World conflicts and the Malawian consumer: What lies ahead?

By Precious Nihorowa* CSSp

The rise of globalization made countries have great influence over one another in so many aspects. These include but not limited to cultural exchange, trade and business opportunities, travel and work opportunities, just to mention but a few. Such increased interaction has brought both positive and negative effects. In the present world, what happens on one side of the world ends up affecting people on the other end of the globe.

 

Recently the world has witnessed a myriad of international conflicts and wars that have arisen from various factors especially economic and socio-political. Of particular mention are the ongoing wars between Ukraine and Russia as well as the recent Iran-USA wars. These two wars have disrupted the political and socio-economic landscape of the world at large. For a country like Malawi, the effects of such wars are even more severe due to the country’s landlocked geographical status. But what do these wars mean for the consumer in Malawi? How do world conflicts shape the Malawian economic outlook? This article seeks to discuss these and similar issues.

 

Almost every government in Malawi has pointed to some global phenomenon to explain why the economy is failing to tick and improve under their watch. The MCP government, for example, used to endlessly refer to the COVID-19 pandemic as well as the Russia-Ukraine war to explain the economic woes of the nation. For many doubting Thomases and for those who had already fallen out of love with the then MCP government, all this sounded as political gimmick and finger-pointing, or simply games that politicians play.

 

But truly speaking, the Russia-Ukraine war indeed had an impact on Malawi economy. This however does not mean that MCP did not have its own faults and that they were not using the war excuse to their own advantage. Perhaps the MCP had their own role to play too in the collapse of the economy.

 

The coming in of the DPP government in September last year came as a relief to the many suffering Malawians who had been economically bullied by changing prices of commodities on the market every day. At that moment, DPP became the most awaited Messiah with a plan for the salvation of Malawians. While at the time DPP took over government the war in Russia and Ukraine was still going on, that didn’t seem like an excuse for them to perform economic miracles for the country.

 

But as fate would have it, few months into government, Iran and USA started waging war, hence further disrupting world peace and economy. Now fuel supply is disrupted, recently hiked in price and automatically saw the rise in the cost of living. But how exactly do world conflicts affect Malawi?

 

Most of the effects that Malawi faces due to global conflicts emanate from its geographical position. Thus, because Malawi is a landlocked country with no direct access to the sea, it has to depend on other countries’ routes to transport goods into the country. If any of the countries on the import routes gets affected by any conflict, the impact is felt on Malawi too. Apart from its geographical position, what makes Malawi feel the impact more is that it is heavily dependent on imports. For example, Malawi imports 100% of its fuel. This explains why the Iran-USA war has heavy consequences on Malawi.

 

The Iran-USA conflict has disrupted world oil flows especially through the Strait of Hormuz hence pushing oil prices up globally. What this means for the Malawi economy is that there are and will be higher transport costs. This will translate into more expensive goods (food, goods, services) and eventually rapid inflation hurting households.

 

Why do prices of goods rise when fuel prices rise? Because business people depend on vehicles to transport goods they have bought to reach selling destinations. Moreover, most local factories depend on fuel to run their machines. And so, rise in the cost of production and transportation translates to rise in the cost of selling. In all this, the consumer is hit harder.

 

The same has been the case with the Russia-Ukraine war. The two, being heavy exporters of grains, saw the flow of the commodity being affected due the instability that the two countries is suffering due to the war. And so, Malawi being a country that still grapples with food insecurity year in year out and depends on imports to supply its deficit, automatically becomes entangled in this disruption. Moreover, both conflicts disrupt fertilizer supply chains.

 

Thus, Russia-Ukraine are heavy fertilizer exporters, while the Iran conflict has affected energy supply which is a key input in fertilizer production. What are the effects then? Higher fertilizer prices is the direct effect. True to this, during the last days of the MCP government, we saw a surge in fertilizer prices to unimaginable levels in the history of Malawi, almost reaching K200,000 per 50kg bag.

Such high prices in fertilizer means that the common consumer who depends on small-scale farming cannot afford to buy even a bag of fertilizer. Consequently, there will be lower crop yields further resulting into reduced agricultural income and more hunger. For a country that heavily depends on agriculture even for its economy, disruption in fertilizer supply is a very big blow.

 

Additionally, world conflicts put Malawi at a risk of sliding into debt and fiscal crisis. Malawi already has high debt and low reserves. The global conflicts force governments to spend more on subsidies for commodities such as fuel and food in order to cushion common and most vulnerable consumers from the impact. The effects of such subsidies are increased borrowing and risk of debt distress. This also means that there will be less money for development such as schools, hospitals, roads and public infrastructure.

 

In this context of these ongoing and seemingly never-ending global conflicts, what lies ahead for Malawi? Honestly speaking, as long as such conflicts continue, their effects on the Malawi economy will be evident. The consumer will continue to suffer the pangs of such conflicts. This is even worrisome because as far as the current world conflicts are concerned, there does not seem to be a light at the end of the tunnel or a sign that they could end soon. Can the Malawi government do anything about this to make sure that the consumer does not continue to suffer?

 

Well, Malawi has no power to control world politics and conflicts, at least directly. However, as a country, Malawi could do well to diversify its economy so that it does not heavily lean on one sector as in the case of agriculture. This could ensure that if world conflicts affect the flow of one commodity, the country’s economy can still move on. Additionally, it is ridiculous that a country with arable land good for farming and one that prides itself in having agriculture as its backbone, still faces food inadequacy and insecurity.

 

Malawi would cushion itself if it attained food security. If we are a country whose economy heavily relies on agriculture, why not introduce factories to have farm inputs such as fertilizer to be locally produced? What happened to the idea of megafarms? All these could ensure food security.

 

Lastly, as a country that currently heavily depends on imports, it would do well to increase local production so as to consume more locally-made products. This will reduce the pressure that is faced when shipping routes are disrupted due to global conflicts. Locally-made products are also cheaper and much affordable for the common consumer as they don’t involve any import extra costs.

 

Moreover, have a lot of products manufactured locally boosts the forex reserves as not much money is used to buy products outside the country. All in all, world conflicts have a heavy impact on the Malawi economy. It takes the willpower and determination of the government to ensure that effects of global conflicts have less impact on the consumer in Malawi.

 

*Fr Nihorowa is a regular contributor to The Lamp magazine.