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Malawi’s Mobile Money Tax: A Good Idea Gets Lost in the Noise

Updated: Dec 29, 2019

The Government of Malawi’s (GoM) proposal to introduce a 1% tax on mobile money transactions in Malawi was ill-timed and ill-defended. But it was not necessarily a bad idea.

The underlying truth about our future as a nation is that we will have to face the facts, the most important of which is that our public purse will always remain not just too deep for the Malawi Revenue Authority (MRA), the GoM’s chief moneymaker, to fill, but also holed enough that the little that goes in it has too many places to be applied to. The MRA raked in only about 18% of GDP in 2018, compared with OECD economies whose tax-to-GDP ratios averaged about 34% in the same year. For Malawi, the proportion of these resources that are eventually invested in development are much less once we account for the money pit called “feeding the hungry” and the gluttonous pockets of corrupt elites. What’s worse is that the remaining 78% of GDP is left to be churned by private interest and ‘pity forex’ from donor countries.

The ruthless reality of such picturesque misfortune happens to be the continuous cycle of our inability to spin development using local, homegrown resources and talent. Much of the talent we are proud of is used and tired, having been wasted on the furtherance of the West, President Mutharika being no exception. The piecemeal development aid received will either make it to the project site once the appetite for workshops, travel allowances and international procurement are quenched – literally shipping a lot of it back to the West from whence it came. Accompanying it is the constant reminder in the name of technical assistance and the menu of conditions for which much of the aid must be delivered. With all this goes our national pride.

Talking of conditional aid, although donors would like to sugarcoat their arms to Malawi with newly-minted partnership principles that characterize national ownership and leadership, magnifying glasses continue to hover on the fine print of our laws, regulations, policies and programmes to ensure that climate-resilient agriculture programmes still promise the delivery of foreign-made fertilizers that support the growing of an expensive crop which was introduced into our diets only less than two centuries ago. In the meantime, the famous N-P-K fertilizer sold by Yara or Monsanto, which our poor farmers purchase directly or through the public purse, destroys the very soil on which next year’s crop will depend while much of it pollutes our groundwater and rises into our atmosphere as greenhouse gas.

Yet today, in the name of defending the poor, we rise in arms to challenge the very chance we have at dictating the terms of our own development. We seem to deny ourselves the opportunity to let the poor contribute to their country’s development, which inadvertently gives them the voice to caution misuse or abuse of public resources when that development does not seem to work for them. Furthermore, we would rather abrogate the poor’s responsibility to contribute that portion of the little they have to their country. We are not asking ourselves why the government believes it is time for us to tax mobile money transactions, and exactly how the 1% tax was to be approached.

Granted it is futile for the poor to invest in development work when the only people who seem to see the point of spending the development account are a handful of greedy zealots disguised in suits, looking important at Capital Hill. Yet it’s not good use of the dosh if it’s made up of tax money coming from the hardworking rich either. At the moment, the only thing eventually vain is having the few people that make up the tax base who vote for political change racing against the large masses of disempowered voters who will easily be hoodwinked when a promise of football stadia, malata and food subsidies, or even ‘a cow for every family’ are mingled in campaign messages. Folly eventually becomes the perpetual winner, as we have attested since the advent of Bakili Muluzi’s presidency in 1994. This is a moment for Malawians to be candid with ourselves and to realize that we have a bigger voice when more of us, rich and poor, put in the kitty our hard-earned pieces of silver.

Now, although mobile cellular penetration in Malawi stands at about 39% of the population (according to Statista’s 2019 statistics), the number of mobile banking subscribers was still leaner at less than one million by the fourth quarter of 2018, according to the Reserve Bank of Malawi. These represented 5.6 million mobile money transactions, a year-on-year 6.3% increase from the 2017 occurrence. This may have implications on how many of Malawi’s unbanked can ably leverage the opportunity provided by service providers to access financial services over mobile platforms.

The preceding paragraph shows that this number is nonetheless growing. This website purports that our Parliamentarians should have grilled Joseph Mwanamveka, Mr. Mutharika’s Finance and Economic Planning Minister, on how he was going to protect the poor. It is easy to gain perspective if one perhaps envisages a cap of MK50 for transactions of or exceeding MK5,000. It allows the remitters to send more money and to keep more for other purposes. Additionally, using the 5.6 million transactions in 2018, the average daily revenues that the GoM would rake out of (roughly 15,340 daily) remittances would not exceed MK767,000 per day or MK280 million a year. He could also have been grilled on how mobile operators like TNM and Airtel were not going to disproportionately transfer the cost of remittances to the very same clients in poverty brackets.

Another aspect was to interrogate Mr. Mwanamveka on whether he has conducted a sensitivity test that would indeed show that the poor would flee from mobile money because of the tax. Not one from the opposing bench, nor NGO that has been loud enough on the matter, is weighing in with such counterbalance. For all we know, the levying of a 1% tax on transactions that may be numerous, yet small in amount on average, may not have worsened the situation of the poor.

So, Mr. Mwanamveka pulled the plug on his proposal. But Malawians need to remember that the poor and rich equally pay towards the road levy, and no one is pulling their hair for it. They have squandered an important chance to ask the right questions to the GoM before more pity would be cashed out of the poor’s situation.


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