Malawi’s Intergenerational Debt Burden: Youth Voices Needed!
Chimwemwe is a young man with that virile enthusiasm of fresh produce from the university, ready to unleash their talents on a worthy employer. He can’t wait for his independence and can only imagine the freedom of squandering his earnings without the surveillant eye of his parents for the first time in his life. Soon, months turn into a year, and then two, of waiting to land that dream job. He will now take anything that comes his way. Nothing. When he finally gets the call that he’s got a job, the reality of his paycheck is that he won’t be able to make ends meet. All conditions are met for entrepreneurship.
After a little market research, he decides on a viable business. His meagre savings will clearly not suffice, which means turning to the credit market to source enough money for startup capital.
You and I will already know, at this point, that Chimwemwe is bound to have it hard landing a loan with any of the 9 commercial banks to Malawi’s name. Of course, although there are at least 20 microfinance institutions that may consider lending with less conditions, the painful fees and higher interest rates do not seem quite like the most sensible thing to take on. He’s bitterly come to realize his responsible, innocent demeanor is insufficient collateral. And MARDEF requires that you share the morality of the devil to access a single Tambala. Yet finally, a letter from his employer – guaranteeing that his earnings will be held for the benefit of the bank in the event of his incapacity to amortize the loan – becomes his saving grace although this will only happen six months after his probation.
With a little patience, Chimwemwe’s business is underway on condition that he abides by the bank’s demands of having to provide periodic evidence that his business was growing through the term of the loan. Chimwemwe wants the money, so he agrees. Over the months, progress is unfortunately slow. Competition as a new entrant is harder than it seemed at first when his major benchmark was observation of how well firms in his industry fared. Learning on the job makes him realize his product line has to be expanded and he needs a couple more employees if he is to make it in the market. He needs more injection of cash, which his bank agrees to without much hustle.
The business expands, but he now realizes two things. First, he had not foreseen the amount of security he would need to keep his larger, more competitive business safe in a town reeling in crime. Second, the fact that he must go to work does not help matters as his employees are not always honest. He won’t dump the job that got him the business loans and so must put in measures to keep the business on track. These measures will cost a little bit more dosh, so he turns to the bank again. With much reluctance from the bank and longer forms to fill, he gets a third loan.
Now Chimwemwe is unable to reconcile his books. With high and frequent bills to pay, it has become really tight to amortize the loan. He must now dip into his salary to keep his dignity and, more importantly, his future creditworthiness afloat.
It is a foregone conclusion that Chimwemwe’s prospects for a social life, or even a life of independence, are a distant affair in which he has successfully transferred his dependence from his parents to the mercy of financial institutions. Although declaring bankruptcy would terminally ruin his future, it now doesn’t sound like a completely crazy idea. It is the only way his debt would be forgiven.
I have made this longwinded rant because this is exactly the reality that Malawi lives in when it comes to her public debt, which has been on a fattening diet for many years now. In 2020, your government and mine owes US$4.1 billion. In other words, it would take two national budgets to reconcile this debt. Although “two national budgets” is certainly not “three” or “four”, no magic wand can just make it disappear, and it will take a lot of blood, sweat and tears to rid ourselves of it. One might turn to Herbert Hoover (or HH), who once said, “blessed are the young, for they shall inherit the national debt.”
After these words from HH, the matter of public debt can no longer be the inept matter that should be relegated into being government’s sole problem. It can’t be a matter far from the reaches of many of our youth who make 64% of our nation. Debt can’t be left to the elderly and those about to expire to make decisions affecting more than half of our country’s population.
As long as debt will affect the youth more than any demographic in Malawi and demand the sweat of young people to pay it off, debt must be a youth agenda.
Currently, Malawi allocates more towards debt repayment than it does any of the key expenditures with the exception of education. See how much proportion of debt we allocate in the 2020/21 national budget:
The Table above means that a good proportion of our government’s resources benefit the IMF, the World Bank, international private banks, local banks and other government bond holders. These are resources that could be spent on improving services that benefit the citizens of Malawi by delivering better public health, public transportation, immigration services, education and justice, among the many failing public services. Imagine the chances of MK376 billion creating 1 million jobs, which would pay an average of at least MK376,000 every year each!
Some of the public services that can be supported will have the potential to transform not only the youth but might also deliver gender equality better. Through improved infrastructure for water and sanitation and hygiene (WASH), energy and transport, the burden lifted on women’s care and domestic work burdens would be unfathomable. These are not even luxurious demands but basic ones. Yet, because of debt, these services will remain all too often inadequate.
Think of Malawi’s international identity. If we’re known for anything, it is through pictures of starved, under-dressed children learning under trees. To change this imagery, we need to be in charge of how our money is distributed, including in how our development and consumption are resourced. We need to make debt a smaller proportion of our national expenditures. Unfortunately, although President Chakwera’s address to the United Nations General Assembly last month – and ahead of debt cancellation week last week – called for debt relief, he will clearly have to do more on his own as it does not look promising that our creditors are ready to forgive. We now resonate Chimwemwe’s situation very well.
Importantly, young people must learn to source the right information and to seek ways of deciphering complex terms that must be broken down for everyone to understand. We must take the mandate, read and learn so we understand how public debt affects every aspect of our lives, that is, employment, our health and our sheer existence.
We must banish the apathetic attitude towards important conversations such as this if we are not to be left wailing about insurmountable burdens of debt that our loving seniors will bequeath to us forever more.
To finish, I bet you that if Chimwemwe’s Malawi were one where public debt were a much smaller proportion that it is, his chances of accessing a loan with easier terms, including a lower rate of interest, would have been much higher. Young people, I urge you to understand why this could have been so.