Why Investing in A Toyota Corolla “Today” Makes Sense for Malawi’s Development

Updated: Jan 21


Even Malawian millennials will be proud to recall the EU stickers that were pasted on EU project Volkswagens in the 1990s and 2000s.

There was one anecdote of an EU project employee who was given a VW Jetta as a company vehicle, whose GPS once failed to recognize an earth road when he once attempted driving it into Dubai in Lilongwe. Rumour has it that the poor thing stalled for not wanting to take its driver into a bush! Apparently, the only gear the thing could take was ‘reverse’ so it could make its way back onto Kaunda Road. Whether this story of mechanical resistance to taking a simple order bears actual truth or not, the story of appropriateness of development support for Malawi remains to be had. The question that arises is ‘why was a VW deployed to a country like Malawi to support development work?’

The inappropriateness of some development approaches is one that might reveal something important. The Jetta was purchased from a German manufacturer, and no matter how ill-fitting it might have been in a Malawian context, it was a successful sale on one part. German jobs were created, if not maintained. Profits were made. More profits would be made in its higher-cost maintenance as the Jetta would persistently dip its tires and springs into Malawi’s potholes.

This is not to taint development aid with a bad reputation, knowing the many good things it has done for the Malawian people and for Africa. But as with all development activity in the past many decades, it has almost always been tagged to the interest of the donor in one way or the other.

This website is awed by the fact that almost thrice as much resources flow to developed countries as they do to poor countries, signaling how aid resources to the developing world always come with a two-way ticket and return with larger baggage than it comes with. Fascinating is how this includes public funds that support private interests back home, creating an enterprise in development work that stimulates very little innovation in developing countries as endless supplies of goods and services make their way around. Activities of foreign private sector from donor countries (think telecoms, energy, supermarkets, to name a few) operate on Africa’s humble infrastructure concurrently as profits are mined out for the benefit of the rich.

Importantly, this article makes the point this week that, instead of a VW Jetta, the EU could have done very well – as it’s done many times –purchasing a good ol’ Toyota or Nissan to plow Malawi’s tough terrains and frequently toxic roads (where roads exist). While it is true that it’s the Japanese corporate mogul who winds up smiling more than the VW executive in Wolfsburg in this situation, Malawi’s developing sectors would be left with more to smile about as the costs of maintaining a Corolla far outweigh those of fixing the Jetta, making development of Malawi the sole purpose of such support.

But there is an even starker fundamental matter this argument brings up. It concerns the logic that cheaper costs of development, which result from the use of a more pragmatic mix of inputs (like the Corolla), will have the potential to spur the completion of high-quality development projects. Let’s take the same EU-in-Malawi example, where the organization’s signature strength has been road construction. Cheaper road construction that comes with a down-to-earth approach of deploying cheaper overheads (which the Jetta is not) would potentially materialize road networks that will weather all storms and boast a high quality, perennial surfaces on which a Jetta would someday roll with much ease.

Such myopia in development support is pervasive in Malawi. It is worse in the private sector where global companies have little shame to operate on poor infrastructure, as long as the day’s profits are spun. The telecommunications sector, despite being battered severely by one of the poorest energy services ever imagined, still thrives in Malawi. To use an industry example where local companies compete with multinationals, the after-tax profits of TNM, a local company, rose by almost 60% (MWK8.2 billion to MWK13.1 billion) between 2016 and 2017 alone. Barti Airtel, a multinational, which claims falling Malawi profits, blames it all on a harsh business environment, despite the multinational’s growth in revenue in Africa, as a whole, from US$92 million (2017) to US$112 million (2018). However, the shortsightedness of Airtel has been one where their shyness to invest (financially or through policy strengthening) in the energy sector, jointly with TNM, is the possibility that mobile technology proliferation in the country would have been multiple times larger than it currently is. Profits would have likely been multiples of what they are today. Likewise, a hands-off approach to road development condemns the processing of tobacco in Kanengo as trucks break down on the country’s roads trying to get in and out of the nation’s epicenter of tobacco sales as a result of poor roads, worse during rainy seasons. But it appears that every year, tobacco processors seem satisfied with the dosh made with little appetite to explore the potential that lies beyond the visible horizon of possibilities.

Where the private sector has invested to protect its interest in Malawi, it has generally either underdone it or done it with little concern for long-term service. Old Town in Lilongwe is symbolic of cheap warehousing and temporary store structures that serve only the exchange of goods and services. Sadder to say that the buildings selling hardware have absolutely no aesthetic value to them. The likelihood of falling apart is high as is the of lack of protections for the thousands of workers that patronize them should a structure collapse.

It serves private sector investors in Malawi best if their involvement in business went beyond the day-to-day transaction of business. Businesses mobilized to invest in business-enabling sectors is not only good for the burgeoning profits and returns to their public investments but also, as Airtel would like to see it, the creation of a friendly business environment. It is also good for Malawi’s development. The development of infrastructure will always have spillover effects on many other socio-economic sectors. An important outcome of a properly-functioning infrastructure system is how it enables the transfer of money to individuals who will always tend to look for goods and services to spend on. The more resources transfer to more individuals, the more likely their filling pockets will also tend to seek better quality and standards in the things they purchase. For locally-established businesses, Malawians will increase their purchases in practically every market. As for foreign businesses like VW, the growing appetite for better quality vehicles and the enabling power of more reliable roads will intersect for the benefit of a growth in demand for their earth road-shy vehicles.

There is a role for government to play to stimulate private sector investments in public goods. Public-private partnerships of this type make good development sense. However, a much bigger role of government must always include regulation if the sights of poorly-designed accidents-waiting-to-happen along our cities’ central business districts will be shoved into Malawi’s history. But so should businesses themselves get their act together if they are really driven by profit-maximization. Cross-border partnerships of the sort Airtel and TNM can develop in areas of common interest should be possible.

And the same goes for development partners who, someday, would like to see it easier to deliver food assistance or vaccinations to poor remote areas. The same goes for development partners who wish to inspire their home-country technologies to reach countries that appear to be poor today. Their relationships with governments should go beyond temporary measures as much as they despise the same in the governments that host them. Their transformation of livelihoods must transcend pity and take the hard approach that not only facilitates lasting change but also fosters better participation of poorer nations in global markets. It’s good for global development, but also good for the VW’s bank account!

#ECONOMICSANDDEVELOPMENT

  • Grey Google+ Icon
  • Grey Twitter Icon
  • Grey LinkedIn Icon
  • Grey Facebook Icon

© 2017 by Tiunike Online, a website of Paulwilliams Associates.

  • Google+ Social Icon
  • Twitter Social Icon
  • LinkedIn Social Icon
  • Facebook Social Icon