redirect=0)When most western countries (from whom the donors originate) had phases of PlannedEconomies before adopting Market Economies, how honest was advice against a plannedeconomy? In any case which industrialised country still uses hoes or cattle ploughers foragriculture? If private industry is generally unable to raise sufficient capital for purchasing ofequipment which would provide benefits and efficiencies in farming, how can farmingmethods improve and the quality and quantity of the yield increase?This point is worth exploring in a bit more detail. If it is the case that such advice wasprovided, how honest was it when it was clearly the case that raising capital for largeprojects which would involve outsourcing technical functions, buying expensive machineryor consulting a considerable number of foreign specialists, was beyond even the wealthiestentrepreneur in Malawi? And when no entrepreneur was willing to risk putting their ownmoney into such a venture, without an assurance from the government that they would beawarded at least a contract that would ensure that they recouped their money back?Further, in terms of credibility and securing against an investment, the government cancreate credibility with relative ease and would be able to secure against an investment,whereas private entities can sometimes be viewed more circumspectly, and wouldn’talways be able to secure against an investment.So, it was again left to foreign investors to develop heavy industries, marginalising localentrepreneurs, who must settle for employee. And as most people already know, manycorporations are masters at “legal” tax avoidance, using tax incentives, off shore companies,tax-free zones and other sophisticated schemes to deprive their government coffers ofmillions or even billions of dollars. It happens everywhere, even in the UK [See sources here:http://uk.reuters.com/article/2012/06/26/uk-vodafone-tax-idUKBRE85P0GO20120626 ;http://www.telegraph.co.uk/technology/google/9739039/Googles-tax-avoidance-is-called-capitalism-says-chairman-Eric-Schmidt.html]©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 25
  • 26. But unlike the UK, where there are hundreds upon hundreds of multimillion pound revenuegenerating companies, such that even in the presence of widespread tax avoidanceschemes, Her Majestys Revenue and Customs (HMRC) is still able to collect hundreds ofbillions of pounds in Tax every year [see this source, in particular page 7 that lists 2010 -2011 collections to be £468.9 billion: http://www.hmrc.gov.uk/about/annual-report-accounts-1011.pdf],most poor countries such as Malawi had no such luxuries. With fewmultinationals, advice against government co-owned industry was unhelpful, discriminatoryand suppressive to say the least.And if you look at the US similar patterns emerge in that the state collects quite sizeablechunks of incomes from big business-simply because there is a lot of industry!(Image source: http://www.washingtonpost.com/wp-srv/special/politics/budget-2010/)Therefore, if the Malawian government was reluctant or under duress not to own industry,yet Malawian businessmen were unable to overcome financial barriers to entry, and foreignowned corporations paid miniscule taxes, what hope of creating sustainable economies wasthere? Wouldn’t this create or perpetuate the rather familiar situation in which resources ofvery poor countries were developed predominantly by foreign corporations most of whom©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 26
  • 27. paid very little taxes, and did very little towards lifting the standards of life of the locals?Doesn’t that fact in itself perpetuate a donor aid dependency?In my view, the Malawian government, and other Africans states would be best advised toignore such misleading advice and begin to invest into heavy industry that will create anexport economy, as other countries have done in the past because a planned economywould greatly benefit themi.SustainabilityMalawi, like many African countries, gets plenty of sunlight, more so by virtue of itsequatorial proximity. So, imagine if every roof, whether iron sheets, tiled or thatched had asolar panel on it. Would there be power cuts or shortages every other week? Further, howmuch fuel would that save? And how many trees would be saved as a result? And on asimilar theme, what if every household planted one tree a year, for example in the fashionof say the Youth Week programme of the Hastings Banda days, and following lightly in thefootsteps of the Nobel Peace Prize laureate Wangari Maathai’s greenbelt movement.Having the benefit of a fresh water lake, if Malawi can strive to become the greenestcountry in Africa, literally and in terms of greenhouse gases emissions, that factor in itselfwould inevitably stimulate biodiversity within our wildlife ecosystems and would mostcertainly improve our tourist industry, bringing in much more Forex into the country (Seelessons from Costa Rica Here: http://www.fodors.com/news/story_3866.html). It wouldalso carve unity and create a sense of togetherness towards a common purpose.In my view, a government owned corporation such as suggested here would be the perfectopportunity to implement environmentally friendly projects that have workedelsewhere(one example here:http://www.africagoodnews.com/development/environment/2768-the-man-who-turned-the-desert-into-a-forest-in-burkina-faso.html ), including an extensive national tree plantingprogramme, creation of additional forests and wildlife reserves, importing additional speciesof animals from other countries(e.g. the Congo basin and Madagascar) to increase ourbiodiversity and such like. In building infrastructure, and pending cost-benefit analyses, theorganisation would adopt measures, practices and technology adopted by “green cities” in©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 27
  • 28. other parts of the world such as in Brazil, Sweden, Canada and Qatar(http://news.thomasnet.com/green_clean/2012/03/14/a-hot-idea-turning-deserts-into-forests/ ). In any case, doing so would likely help combat the challenges brought about byclimate change. In fact according to a World Bank Report (here:http://climatechange.worldbank.org/sites/default/files/Turn_Down_the_heat_Why_a_4_degree_centrigrade_warmer_world_must_be_avoided.pdf) tackling climate change is linkedto ending global poverty.A further point worth mentioning and that is somewhat linked to the dependency problemis the role of Education. There are many educated people in Malawi, loads! Every single day,whether in the newspaper, on the radio, or amongst friends, you will hear a reference tosome Dr. or Professor, or somebody who has a Masters degree in some field. Many of themare foreign educated but if you investigate further, you quickly find that very few of these“intellectuals” have been given a real challenge that will stretch them mentally and utilisetheir many skills. Many settle within the boisterous frustrations of working as universitylecturers, going months on end without pay; Or receiving breadcrumbs in one NGO oranother, undertaking dead roles, and led by unresponsive, short-sighted, fat-cat bosses. Ifnot they are in regressive government departments doing clerical jobs for which they areoverqualified; or they are working as consultants, underutilised. Else, they are in farming orin some other function, but because of lack of sufficient capital, still heavily underutilised. Incontrast, and as if a mockery, the old guard (or neopatrimonials known respectfully asAchikulire) despite having little formal education, and who achieved notoriety in business orpolitics under the one party system or as a result of their affiliation/relation to a minister orpresident, are still doing relatively better, and dominate some industries. Yet the Malawiangovernment appears powerless to help these educated individuals, and in the words of afriend, “they are left to slowly rot away and become irrelevant”. What then was the purposeof all the highly advanced training, the PhD’s and Masters? Is this not waste? How willMalawi develop if those who have the skills are not utilised and supported to practice theirvocations? Most of these people have years of experience, and their activities and contactsboth on the ground in Malawi and abroad have given them a unique depth of understandingas to why countries develop and the root problems plaguing Malawi’s economy. Yet the©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 28
  • 29. furthest they vent their knowledge is at parties, amongst friends, or at the bottle store,amongst strangers.In my vision for Malawi, foreign educational institutions such as Universities will play apivotal role in assisting to end aid dependency. So, if 100 Universities across the world were“compelled” to loan to 200 of the entrepreneurial of these professionals $35,000 each inVenture Capital funding, I find it extremely difficult to accept that, with the knowledge,exposure to progressive ideas, with their experience and contacts (be it other Africans inGhana, Kenya, etc., or with former classmates in Europe, the US, Asia or Australasia, etc.)that such capital wouldn’t enable a majority of the recipients to create sustainable businessmodels on the ground.It wouldn’t be a free lunch. There would be a need to comply with Financial Servicesregulations regarding lending by Educational Institutions. For each applicant, a business planwould need to be submitted for vetting and fraud checks including credit checks to ensurethat only the genuine applicants were assisted. There would be a need for training andbusiness management support to ensure that the entrepreneurs are constantly beingequipped with skills that could be of use in their businesses. Minimally, it would allow thoseideas which had the best potential, low entry barriers, possibly a successful pilot run, and abig enough market for a viable sustainable model to be created, to be funded.To make things a bit more interesting, suppose those universities included a clause in itsloan agreements that stipulated that if the initial investment is doubled, excluding costs,then as soon as the initial loan is repaid, say within a space of 3-5 years, the borrower wouldbe entitled to another loan, this time twice the amount ($70,000) and so on. In my view,such a scheme would be a huge incentive to innovation that would challenge Malawi’sunderutilised entrepreneurs and would have a tangible and measurable impact within ashort period of time because the entrepreneurs would have access to essential capital andForex, which most currently struggle to find. Such resources would enable them to buyequipment and employ a couple of people to assist them roll-out their business ideas.The Universities would also benefit in other non-obvious ways. For example, BusinessSchool students would have an opportunity to be seconded on short term internships (a©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 29
  • 30. couple of weeks to several months) in these ventures to gain experience, transfer additionalskills and arguably contribute to these companies. And those that prove to be commercialsuccesses could even offer these students full-time employment.DiversificationBecause of the resources at its disposal, a national corporation can seamlessly diversify intoother industries and branch out to create other companies. For example it could invest inTourism, partnering with local tourism providers to establish high quality standards and / orcooperatives; it could invest in Commercial Farming (everything from Soya beans, Poultry,Bee keeping to fish, cattle / pig farming, all on a large scale); It could dive intoTelecommunications; Information Technology outsourcing(from graphic design and callcentres to cloud networks + unified systems); Manufacturing (foodstuffs, alcohol, furniture,fertilizer, cement, glass, plastics products, cosmetics and such like.); Assembly (computers &electronics, bus & rail carriages, motorcycles and such like.); Pharmaceuticals; Education(creation of new learning institutions/ universities with research specialisations in medicine,engineering, agricultural technology, business, etc.); Recycling (metal, plastics, wood,paper, carbon-composites, etc.); Shipping - an International Import and Export / Logisticsbusiness; Banking & Insurance; or even investing in the development of Real Estate (flatsand houses, hotels and world class business centres).Much of the systems and machinery would already be in place, as would be staff and amanagement. In essence the first corporations would act as a training ground to equip©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 30
  • 31. employees with transferrable skills that are essential in the subsequent corporations. Onceissues such as demand, market/ viability analyses, type of crop / animal, vets andvaccinations, pesticides, nature and cost of new machinery, logistics, profit margins, import/ export tariffs, procedures and legal compliance, specialists, etc. in each of the identifiedopportunities had been determined, “satellite” management boards would be hired toindependently run the spin-offs as independent national corporations in their own right.This also means that shares would be issued in a similar manner as above and the wholecycle repeated all over again.So as an example, Blueberries cultivated on a commercial scale in South America (notablyArgentina + Chile) find their way to England, and are subsequently used in everything fromfruit and desserts to juices and pet food. In the UK alone combined retail sales value forstrawberries, raspberries, blueberries and blackberries are close to £700 million(http://www.knowledgescotland.org/success-stories.php?id=245)Similarly, the US imports Meat and poultry from New Zealand. According to this sourcehttp://www.ustr.gov/countries-regions/southeast-asia-pacific/new-zealandThe five largest import categories in 2011 were: Meat (frozen beef) ($906 million), Albumins,Modified Starch and Glue (mostly caseins) ($312 million), Dairy, Eggs, and Honey (milkprotein concentrate) ($286 million), Beverages (wine) ($224 million), and Machinery ($182million)...”According to a ACDI/VOCA report (source: Value Chain Assessment: Indonesia Cocoa , byHenry Panlibuton & Maggie Meyer, June 2004), Cocoa Beans exports from Indonesia arecurrently valued at approximately $600-700 million per year, however there have beenconcerns regarding the quality of the beans (source:http://www.accessdata.fda.gov/cms_ia/importalert_106.html ) and a much documentedfall in production in recent years (http://www.reuters.com/article/2012/10/15/us-indonesia-cocoa-factbox-idUSBRE89E1DL20121015 ), which could mean an opportunity fora savvy new entrant??©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 31
  • 32. Similarly, the US imports raw materials, foodstuff, fish and food grains from Thailand, and in2011 they included Prepared Meat, Fish (shrimp and tuna) (worth $1.4 billion), …Agricultural products from Thailand to the US totalled $2.6 billion in 2011, the 8th largestsupplier of Agricultural imports, and included: rubber and allied products ($1.0 billion),processed fruit and vegetables ($468 million), and rice ($419 million).(Source:http://www.ustr.gov/countries-regions/southeast-asia-pacific/thailand);According to 2009 statistics, the Netherlands imported a total volume of $358.9 billionworth of goods (http://www.economywatch.com/world_economy/netherlands/export-import.html) This may be a market worth exploring, in terms of what do they need, whereare they currently buying it and why, what can we supply them, what are they short of whichwe can grow, what are we already supplying, etc. In any case, South Africa exported over$700 million worth of goods to the Netherlands, (http://mg.co.za/article/2012-02-02-sas-food-exports-on-the-rise), and in 2009 the Netherlands imported $290 million worth ofCocoa from Nigeria (http://atlas.media.mit.edu/explore/tree_map/import/nld/nga/show/ )all of which may be indicative of opportunities worth exploring in detail?According to this source (Canadian: http://www.ats-sea.agr.gc.ca/amr/pdf/6069-eng.pdf),the US imported over $1.4 billion worth of fruit and vegetable juices from the world in2010. The global market for fruit and vegetable juices is forecast to reach 64.46 billion litresby the year 2015(Source: http://www.prweb.com/releases/fruit_juice/vegetable_juice/prweb8058140.htm).With all the fruit trees (notably mango trees) in Malawi, and considering that Zimbabwe is©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 32
  • 33. no longer a big producer of fruit that it were in the eighties and nineties, Malawi should bechurning out hundreds of millions of litres of fruit juice each year.In addition, Sugar exports from Australia are worth between $1.5 billion to $2.5 billion(source: http://www.canegrowers.com.au/page/Industry_Centre/about-the-australian-sugarcane-industry/). Think, Dwangwa Sugar Corporation, which is only 8% governmentowned. An investment into two or three large government co-owned Sugar plantations inwhich the government held a majority stake was the most obvious thing to do. If availabilityof land were a problem, the corporation could "rent" unused land south of the border anddevelop such large plantations in Mozambique, Angola, Botswana, Zimbabwe, or evenacross the Mozambique Channel in Madagascar, and negotiate fee sharing arrangementswith the governments of those countries.Further, it could do a lot more; the Dangote Group for example was built partly on sugarproducts, which probably shows that there is still a large market for processed sugarproducts across Africa. As a sugar producer, Malawi shouldnt have to import processedsugar, coffee or tea products from abroad, let alone have shortages in times of crisis. Thesemust be processed in Malawi, marketed extensively and exported. And in austere timessuch as is currently the case, the buyer is more likely to buy on price.According to the Bureau of International Recycling, the global recycling industry is worth atleast $200 billion (http://www.bir.org/industry/). In 2010 alone, the US generated $30billion from export of commodity grade scrap products(http://www.isri.org/ISRI/_Government_Relations/Economy/ISRI/_Government_Relations/Economy.aspx?hkey=b2a84682-0476-44cc-83ac-2133474d5c74). Surely, this has got to be amarket worth exploring in more detail?According to Vinexpo Chairman Xavier de Eizaguirre, the global Wine industry is worth atleast $170 billion. And is growing rapidly, largely driven by consumption in China (source:http://www.digitaljournal.com/article/341736). Such is the growth that not only have SouthAmerican countries like Chile and Argentina become prominent grape growers, even theSouth of England which previously wasn’t considered to have the ideal climate is becoming©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 33
  • 34. a vineyard region. (More stats here http://www.morssglobalfinance.com/the-global-wine-industry-%E2%80%93-where-is-it-going/)According to this link (http://www.corona.com.vn/?show=newsadd&nid=21), in 2008,footwear industry exports from Vietnam were worth $3.16 billion.With a government co-owned corporation, it will be possible to bid for projectsinternationally, and possibly even acquire other potentially profitable opportunitieselsewhere. You see it with Vale (http://en.wikipedia.org/wiki/Vale_(mining_company))which began as government owned and has grown from a national mining company into abehemoth which is now the second largest mining company in the world, with acquisitionsin Canada, Japan and other parts of the world. Surely, there are some practical lessonsMalawi can learn from such companies?A further point is that Malawians must learn to reject deals or proposals that are bad forMalawi in the long run. In the case of mining, this is metal ore we are dealing with so ifsomeone doesnt want to buy it or if the price they are offering is too little (or insulting) -you can always refuse to sell it to them. And store the ore. Tomorrow another customer willshow up, and in the case of Uranium, there are many customers: Iran, India, Brazil, China,the US, and many others, all with huge energy needs. So, as an example, if Iran wanted tobuy our uranium in exchange for petroleum, you couldn’t get a better deal. In any case,many countries including the EU are still trading with Iran, despite trade sanctions, with EUimports from Iran in 2011 amounting to ~€15.8 billion.In conclusion, the above presents only a tiny picture of the global opportunities such anorganisation could target. However, I believe that with a considered vision, fresh thinking,extremely careful planning, a deliberate and calculated risk, a progressive and sacrificialteam, and with a stringent management strategy, and an organisational culture focussing onintegrity, service and nurture, and by referencing to what has borne positive fruitselsewhere, it is possible to create and harness three or four such home grown brands intoremarkable and profitable multi-billion dollar conglomerates.©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 34
  • 35. If run responsibly, such national corporations would be the pride of Malawi, and would mostdefinitely propel our country’s economy into the 21st Century, helping Malawians enjoy thesort of financial freedom enjoyed by countries such as Botswana, Mexico, Brazil, Kenya,Ghana, Malaysia, South Korea, Venezuela, Thailand and China respectively, some of whoseindustry began as state owned, and many of whom still have state owned industry. It wouldhelp bridge income disparities and would raise the standards of living of hundreds ofthousands of low income families, equipping workers with transferrable skills in the process.Its environmental credentials would be attractive to foreign investors and its social policieswould help with healthcare initiatives, tertiary training and be a model for responsiblecorporate governance. Most importantly, it would provide ordinary Malawians with ameans of realising a proportional benefit in their resources.For Malawi and several other African countries facing this aid dilemma, the resources,expertise and answers are arguably already available; the only ingredient yet to be added tothis equation is the exercise of a determined, concerted, well-informed and independentpolitical will. But in the event that such highly desirable political will was not forthcoming,for whatsoever reason, individuals and Malawian businesses must act quickly to organisethemselves and pool resources together to form ‘cooperatives’, for example as was the casewith a group that in 2012 bought biodiesel equipment in the US(http://blog.al.com/montgomery/2012/01/malawi_businessmen_spend_up_to.html). Thecollective pooling together of resources would arguably allow the cooperatives to begintargeting national and international opportunities such as those outlined above, becauseunless the Malawians economy can become self-sufficient and industrialised, we will foreverstruggle to maintain true independence on the global arena.And it’s not about embarking on some heroic stunt. It’s the things that matter: - where ourmedicines and consumables come from and whether we can save money by manufacturinga few ourselves? Whether we can create savings on the source of our electricity? The qualityof healthcare(access to a clean hospital bed + medicines; family planning being standard); ifevery child has an access to a good level of education, if the homeless and hungry can behoused and fed, and the jobless provided with training and a job(even if it meant part timejob, so long as they can be resourceful), if our lakes, national parks and game reserves are©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 35
  • 36. protected and enhanced; corruption thwarted mercilessly, if our industry is developed sothat (i) it caters for most of our basic needs (ii) generates sufficient Forex (for fuel and moresustainable + eco-friendly industry, etc.) to enable us to tap into the global economy, ifMalawi can strive to construct world class facilities to attract international business, reducecrime and increase security (to say 1970’s levels) across the country for international visitorsto feel safe; if civil society is resourced to educate against deforestation and offeralternative and sustainable sources of energy, if the priorities of a majority of our politicians’can shift from being archetypically self-centred, to being servants of the state, paid similarsalaries as doctors, if our mentality can change from what J F Kennedy referred to as whatmy country will do for me, to what I will do for my country, the pillars of economicdevelopment will have been laid.Chinese propaganda poster, April 1965, it reads: “Fully engage in the movement to increase production and to practiceeconomy to set off a new upsurge in industrial production” via http://chineseposters.netIn any case, if countries like China, Brazil or South Korea stuck to inefficient and archaicagricultural methods or core industries by which they were defined 60 years ago, do youthink they would have developed at the pace they have? Taking the example of China,despite the controversy with cheap labour / poor working conditions [which is not unique toChina as even industrialised countries had a phase of poor working conditions(http://www.bbc.co.uk/schools/gcsebitesize/history/shp/britishsociety/livingworkingconditionsrev1.shtml )] and an artificially maintained currency, has their sacrificial spirit and hardwork not paid off, benefitting millions of Chinese?©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 36
  • 37. I urge every Malawian to carefully consider these observations and other visionary workssuch as Henry Kachaje’s Imagine an economically Independent Malawi. Each one of usneeds to play a part in terminating this toxic debt cycle that has enslaved our country fordecades. “You cannot pick up a pebble with one finger.” – Malawian proverbLet us graft together and transform Malawi for the better, learning from the mistakes of thepast. We may not be able to do it as individuals, it will not be easy, but together, united,irrespective of tribe, religion, customs, colour of skin, irrespective of language, irrespectiveof social status, we can make real progress; Malawians shouldn’t accept mediocrity, hand-outs and unending hardship as standard.Not every problem can be solved overnight and while mistakes WILL be made, yet in seekingto develop Malawi (in substance, not rhetoric), if we collectively, sacrificially and selflesslybegin structured meaningful projects, hand in hand with willing trade partners, we canachieve progress that has never been seen previously. Progress mapped not by foreign aidorganisations, or vested interests that have neither sympathy for nor responsibility towardsthe poorest Malawians; instead, progress which terminates aid dependency once and for all.[In the next and final chapter, I will outline examples as to how other countries and businesses havespecifically implemented planned and strategic Economic policies, and lived to reap the benefits]©2012 -2013 Sangwani J. Nkhwazi, Manchester, UK. Page 37