Money and Shopping and Stuff

Exchange Rates and Other Complexities

When I first arrived here, I diligently changed some US currency at a nearby bank and received the official exchange rate of 166 Malawian Kwacha (K166) per $1. However, I quickly learned that such officious behaviour on my part was not rewarding – if I changed my money on the black market with the guys outside the stores downtown, I could get K270 for every US$1, so that’s what I did with the rest of my cash. However, sadly whenever I withdrew money from my Aussie account using an ATM, the bank did the conversion using the official exchange rate, so I was stuck paying more for my kwacha.

Then about two weeks ago the new government bowed to pressure from the international financial gurus and devalued the kwacha to a more realistic figure - $US1 now buys K250 at the bank and on the streets! There had been pressure on the previous government to devalue to bring the kwacha into line with its true value, but that had been resisted and, as I understand from my limited comprehension of matters such as these, that helped precipitate the foreign exchange crisis that led to the shortages of fuel, drugs and other imported commodities.

From my perspective, the devaluation is a good thing because now my Aussie dollars buy me more kwacha, but for the average Malawian, the devaluation has meant an increase in the price of many goods and services, but no concomitant increase in income. And with the economy already running an inflation rate of around 10-12%, people really are struggling. I think this is why the previous government were loathe to devalue, as they knew it would hit folks pretty hard.

I don’t think there are any easy answers for a country like Malawi with a limited ability to export and earn foreign exchange coupled with the need to import many essentials and a faltering internal economy. It’s a tough one.

Acquiring Money

The largest denomination here is the K500 note, with K200, K100, K50 and K20 notes also and the remainder in coins. Having the K500 as the largest note would make sense in an economy where K500 actually bought you something significant, like a tank of fuel or a month’s supply of cat food. Here however, K500 (now equivalent to $2) will buy you half a dozen apples, or a loaf of bread plus a packet of biscuits. So in order to really buy much at all, you need quite a few K500 notes.

But at the ATM, you can only ever withdraw K20,000 at one time, which is barely enough to fill the tank or pay a week’s rent. However, that amount of money is dispensed to you in forty K500 notes and K20,000 is the limit because that is all that will fit through the slot in the machine! Such a thick wadge of notes is far too big to folded neatly or discreetly into any wallet or purse. I certainly feel very conspicuous leaving an ATM with such a pile of moolah, but as cash is king here and I can’t use a plastic card to pay for anything anywhere, I am forced to make the pilgrimage to the ATM at regular intervals and stock up on piles of banknotes. The only transaction I have managed to put on my credit card was for the rental car and everything else – my rent, out-of-town accommodation, groceries, lunches at cafes – is paid in cold, hard cash. My debit card wallows unused and unloved in my wallet, never seeing the light of day.

The craziness of this situation was highlighted to me last week as we prepared to go on a 3 day field trip for work. As well as booking a vehicle and sorting out the staff who will come along, one of the key activities of any overnight work trip is to fill in a Travel Authorisation (TA) and get it approved so that the finance officer can write you a cheque for all your expenses, which you cash in advance of the trip. Thankfully the TA is only one page long and fairly easy to fill in, but the wonderful thing about it is that it uses old-fashioned carbon paper technology to make multiple copies – in this case 7 copies!!! The bottom one is barely legible! Carbon paper is still used on a daily basis all over this country as people write out receipts for each transaction. There may be some young people reading this who don’t know what carbon paper is, so I suggest you ask an elderly relative to explain the concept to you! Suffice to say that in today’s digital world, when you send an email and “cc” it to someone extra, then the “cc” stands for “carbon copy”.

Enough of a technological digression, back to the real business of money. I filled in my TA which was to cover the accommodation and meal expenses for myself and two other team members, which came to K130,000 (about $500). As I said, we can’t put any charges onto a credit card here so everything has to be paid for in cash. I duly got my cheque and trotted off to the bank and joined the queue. And waited. I was in the queue for half an hour – luckily I didn’t have anything else really urgent to do! The very helpful teller then exchanged my one piece of paper, the cheque, for a pile of K500 bank notes - all 260 of them! The pile was about 8 cm high! I hate to think how much cash you need if you are going away for a longer trip.

However, there is some good news. The K1000 note has just been released in the last few days, as have new printings of the other denominations - Hallelujah! The new notes are much smaller and seem to stack into thinner piles than the older ones, so I think they will be much more user friendly and less obtrusive.

Spending Money

Where I come from, the full dexterity of the English language is required to enable the word “shop” to operate as both a verb and a noun. The verb “to shop” as in “I shop, you shop, she shops till she drops” is used to describe the act of “shopping”. As a noun, “shop” means a physical building, with four walls and a roof and a door, as in a “bookshop, toyshop, bicycle repair shop”.

A local bicycle repair shop (just for Trevor) - these are very common due to number of bikes that need repairing!

In this part of the world, they have dispensed with the need for the noun. I have concluded that you can buy everything you could possibly require from vendors operating at the side of the road! Need fruit? Then let me sell you bananas, mandarins, apples! Veggies, tomatoes, salt, sugar, dried beans, dried fish, fried doughnuts, chicken kebabs - all available from your friendly roadside supplier. The most ubiquitous are the folks selling groundnuts (aka peanuts) with a vendor ready to sell you a plastic bag of nuts stationed every 500m or so on busy roads! And you shouldn’t have to walk far to find someone who will sell you bananas too. And if you want some animal protein to round out your diet, you can take a chance on some fresh fish or acquire some live chickens or try out the local butchery with whole animal carcasses swinging in the breeze under a thatched shelter (roof only, no walls, and no refrigeration!!!) or on a tree branch in the shade. Needless to say I am happy to buy plant products from such vendors but I only buy meat from a supermarket. Still, the roadside meat is cheap – we stopped on the way home from the field the other day and acquired some goat meat for about $3 a kg for one of the team.

But it is not just food you call buy from folks along the roadside. Should you require new shoes, a phone battery, car batteries, toys, generators, motor mowers, plants for the garden, clothes, lingerie, cutlery, crockery, pots and pans, radios, CDs, DVDs, books, newspapers, puppies, kittens, chickens, pigeons, cement, wrought iron gates, window frames, net curtains, firewood, charcoal, wooden clothes airers – all are available from a street vendor, somewhere in the city. And it is not just limited to small household items. If you go to the right parts of town, you can buy cane furniture, bedroom furniture, cabinets, tables, chairs and couches direct from the manufacturers spread along the roadside, under open-sided shelters. Many of these furniture-makers are once again making furniture for the living, which is a good sign. 10 years ago they would have been making coffins but the arrival of anti-retroviral drugs has decreased the death toll from HIV/Aids and my understanding is that the average life expectancy has risen from around 40 years in 2004 or so, to about 51 years now. Having said that, you can still buy coffins direct from the manufacturer along the side of the road if you need one!

About the only thing I haven’t seen for sale in roadside stalls are fridges, but that just means I haven’t discovered the right part of town yet!

It is possible to haggle with the roadside vendors for a better price than what they are offering, but I am completely useless at it. For example I needed to buy some new sandals for field work the other day and couldn’t be bothered searching round to find them, so tried on the first reasonable pair I saw and decided to buy them. The vendor first told me the price was K3,800 but for me, he would drop the price to K3,500. I said no, I would pay him the K3,800, instead of beating down the price further! I would never make it in true market economy where haggling is expected! But I figured that for me to pay $15 rather than $14 for the sandals, that is still very cheap and I can live without the $1, whereas maybe the K300 extra for him will make his day a little easier.

The Price of Stuff

So what does your pile of kwacha buy here? Well, petrol is about $2 a litre when you can get it, a loaf of bread is about K300 ($1.20), a can of peaches $2, a litre of milk about 80 cents, a 500g box of muesli about $5, while a dozen eggs might set you back $2.50. Meat is relatively cheap (and it’s mostly beef, with a bit pork but I haven’t seen any lamb) while cheese is quite expensive and not very good. I spend about K2,000 ($8) a week on fresh fruit and veggies if I go to the market, and $30-$40 on other items, but I do shop at the more expensive supermarkets and tend to buy at the more expensive end of the range, so I could live much more cheaply if I really wanted to. I did a big supply shop when I first moved in and probably spent about $100 but I am still munching my way through the pasta and rice and other staples I bought back then and I won’t get through it all by the time I leave.

If I go out and have a coke, a 150ml bottle generally costs K150 (about 60c), although I was very surprised to only be charged K60 the other day! In comparison a “green” in a pub costs K300 – a “green” being a bottle of Carlsberg beer, which according to the advertisements here, “is probably the best beer in the world”. Not being an officiando, I am completely unqualified to pass judgement on such a statement, but it does seem a bold call to make. However, if the comparison is Chibuku, the local brew, which comes in a cardboard tetra-pak container not dissimilar to a milk carton, which has the exhortation “Shake, Shake” written on it, then Carlsberg might have a point! Apparently the brewing process of the local beer does mean that shaking it is required to make it drinkable, but again I can only take that on hearsay as I ain’t going to try it for myself!

As for the big ticket items, you can buy a dwelling in some poorer parts of the city for maybe K250,000 ($1,000). That will get you a small house with brick walls, a corrugated iron roof and no ceiling. There is unlikely to be a bathroom inside, instead there will be facilities in an adjacent structure, and you may also need to cook on your charcoal stove outside. But if you earn a salary of K15,000 a month ($60) as a housekeeper or night-watchman or gardener, then that’s about what you can afford. And plenty of people don’t earn that amount of money per month. The minimum wage has just been increased to about K8,000 per month ($30 or so), which would be very tough to survive on. School fees are a big expense for many families. Although primary schooling is free (and provided for 8 years for each child), it costs about K9,000 ($35) for each secondary school term, and that cost three times a year for each child is just too much for many low-income families. I have noticed, however, that many people in the city who have jobs also have a plot of land somewhere to grow maize and other crops, which means they can meet some of the food requirements for the household that way.

A more substantial home in a more affluent part of the city, comparable to an average 3 bedroom home in the middle suburbs of any NZ or Australian city will probably cost you in the order of 10 million kwacha which sounds like a lot of money but is only $40,000. However, the interest rates on mortgages here run at 26% per annum, so that’s a tad higher than I am used to!!! Still, folks at work expect to pay off their loans in about 4-5 years, so that’s a better proposition than most of us can expect, and they are grateful that the rates have dropped from their peak of 43% pa! Technicians at work probably earn around $1,500 per month (so $18,000 pa compared with about $50,000 or so in Aust) which is a good salary for locals in this part of the world. Casual staff get about K50,000 per month, so that’s $200.

The presence of so many foreign agencies and international organisations who pay their staff in US dollars or Euros or other currencies does skew the market here quite badly. So the rent on our house is $1,500 per month which is typical for our part of town but much cheaper than the areas nearer the embassies. In comparison, renting a nice, but smallish home in the suburb next door would only cost about $200 per month.

Creative Accounting

Over the past few weeks as the new government settles in, there have been some interesting revelations about activities under the previous president. He brought down a zero-deficit budget last year, which was based entirely on earnings from within the country with no reliance on external aid money. Quite an achievement in a country that has always relied on donor money for about 40% of its income.

Except that the zero-deficit budget was not actually real, it was a fabrication based on some very creative accounting. What happened, as far as I can glean from the news reports and personal conversations I have heard, is that the Malawi Tax Office took a bank loan for K15b (b = billion, so about $600m) and declared the loan as tax revenue on their books, ie as earned income, rather than a loan. The finance minister signed off on the arrangement and tabled the accounts in parliament as a true and accurate record of the state of the nation’s position, which was then approved by the government. It is only now that they have confessed that in fact the K15b is a loan, that tax-payers must repay, not actually tax revenue!!! I guess it is one way to balance the books, but not a very sustainable option in the long-term! The rumours now are that the actual amount borrowed may be closer to K30b, but it is hard to know just what the real figure is likely to be. But sadly, the general tax-paying population are the losers in the long term for this little adventure in attempting to balance the books.