LILONGWE-(MaraviPost)-The country’s social monitoring body Centre For Social Concern (CFSC) still pushes for MK100,000 as practical minimum wages for workers citing high cost of living.

The body observes that the currently MK50,000.00 minimum wage does not meet the currently poverty lines among workers.

CFSC Executive Director Fr. Father James Ngahy says Malawi government must put deliberate policies that induce productions towards worker high wages.

CFSC Executive Director Fr. James Ngahy: Let workers get something good against high cost of living

Fr Ngahy observes that capitalism thinking its what is impinging many employers to offer better wages for workers.

“According to 2018 National Statistical Office (NSO) about 9 million Malawians are living below poverty line.[1] Given this situation, if Malawi has to move forward, then this unacceptable prevailing social-economic state of affairs should be addressed. The poor people are facing numerous social economic challenges due to post 2019 elections and global pandemic of COVID-19.

“There is, therefore, an urgent need to undertake initiatives aimed at social and economic transformation. An increase in Minimum Wage is one of the initiatives that government must implement to bail Malawians out of poverty,” reads part of the statement CFSC shared to media on Friday, February 25, 2022 in the capital Lilongwe on 2022/2023 National Budget.

“It was reported by the Minister that moving on to price developments, consumer prices were markedly accelerated during the 2021/2022 fiscal year mostly due to an increase in food and fuel prices. Headline inflation, which had been in single digits for close to two years, recently crept back into double digits. Headline inflation accelerated to 11.5 percent in December from 9.1 percent in June 2021. Food inflation, which has been the main driver of inflation in the country, rose to 13.6 percent in December 2021 from 11.1 percent in June 2021.

“Similarly, non-food inflation increased to 9.5 percent in December 2021 from 7.2 percent registered in June 2021. The upsurge was mainly on account of the increase in global oil prices which directly feed into non-food inflation. The global oil prices rose to US$88.2 per barrel at the end of January 2022, from US$73.5 per barrel at the end of June 2021,” says CFSC.

The statement adds, “Despite this development the government through the Minister of Finance maintained Minimum Wage on 2022/2023 proposed budget. Centre for Social Concerns has noted with concern that by maintaining the Minimum Wage, more Malawians will be pushed into poverty bracket.

“Studies conducted by the Centre for Social Concern through monthly 2021 Basic Needs Basket (BnB) findings revealed that the cost of living has been increasing monthly reaching up to MK236,000 in January, 2022 from MK164,000 in June, 2021. The current Minimum Wage of MK50,000 cannot support to buy food that provide adequate nutrition and buy essential household needs. The Centre proposes Minimum Wage of MK100,000 in line with food poverty line which is above MK100,000″.

“CfSC is of the view that the low Minimum Wage is not necessarily due to performance of our economy, but rather total negligence and maintenance of exploitive policies. Centre for Social Concern believes that an increase in Minimum Wage will support majority Malawians to move out of poverty line.

The poor Malawians are greatly affected by global pandemic of Covid-19 and negative effects of the post election demonstrations. It is, therefore, imperative to formulate a budget that will also cushion the poor people in Malawi who form majority of the population and not only supporting few ‘bourgeoisies’. As a country we also need to put a deliberate policy to cushion low income earners, ‘proletariats’, who are struggling to survive during this pandemic period,” adds CFSC.

The body concludes, “Centre for Social Concern feels that the 2022/2023 budget is mostly focusing on economic recovery of mainly the rich people. Centre for Social Concern believes that an increase in Minimum Wage will help majority of Malawians in attaining their rights such as right to food, right to education, right to access to quality health services, and right to life.

The low Minimum Wage of MK50,000 per month is impinging Malawians to dignified life. There is a lot of discrimination due to provision of low Minimum Wage that was set by government. A lot of Malawians are wallowing in abject poverty due to provision of low Minimum Wage.

Below is CFSC full dissecting Malawi’s 2022/2023 National Budget

Background and Introduction

The Centre for Social Concern (CfSC) brings you another reflection on the budget as it has been doing in past years. Centre for Social Concern, founded in 2002, is a faith-based organization that promotes research and action on social issues, linking the Christian faith and social justice. T

he Centre aims at transforming the unjust structures in Malawian society through research and advocacy so as to ensure sustained change in policies for the betterment of all in line with their human dignity.

In the spirit of exposing the plight of the poor and with the realization that the average person is struggling to afford even the most basic of monthly commodities, CfSC, through its Social Conditions Research Programme conducts the “Basic Needs Basket” survey since 2002. The Programme aims at gathering facts through research; hence, use those facts to lobby and advocate for change in policies and/or practices that promote attainment of sustainable livelihood. The hallmark of the programme is to contribute towards a humane and socially just Malawi.

The Centre’s activity dwells on four pillars namely, Economic Governance, Active Citizenship, Social Conditions Research and Interreligious Dialogue (IRD).

The input to the budget falls under both the Economic Governance and Active Citizenship pillars; but informed with data from the Social Conditions Research which documents through Urban and Rural Basic Needs Basket (BNB) on the cost of living. If the two pillars are properly achieved, then the peaceful co-existence becomes a realistic possibility. Thus, there is a substantial nexus of the three pillars, making a ‘trinitarian’ connectivity of the Centre for Social Concern.

The Library and the Computer Laboratory of the Centre for Social Concern give us a room to broaden our knowledge and our research since ‘Education is power’, and it empowers our staff and other library’ users especially the youth or students.

The 2022/2023 Government Budget that was presented by the Minister of Finance, Honourable Sosten Gwengwe, is the second under the new National Vision: The Malawi 2063. National Planning Commission (NPC) laid out a national development blueprint, the Malawi 2063, which outlines that by the year 2063, the Malawi we want should be “an inclusively wealthy and self-reliant industrialized upper-middle-income nation.” (That’s 41 years ahead of us – how old shall we be by then if at all we shall still be alive?)

The budget has, therefore, designed to set Malawi on the trajectory towards the achievement of the nation’s aspirations towards 2063.

The budget is titled: “Accelerating Implementation towards Wealth Creation, Job Creation and Food Security.”

This analysis has been made on the premise of the statement of the Minister of Finance which states:

“Malawians deserve quality and efficient public service delivery. They deserve a conducive and enabling environment that guarantees Wealth Creation, Job Creation and Food security. The 2022/2023 financial plan, therefore, has been developed to continue fulfilling the campaign promises that this Administration made when it was ushered into Government. In keeping with the spirit of the President’s State of the Nation Address delivered in this House on Thursday, the 3rd of February 2022 titled, “Fixing the Systems to Deliver Long Term Priorities and Defuse Short Term Pressure”, this budget will build on that premise.”

In the spirit of exposing the plight of the poor, Centre for Social Concern carries out the budget analysis to determine whether the budget that has been formulated will help to address the challenges that the poor citizens are facing in the country and to ascertain whether the country is on track to end poverty and inequality.

CfSC takes full cognizance that 2022/2023 Budget will be implemented amidst the Covid-19 pandemic, which has wrecked the world economy since November 2019. This is a health pandemic, which quickly morphed into an economic crisis largely through measures adopted to contain the spread of the virus and in the process causing disruptions to global supply chains leading to rising inflation around the globe.

  • Centre for Social Concern’s Point of View on the Budget

2.1 Agriculture Sector

The Tonse Alliance government, through Malawi Congress Party’s leader, Dr Lazarus Chakwera, campaigned on a ticket of transforming Malawi into middle income economy by building a capable democratic development estate. Malawi being an agricultural country most of the campaign promises by current Tonse Alliance government were dominated by promises to transform Agriculture Sector in order to ensure Food Security, Improved Income and Creation of Employment. Going through Tonse Alliance manifesto the campaign centred on production and productivity issues, markets and marketing issues, agriculture services and value addition issues. Agriculture is on priority number one on Malawi 2063 agenda.

The Minister of Finance reported that the Agriculture Sector has been allocated MK447bn. This provision is intended to enhance agricultural productivity as Prescribed under Pillar One of the Malawi 2063 and to achieve permanent food security for all Malawians. These resources will cater for wages and salaries for officers in the sector. Out of the MK447bn that is allocated to Agriculture, the Affordable Input Program (AIP) has been allocated MK109bn, which is a reduction of MK33bn from MK142bn.

CfSC surely applauds the government for aiming at reducing dependency of stallholder farmers on subsidies. CfSC is also proposing to Members of Parliament to consider upward adjustment of budget on agricultural development projects to improve productivity and to promote structured markets. An increase in presence of structured markets will lead to profitable farming thereby increasing income for smallholder farmers, and of course, employments.

It is envisaged that profitable farming may reduce burden on tax payers’ money through subsidies. The Members of Parliament need to consider in investing in production of agricultural products for the regional and international export markets. This in effect, would improve the incomes of smallholder farmers at household level and create employment as mentioned above. The increase in allocation in developing agriculture can also boost the availability of foreign exchange at macro level, thereby contributing to sustainable economic growth and development of this country.

2.2 Minimum Wage

According to 2018 National Statistical Office (NSO) about 9 million Malawians are living below poverty line.[1] Given this situation, if Malawi has to move forward, then this unacceptable prevailing social-economic state of affairs should be addressed. The poor people are facing numerous social economic challenges due to post 2019 elections and global pandemic of Covid-19.

There is, therefore, an urgent need to undertake initiatives aimed at social and economic transformation. An increase in Minimum Wage is one of the initiatives that government must implement to bail Malawians out of poverty.

It was reported by the Minister that moving on to price developments, consumer prices were markedly accelerated during the 2021/2022 fiscal year mostly due to an increase in food and fuel prices. Headline inflation, which had been in single digits for close to two years, recently crept back into double digits. Headline inflation accelerated to 11.5 percent in December from 9.1 percent in June 2021. Food inflation, which has been the main driver of inflation in the country, rose to 13.6 percent in December 2021 from 11.1 percent in June 2021.

Similarly, non-food inflation increased to 9.5 percent in December 2021 from 7.2 percent registered in June 2021. The upsurge was mainly on account of the increase in global oil prices which directly feed into non-food inflation. The global oil prices rose to US$88.2 per barrel at the end of January 2022, from US$73.5 per barrel at the end of June 2021.

Despite this development the government through the Minister of Finance maintained Minimum Wage on 2022/2023 proposed budget. Centre for Social Concerns has noted with concern that by maintaining the Minimum Wage, more Malawians will be pushed into poverty bracket.

Studies conducted by the Centre for Social Concern through monthly 2021 Basic Needs Basket (BnB) findings revealed that the cost of living has been increasing monthly reaching up to MK236,000 in January, 2022 from MK164,000 in June, 2021. The current Minimum Wage of MK50,000 cannot support to buy food that provide adequate nutrition and buy essential household needs. The Centre proposes Minimum Wage of MK100,000 in line with food poverty line which is above MK100,000.

CfSC is of the view that the low Minimum Wage is not necessarily due to performance of our economy, but rather total negligence and maintenance of exploitive policies. Centre for Social Concern believes that an increase in Minimum Wage will support majority Malawians to move out of poverty line.

The poor Malawians are greatly affected by global pandemic of Covid-19 and negative effects of the post election demonstrations. It is, therefore, imperative to formulate a budget that will also cushion the poor people in Malawi who form majority of the population and not only supporting few ‘bourgeoisies’. As a country we also need to put a deliberate policy to cushion low income earners, ‘proletariats’, who are struggling to survive during this pandemic period.

Centre for Social Concern feels that the 2022/2023 budget is mostly focusing on economic recovery of mainly the rich people. Centre for Social Concern believes that an increase in Minimum Wage will help majority of Malawians in attaining their rights such as right to food, right to education, right to access to quality health services, and right to life.

The low Minimum Wage of MK50,000 per month is impinging Malawians to dignified life. There is a lot of discrimination due to provision of low Minimum Wage that was set by government. A lot of Malawians are wallowing in abject poverty due to provision of low Minimum Wage.

2.3 Government Reforms

The Minister of Finance reported that as directed by His Excellency, the State President in his State of the Nation Address, my Ministry will in the 2022/2023 fiscal year implement the following expenditure control measures:

  1. Review benefits and entitlements for senior Government officials, including the Presidency and Cabinet Ministers;
  2. In consultation with the Office of the President and Cabinet, review the Government Motor Vehicles Policy with an aim of reducing expenditure in terms of number, types and sizes of motor vehicles;
  3. Continue with the installation of pre-paid utility meters in all Government Institutions without exception;
  4. Procure Security Equipment and Fertilizer directly from manufacturers;
  5. Recruit competent graduates in accounting to fix challenges faced in processing of payment in IFMIS and Government Accounting; and
  6. Fast track the digitization drive to reduce paperwork and fraud.

CfSC welcome the reforms and proposes the government to consider also reducing the number of ministers and reducing the number of presidential trips by promoting delegation and reduce the number of vehicles as entourage accompanying the president.

2.4. Taxation Justice

Centre for Social concern has for a long time advocated for progressive tax systems that will not only increase the revenue basket but fairly distribute the same to reduce the gap between the rich and the poor.

CfSC, therefore, agrees with what was said by the Minister during the presentation of this year’s budget that ‘a good tax system needs to conform to the principles of progressivity or vertical equity whereby high-income earners should pay more taxes than low-income earners’. The Minister maintained Free Tax Band at MK100,000. Accordingly, the new monthly PAYE schedule will be from 0 to K100,000 at 0 percent; between MK100,000 to MK330,000 at 25%; and from MK331,000 to 1 million at 30% He stated that this is expected to promote distribution of wealth in the country and increase disposable income for all low income earners.

Centre for Social Concern is of the view that this taxation system is an injustice to low income earners. The cost of living is now at MK236,000. Taxing 25% to Malawians earning less than the current cost living is unfair to low salaried workers who are struggling to survive.

Centre for Social Concern proposes the removal of Custom Duty Free for elites such as Members of Parliament, Ministers, Judges and all those who already earn high income from the government. This taxation system will reduce inequality and poverty in Malawi. The increase in Free Tax bracket will be in line with the United Nations Development Goals that advocates for leaving no one behind by 2030. CfSC believes that an increase in Free Tax Band will lead to an increase in disposable income. The increase in disposable income will lead to an increase in demand for commodities. In addition, the increased demand for commodities will create more labour that will also lead more people paying taxes.

2.5 Public Debt

CfSC is pleased that the government through the Minister acknowledged that the current level of Fiscal Deficit, is beyond the internationally acceptable level of 3 percent of GDP. The Minister also reported that Public Debt Management will be at the centre of the 2022/2023 Budget implementation. He also reported that Ministry of Finance is currently reviewing our Domestic Debt profiles with a view of restructuring debt towards longer maturity period, which will address the current debt sustainability concerns.

In addition to debt restructuring, the Government will in the 2022/2023 fiscal year continue to exercise fiscal discipline, avoid debt creating policies, and reduce granting of extra budgetary financing at Treasury.

The Public Finance Management Act (2003) is also being reviewed to address gaps that have been observed in the current legal framework on issues of contracting Public Debt.

Despite having good strategy Centre of Social Concern hopes that the government will implement the strategies otherwise it might be another talk-show.

2.6 Interest Payment

While the allocation of Interest Payment is meant to clear arreas, Centre for Social Concern is of the view that payment of MK523bn is on higher side considering that it is higher than allocations to key sectors as indicated here below:

Interest Payment          = MK523 bn

Education           = MK462 bn

Agriculture                   = MK447 bn

An increase in Interest Payment reduces disposable income for citizens since the government increased taxes. Increase in Interest Payment also reduces provision of social services to its citizens. CfSC is, therefore, asking the government to put in place practical strategies like using less expensive vehicles by the executives, reducing unnecessary executive travels to reduce expenditure that will lead to reduced borrowing. The continued appetite for borrowing by government is negatively impacting poor Malawians.

2.7 Maize Purchases

CfSC has noted that the proposal in this budget of K12.0bn by National Food Reserve Agency (NFRA) and ADMARC to restock the Strategic Grain Reserves is a good gesture. While the proposal sounds very good, however, experience has shown that small-holder farmers do not benefit from this allocation due to the inability by ADMARC to buy maize from small-holder farmers. Centre for Social Concern has noted with regret that small-holder farmers sell maize below farm gate price of MK150/kg. CfSC recommends that the government must ensure that farmers are not being exploited. This money must not benefit a few Malawians.

2.8 Implementation of Development Projects

The Road Transport Sector continues to be the predominant mode of transport in the country. The social economic benefits that good accessible roads bring are a catalyst for our accelerated development. It is in this vein that the Centre for Social Concern prioritized on advocacy of road project of Machinga-Chingare-Lirangwe road to fully support economic development and the general social welfare of the people. During the delivery of the budget statement, the Honourable Minister reported of 53% completion of the road. Our assessment reveals that only 1.5km was completed out of 19kms first phase of a total of 61km.

CfSC is of the view that the 53% report of completion is unrealistic. Unfortunately the road is not among the priority roads to be constructed this year.

2.9 Constituency Development Fund

The Honourable Minister reported that the budget must be inclusive, a budget must be pro-poor and a budget must be developmental. It is in this vein, that the Constituency Development Fund (CDF), as a direct injection to rural projects and as a complementary part of/to the 100 million dollar rural GESD program has been revised to MK100 million per constituency. While we agree with this assertion, several reports and experiences revealed that CDF is marred with a lot irregularities.

CfSC therefore, proposes the government must put strategies to ensure adherence to guide and guard or else the allocation of this money will be a waste of resources.

2.10 Removal of VAT on Cooking Oil

CfSC commends the government for this good gesture. It is envisaged that it will increase access to this essential commodity by the rural majority. Vegetable oils are known to have numerous health benefits. Primarily, it is the major source of energy and a carrier of essential nutrients which are vital for growth and metabolism, protecting brain cells, reducing the risk of heart diseases and increased access to these will reduce nutrition problem more especially in children.

However, the question comes: ‘Will this reduction in VAT translate into reduction of prices by the sellers?’ Government and other concerned institutions should make sure in monitoring the prices on the market to ensure positive response in pricing.

Conclusion

Centre for Social Concern, therefore, concludes that the 2022/2023 Budget has both some positivities and some negativities. It is, therefore, imperative for the Honourable Members of Parliament to scrutinize the budget accordingly and perpendicularly with sober mind with an aim of ensuring the full attainment of the United Nation Development Sustainable Development Goals and our own blueprint of Malawi agenda 2063.

The issue of climate change with the persistence of global warming, the government needs to invest accordingly on ‘Disaster Management!’ The experience of cyclones Idai (2020), Anna (2022) and the Cyclone Batsirai (February 2022) should not be taken for granted. ‘Prevention is always better than cure!’

All in all, with all the above dissect, critical analysis and recommendations from the Centre for Social Concern, if the government will be able to fully implement the proposed budget, that itself will indeed be a credit to the Tonse Alliance government.

God bless the ‘Warm Heart of Africa’, our beloved and peaceful country, Malawi.

Thank You

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