Reagan Kaluluma

Social Protection and Poverty Reduction in Malawi; Options

Introduction

Since 2006, Malawi has been implementing domesticated version of the Millennium Development Goals (MDGs) called Malawi Growth and Development Strategy (MGDS, MGDS 2006-2011). This is the overarching policy document guiding development programmes. The overriding philosophy of the MGDS is poverty reduction through sustainable economic growth and infrastructure development (MGDS, 2006-2011 ibid). This is in line with the Republic Constitution which guarantees the citizens right to development and its enjoyment (Article 30, The Constitution of The Republic of Malawi, 1994).In this paper, development shall mean removing obstacles to what a person can do (Fukuda-Parr S., 2003) or according to Sen (1999), expanding capabilities of people.

To date, the focus has been stimulating economic growth to create wealth as a means to achieve poverty reduction. In order to stimulate economic growth, the government has put emphasis on trade and private sector development. Initiatives have been taken to see establishment of new investments like cotton industry (MGDS, 2008). Agriculture, education, mining and tourism have also been given priority to facilitate creation of wealth to reduce poverty (ibid). The contribution of agriculture to economic development is enormous, as evidenced by the favorable direct and indirect impacts of agricultural growth and investment on Malawi’s economy, in terms of national income, inflation, interest rates, exchange rates and other macro economic variables (Kumwenda I, 2009). Malawi economy has for so long been agri-based. Most of the exports are agricultural produce like tobacco, tea, coffee and sugar. Of late the country has been exporting maize to countries like Zimbabwe. The market of these agricultural produce has been a challenge due to dropping of prices at international level.Manufacturing industry is still in small and in 2004accounted for 11% of the GDP; construction, 2%; electricity and water, 1%; and mining and quarrying, 1% (Yager R.T, 2004). Formal employment in the mining sector amounted to about 2,700 workers in 2004 (ibid).These efforts have seen steady economic growth of about 6% per year since 2006 (MGDS, 2008). This has contributed to reduction of poverty levelfrom 52% in 2004 to 39% in 2009, while ultra poor level has reduced from 22% to 15% during the same period (NSO, 2009). The significance of this economic growth has been watered down partly due to the rapid increase in population in the country. The national population increased from 9million to 13 million between 1998 and 2008 (NSO, 2009). This implies that there are over 5million people who are living below poverty line, 2 million of them in extreme poverty and these are the people who need urgent attention.

The objective of this paper is to critically discuss two options of promoting economic growth alone and hope that poverty will be reduced due to the trickle down effect or take an affirmative action of protecting the poor and vulnerable through economic growth and social protection.

Poverty Reduction through Economic Growth or Economic Growth and Social Protection.

Since independence in 1964, Government of Malawi has been trying to improve its export base through agricultural produce and manufacturing. To promote agriculture and trade, government initiated establishment of cotton ginnery, clothe manufacturing factory called David Whitehead and Sons, Sugar Corporation of Malawi, Malawi Development Corporation, Agricultural Development and Marketing Corporation, and Grain and Milling Company among others. In the early 1970s and 1980s these companies were doing well but things changed following structural adjustment programs through which one of the conditions was to liberalize trade. This process of privatization had its own negative impact on the manufacturing industries (Chirwa E.W., 2001). Companies were closed and some those which survived trimmed their human resource which resulted in increased unemployment. The situation has not improved for the poor Malawians in the rural areas. Poverty is still rampant (NSO, 2009).

The Government has two options , either it continues investing in programs which will promote economic growth and in the long run poverty is reduced through trickling down or it start taking affirmative action by making sure that the poor are protected and their potentials unlocked from abject poverty.

Based on the past experience which has seen the country’s poverty levels not significantly changing for any better but instead the number of people trapped in poverty is still high at 5 million,government should make quick decision on affirmative action. It would not be of any value that economy is growing at 6% but majority of people including children are still struggling with poverty. Continuing prioritizing on economic growth alone will see over 837,000 orphans (NSO, 2009) most of them in extreme households live a hard life. They have to find their own means of survival before they start enjoying their right to development. Close to half a million disabled people (ibid) most of them have children who need support for education, food and health, have to wait for the economy to growbefore benefits trickle down to them. Over 43% of the total households will continue surviving on only two meals a day because they cannot afford three meals a day (ibid). At current rate of economic grwoth, it may be suicide to hope that wealth generation will be sufficient enough to automatically trickle down to the poor. Profits realized from trade are not always ploughed back into business to generate more work for people; some money is moved out of trade (Funke, Fall 2010).

On the other hand government can take action now by combining economic growth with social protection. Social protectioncan play key role in promoting equity, direct alleviation of adult and childhood poverty, as well as allowing household members manage risks (Anderson E. and O’Neil T., 2006).It is the responsibility of State to take measures to introduce reforms aimed at eradicating social injustices and inequalities,(Article 30 (3) The Constitution of The Republic of Malawi, 1994).Key programs under social protection include farm input subsidy, public works, village savings loans, cash transfers (National Social Support Policy, 2009). These are some of the programs already being piloted. Social protection combined with good education will see the population which is stuck in dire poverty being activatedto contribute not only in their household economies but also in the national economy. The nation cannot ignore the great impact of subsidy program on farm inputs which has for the past four years seen the country being not only being food secure but also exporter of maize (UN Summit Sept 20-22 fact Sheet). Social protection is an investment in human capital which is a tangible asset in poverty reduction. An Evaluation Report from the pilot phase of the Social Cash Transfer Scheme in Mchinji, one of the seven districts implementing the scheme, indicates improved well being of the lives of the beneficiaries (Miller C. et al, 2008). There has been increased intake of nutritious foods, good performance of children in school and improved household food security (ibid).Children coming from households which are food secure have high probability of doing well in class and progress with their education pursuits. This will reduce the need for school feeding which is there simply because some households cannot afford to prepare breakfast for their children because they are extremely poor. This shows thatthe poorare not poor because of inability to think but because of limitations to opportunities for moving out of poverty.In order to break the poverty cycle, education is key as it reduces obstacles to demand (Anderson E. and O’Neil T., 2006). It empowers people to demand better services and helps in opening other opportunities like access to loan and employment. It is difficult to develop a country where a big proportion of the population is not contributing towards national building because of they are too poor.

Few households in poor countries are able to support themselves on the basis of single business activity like farming or full time employment (Rakodi C. and Tony LJ., (Eds) 2002). It is imperative that government should put focus on both economic growth and social protection as main strategies to reduce poverty. These strategies have both short and long term benefits.

Social protection for instance will ensure quick distribution of wealth among the citizens. This is important for overall development of the country, as it will enhance productivity of the people who were otherwise trapped in dire poverty. It will in the long run increase tax base of the country thereby improving services such as health and education. Decline in income inequality, alongside economic growth, accelerate the rate of poverty reduction (Anderson E. and O’Neil T., 2006 cited WDR 84-86, HDR 65-66). Higher income inequality lowers effectiveness of future economic growth in lowering income poverty (ibid). The country cannot afford to allow certain proportion of the society to enjoy all the benefits of economic growth while others are falling through the cracks. Experience from Mchinji Pilot Social Cash Transfer Scheme has shown that households welfare improve instantly with injection of little cash. They are able to use it to buy food stuffs, support children in school and buy non food items like soap (Miller C. et al, 2008). This also stimulates local economy as small scale businesses flourish in these communities because of improved purchasing power of the people (ibid). This is in inline with the National Social Support Policy, which is to unlock economic potential of people trapped in dire poverty. Neglecting the poor is costly to the few people who are heavily taxed because these poor people will still need government services like hospitals and schools which are paid from taxes.

Implementation

In terms of implementation, poverty reduction programs need to be multi-sectoral. Government as the custodian of the policy should ensure that there is coordination and alignment by all partners and that there is long-term support, including contributions from non-state actors (National Social Support Policy, 2009). Capacity of government and stakeholders will determine the impact of this new policy. Democratic government increase expenditure on pro-poor budget (Anderson E. and O’Neil T., 2006), and governmentshould mobilize resources towards this good policy. Since some of the programs are already being implemented on pilot phase it is important to critically analyze how these programs are performing and how they can be linked to each other to reduce overall operational costs while maximizing impact. When governments perform poorly, the consequences are wasted resources, undermined services, and denial of social, legal and economic protection for citizens, especially the poor (Grindle M.S., 2004). After analyzing all the current and potential social protection programs, government should prioritize just few, may be three or four and coming with skilled team of officers for overall management and implementation through line ministries or departments.

Donors and international agencies’ main role should be to assist across board with financial and technical resources (MGDS, 2006-2011). They shouldmonitor how their actions and non actions impact upon the political relation forces (Anderson E. and O’Neil T., 2006). Already there is informal commitment from donors as indicated by the support they are providing these programs like school feeding and public works.The private sector should be encouraged to establish partnership with government in the provision of goods and services (MGDS, 2006-2011). Private sector can help in providing better school facilities, health centers and even take part in social protection for instance banks can help in paying beneficiaries through their outlets. Non Governmental Organizations (NGOs) and Civil Society can also implement some activities like promoting good governance (MGDS, 2006-2011). Some organizations like Oxfam and NOVOC are already implementing social protection programs. This should just be formalized and well coordinated. The NGOs can promote transparency in government and also advocate for welfare of the poor (Anderson E. and O’Neil T., 2006).

Conclusion

This paper has reviewed the Malawi Government options for reducing poverty and concludes that the government cannot afford to ignore the fact that millions of people are stuck in dire poverty. These are the people who could have been contributing towards national development, but they can’t because of reasons beyond their control. Together trapped in these extreme poor households are children whose future is condemned if government ignores these households. Social protection interventions are aimed at the poor and vulnerable, to ensure that such households graduate out of poverty, and in turn eventually contribute to economic growth (National Social Support Policy 2009).

It is evident that manufacturing industry and mining is still its infancy stages and cannot create enough jobs to boost the economy while reducing poverty. Extreme inequality causes social strive which usually does not attract investors. It is important that while economy is slowly picking there should be a deliberate effort to ensure majority are on board. Economic growth strategies alongside social protection will provide better results.

Policy Recommendations

From the discussion above, this paper recommends that government should fast track poverty reduction strategy by promoting policies that will reduce inequality while promoting equity. Social protection has proven to be a potential strategy to reduce extreme poverty while investing in human capital. Investment in future generation is through empowering households to care and support children. Reduction in poverty will eventually make it easy to meet other Millennium Development Goals like reduce child mortality and achieve universal primary education. Economic growth alone will not reduce poverty but rather increase inequality. Government need to promote economic growth that considers equity through deliberate wealth distribution which will benefit millions of Malawians.

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Reagan Kaluluma. Final Paper, Poverty Inequality and Development. Fall 2010 Class