Malawi

Lord Collins of Highbury Excerpts

Thursday 23rd October 2014 Lords Chamber

[Lord Collins of Highbury (Lab)]

My Lords, I, too, want to thank my noble friend for initiating this debate tonight. As we have heard, Malawi is one of the poorest and least developed nations in the world, ranking 170 out of 187 in the Human Development Index and with rural poverty increasing in the last decade to 57% of the rural population.

Although fragile and despite many challenges, DfID’s latest annual report—which, I accept, is a little out of date—shows that Malawi’s macroeconomy is displaying some signs of improvement. There is no doubt that progress has been achieved through DfID’s focusing on the key priorities of attacking poverty and inequality, and through investment in education, health, agriculture, water and sanitation, with an emphasis on the rights of girls and women—that is absolutely right. DfID has promoted wealth creation and economic growth by expanding its private sector development portfolio to improve growth in the agricultural sector.

More women are being helped to access finance through village savings and loan schemes. Of the 26,000 additional people supported to access credit through DfID in 2013-14, 21,000 were women. DfID’s work in resilience is helping to improve rural incomes and reduce the vulnerability of farmers to external shocks. An additional 74,000 people were supported to cope with natural disasters in the 2013-14 period. In the same period it helped 140,000 people to have access to clean water and improved sanitation, and by 2015 it will have supported 750,000 people in that way.

Despite DfID’s work supporting accountability reforms and preparing for the 2014 general elections, poor governance and corruption continue to prevent Malawi from achieving its full potential. As we heard from noble Lords tonight, DfID has frozen its direct budget support to Malawi as a result of the so-called “cashgate” scandal, which saw substantial sums of aid funds going missing, with the Government of the then President, President Banda, being heavily implicated in the diversion of funds. This is the second suspension of direct aid arising from corruption in the past three years. As we have heard, the suspension is ongoing despite the May 2014 elections, which saw the removal of President Banda and her replacement with Peter Mutharika.

Clearly, we support the move to suspend aid if there is strong cause to believe that misappropriation is happening. However, for a country so dependent on aid, this is a huge hit, especially when other donor nations have also frozen budget support. I am of course aware that DfID believes that sufficient action has not been taken to address financial and management issues under the new Administration. However, in these circumstances there is a need for DfID to engage closely with the new Malawi Government to ensure that there is a clear road map of steps that can be taken that will lead to the reinstatement of budget support.

In that respect there are a number of questions that I would like to ask the Minister, which have been reflected already by noble Lords, particularly my noble friend. First, have DfID Ministers met with Malawi Government representatives to discuss progress on tackling corruption and steps towards the resumption of budget support? Secondly, what assessment has been made of the willingness of the new Government to take serious steps to improve financial management? Thirdly, what was the outcome of the DfID-funded forensic audit team operating in Lilongwe to attempt to identify misappropriated funds?

Despite the progress I have referred to, Malawi still faces huge challenges in health and education, where just 66% of young people complete their secondary school education. Can the Minister highlight for noble Lords what impact the suspension of budget support is having on public services? Is the department happy that the continuing funding for NGO-based programmes in Malawi is proving effective at limiting that impact? Moreover, as and when budget support recommences, is there the potential for back payments to be made that will help to reverse the negative impact of funding shortages on public services?

Sustained youth unemployment, underemployment and low pay are a severe drag on the nation’s ability to tackle poverty levels, a situation that is set to be exacerbated in a nation where almost 47% of the population is under the age of 14. As I have indicated, the UK’s development programme for Malawi rightly includes a substantial private sector development programme, but it is not clear that it is adequately focused on the particular issues of youth unemployment or on moving people from precarious work into more secure and properly remunerated jobs. The private sector development programme concentrates particularly on the oil seed sector and on reforms that would help to grow it as an export sector, but as with much agricultural work in Malawi, wage levels and working conditions are extremely poor. Is there enough focus on encouraging sustainable, properly remunerated employment in this sector, and how is DfID ensuring that its funding and support for agricultural regulatory reform strikes the right balance in enabling private sector led employment growth while protecting the small-scale farmers who make up the bulk of Malawi’s rural population from land grabs and unfair practices?

Some 20,000 farmers in Malawi currently benefit from fair trade schemes, particularly in the tea, coffee and groundnut sectors, with premiums being reinvested in rural schools, healthcare and infrastructure. However, with 90% of the population working in agriculture, there is clearly enormous scope for further expansion. Yesterday, along with my noble friend, I met with members of the team from the CDC Group who highlighted the direct investment being made in a company in the DRC to develop palm oil—in a very difficult situation for arable operations. This has already resulted in improved wages. I discovered that the negotiations with the trade unions were carried out on television, so they were there for everyone to see; it is a practice that we could perhaps adopt here because it might improve things. A major ingredient of the success which the CDC highlighted was the level of co-operation between DfID officials locally and the CDC in assessing the resilience and sustainability of what is clearly going to be a long-term investment. Does DfID’s private sector development programme in Malawi provide a specific focus on and assistance to the fair trade sector? Also, in encouraging British investment in Malawi, does the department, along with the high commissioner, actively seek to promote fair and ethical trade opportunities?

The noble Lord, Lord Steel, and my noble friend have raised the issue of visas, and I want to repeat their questions. In the end I would ask the Minister to ensure that there is a review of the current operation to assess its effectiveness, proportionality and impact on the current system of civic and community links. As my noble friend so ably put it, we must recognise the essential role that civic society can and should play in Malawi and among its partners in the United Kingdom—particularly, as we have heard in the debate, in Scotland. We must strengthen both economic growth and good governance.