Of Tins-of Paint Peacocks—When a New Mindset Is Critical

Picture this: A man parks his car in a narrow city lane [outside a paint shop] to load tins of paint into his car and everyone else—especially the majority of us who cannot afford the ‘economic feat’ he is presumably undertaking [building his own expensive family mansion somewhere in this city]—are forced to pause in a long queue of cars and watch: appraise what he is achieving!

The only problem with the above picture is that the man is actually and intrinsically involved in one of the most ‘stupid’ national pursuits: i.e. Malawians investing their hard won personal income and thus ‘potential business capital’ into long-term and un-mortgage-able assets called ‘houses’! But tell that to an average Malawian—including those who were forced to pause and admire the ‘elevated national stupidity’ this man was indulging in—they would probably have you lynched.

Has it not been drummed in our minds time immemorial: ‘for whatever we may not have, a decent man must have a roof over his head?’ [Was that not Kamuzu himself?] So, how can one consider ‘building a roof over one’s head’ stupid; let alone call it a national development stupidity?’ Are there no whole national housing industries being bandied around? Indeed, the lack of the ‘Sectional Title Act’ in Malawi—allowing people to parcel and sell off parts of their houses and buildings—is currently being blamed for the slow take off of the Malawian housing construction industry similar to that in Kenya and other parts of Africa. Everyone will tell about the success story that is the housing construction industry in the USA. Just like ‘New Jobs’, ‘Housing Start’ is a very important statistic on the USA’s economic development barometer. We ought to have that one here too—‘housing start’ or ‘housing finish’ [given houses built on personal incomes take ages to finish around here].

On the other hand, have you not heard government officers—and even politicians—bemoan the high rental cost that government is paying for office accommodation because government does not have its own buildings and properties? Look across the Capital Hill and you will see a new government building going up there. Its express purpose is to house government agencies at the Hill and reduce the government rental bill—running in billions of kwacha per year—in and around Lilongwe City. It is the thing to do: build your own roof: avoid paying money to outsider ‘blood sucking profiteers’ [the nastier the description if they happen to be of Asian origins!]. Those billions being given to Asian property owners could then be used to meet other government recurrent costs in these days of ‘Zero Deficit’. People are being promoted into senior government posts for mouthing such ‘sense’! The operative mindset is ‘own-to-succeed’.

Indeed, the more DIY [do it yourself] you build your house, the most recommended. I remember even renowned Malawian economist Thomas Munthali PhD once wrote in his weekend newspaper article recommending that we—middle class Malawians—go DIY in everything we do about our houses! Cut out all those ‘blood sucking’ and exorbitant ‘ganyu’ people [and ‘vendors’ while you are at it]. Imagine—in anticipation for his wages for a job ill performed—the ‘bugger’ also demands a cup of tea and even lunch before he leaves with his day’s loot! It defeats the purpose DIY, doesn’t it?

The litany of anecdotes on people peacock-ing with national development capital and resources are aplenty. Meantime, quite a lot of us pause to admire and even applaud such acts because—irrespective of the actual reason and purpose of such ownership—‘owning is a sign of Success’. Hence, that guy with his tins of paint felt quite superior and appreciated for inconveniencing all of us. Everyone is into ‘white elephants’ too! Yeah, that is exactly what your investment in your house is: a white elephant.

The other day, I had the pleasure of listening to a certain senior civil servant warn fellow-but-lesser civil servants to ‘stop bugging government about government standing ‘last-resort guarantor’ with banks on housing loans’.

‘It’s economic suicidal!’ he was emphatic. ‘To even think of building a house through a bank loan! You’ll be working for the bank all your working life and your pension too!’ Better kungoomba basi!

He was right because—beside putting up the house and paying the mortgage—what other value as ‘business investment’ collateral is the house to you? So therein is the problem with ‘having a roof that does not leak over your head’. It doesn’t leak but you have just put all your ‘potential personal development eggs’ in one basket for the rest of your life! So why is every Malawian making a beeline towards such a ‘one-basket’ mistake?

We are imperfect copy cat that is why.

‘If I build a house I can draw a second mortgage,’ is the traditional response. So now we are into building ‘houses for rent’ too. It makes sense. It increases the national housing stock. Isn’t that how national wealth is estimated? Higher housing stock equals greater national wealth and possibly greater national happiness! Major economies are rated in that way. But if it were hip to slurp mucus off one’s upper lip in one part of the world would it also be hip here? Well, the American property bust since 2008 came from such hip, didn’t it?

The first national stupidity is we copy indiscriminately—worse we don’t understand the underlying logic of a good deed. It has never occurred to us that there are good and honest deeds that are highly poisonous if the timing of the good deed is wrong. Housing industries and even owning a house are good and commendable deeds. Malawi needs that desperately. But at what point in one’s stages of economic development should these be prioritized? As I said in a previous blog, Kamuzu saw roads being built during the Roosevelt ‘New Deal’ and thought that ought to come before everything else. Now we have goods roads and nothing else to go in the name of national development—white elephants! Don’t get me wrong. Building roads and other peripheral infrastructure are important. Indeed ‘infrastructure’ is a key consideration when FDI [foreign direct investors] assess an investment opportunity into a country. But, one has to have timing and finesse; all the more reason China shut out those foreigners—imposing their development priorities on a system. Playing according to foreigners tunes diverts resources from critical areas of development.

Are we into housing ownership ahead of the correct time? Have we internalized building houses; even when we can rent? Increasingly, it is taboo—almost criminal—to rent a house when you can build one. It is considered ‘irresponsible’—like remaining unmarried in a sea of desperately unmarried spinsters. But is the timing and finesse right?

There are other factors too. If there had been a separate housing industry in Malawi [once Malawi Housing Corporation under Kamuzu had fulfilled this function] then it would have been possible to rent. Yet, there are no independent records to indicate that back then people were able to invest their ‘surplus income’ [read capital if you are business minded] into various ‘liquid cash’ ventures. On the other hand, the Kamuzu MHC went the way of the other ‘failed’ economic white elephants of the time. Indeed, in the absence of a fully developed housing industry we must invariably divert valuable personal development capital towards ‘providing roofs over our heads’.

But where a rental house is available then I believe the economic finesse is renting one. This is because on a continuum—between liquid cash and hard cash—building a house [not very easy to quickly convert into cash] involves tying valuable liquid cash [capital] into illiquid cash [a fixed asset]; especially in this country where ‘sectional titling’ does not exist and therefore a fully fledged housing market is impossible. A house—especially with the bank holding the title deed until the last mortgage installment is paid—is the most notorious form of personal development capital. In my mind, I think giving mortgages to working families was one of those ‘marketing afterthoughts’ [a sales agent desperate for his monthly commission] that really should not have happened wherever this ‘business started’. Mortgages—and that should apply to you—should be restricted to corporations and/ or employees whose companies are prepared to carry the legal responsibility of paying back that money! If you own a company then by all means take a mortgage in the name of the company that belongs to you. There is a clear difference therein terms of legal responsibility for the mortgage. By default, Malawians have diluted the arguments therein—confused who really ought to carry the mortgage burden [mortgages should be part of a business managers pay or ‘withdrawals’ structure]. Instead, by ‘building the houses ourselves’ we are withdrawing from ‘withdrawals’ and in so doing we have fully exposed ourselves to what should not be our Shauri.

Mistake number two—besides assuming other-level Shauris—is that we have come to accept, even for those with their housing assets unencumbered by mortgages, very low returns on our investments. What clever company executive [if you were a proper chief executive of this ‘housing business’ you have opted to run from the comforts of your bedroom] puts up a ten million kwacha investment and expects 800,000 kwacha per annum return-on-investment and smiles about it? Yeah that is the best ROI you can get in this country of ‘poverty salaries’ [because CEOs in Malawi earn the same as floor foremen in the USA]. Naturally, no ‘decent’ Malawian tenant [earning an equivalent of unemployment benefit check in US] will pay you 80,000 per month—in a ten million kwacha house [one without even have a decent carport to park his ramshackle scrap metal of a car!] By the way, 800,000 kwacha on ten million kwacha works out to be below 10% p.a. ROI. So, that ‘tins-of-paint peacock’ in town was inconveniencing us for an income he could have earned—at 23% p.a. interest—if he had left his ten million kwacha in a simple savings account at the bank anyway! So much for DIY or is it ‘Poverty Economics’ in Malawi. Add up the number of ‘tins-of-paint peacocks’ across Malawi—sweating for 8% ROI per annum when they could have invested the whole ten million kwacha into certain businesses—with a potential 25% ROI. It makes you wonder why Malawi is sweating under the weight of economic underdevelopment [national economic stupidity] that surrounds us!

In my next blog I will tell you about the people who have accosted me—literary reminded me—to return the hired car I have been driving since Christmas!

The author can also be contacted on zivaiclaude@gmail.com