Malawi's economy is highly dependent on the agriculture, fisheries and forestry sectors (Fig. 2 1: Composition of GDP by sector of origin in Malawi 1973-1994) which account for about 35% of GDP Mineral resources are very insignificant, and in general the production base is narrow. The land and water resources are therefore very vital for the livelihood of the majority of Malawians.

Until 1980 Malawi achieved economic growth well above most sub-Saharan African (SSA) countries at an average DGP growth rate of 7%.  A greater proportion of this growth came from the smallholder sector. However, economic growth was significantly depressed thereafter, and even ran into negative growth between 1981-1991. Correspondingly, the contribution to GDP by the smallholder sector started to decline, but there was a sudden drop in 1992 due to the serious drought (Fig. 2 2). The contribution of the estate sector steadily increased over the same period while the manufacturing sector changed insignificantly.

These economic difficulties led to declining incomes of the smallholder farmers and the low wage income groups, whose real earnings dropped quite significantly. The income index of the smallholder farmers, for examples fell by 41% during the period between 1981 and 1991. The low wage earners, who constitute about 12% of the labour force, saw their earnings drop by 42% while informal sector workers, representing between 5-10% of the labour force, saw their real earnings reduced by about a quarter over the same period.

The economic problems experienced over this past period have been attributed to a number of shocks The high growth of the population, rising inflation, the onset of drought in the early to mid- 1990s and continued decline in government on social services in real terms all contributed to the deterioration of disposable incomes among the majority of the Malawi population increasing dependence on external financing of development programmes (see fig. 2 5) has exacerbated the situation, by increasing debt repayment obligations The continued deterioration of real household earnings coupled with the heavy dependence of the communities on the land and ecosystems, has placed the natural resource base in a particularly vulnerable situation, resulting in increased fragility of the environment

Although the economy picked up during the 1995-96 period and growth is expected to be steady at around 4% from 1997-2000 (UNDP, 1997), its performance during the immediate past reflects its vulnerability and lack of flexibility to contain the shocks. It is recognized that the economic impacts of the past period on the majority of the population, human activities and the environment are yet to be reversed.
 
 

2.1 Macroeconomic policies, environment and development

Macro-economic policies relating to monetary, fiscal, exchange rate, trade and employment regimes greatly influence sectoral policies in land, agriculture, forestry, population and the environment. While inter-relationships between macro-economic policies on the one hand, food security, agricultural development, environment and natural resources on the other, are extremely complex, understanding them is very critical in influencing the process, pace, magnitude and direction of sustainable development necessary for enhancing people's welfare.

The Structural Adjustment Programmes (SAPs), which were introduced in Malawi in the early 1980's through initiatives of the World Bank and the International Monetary Fund (IMF), impacted greatly on macroeconomic policy. Although directed at correcting policy distortions that were deemed to have led to a sharp drop in growth of the country's economy, the outcome of the SAPs have not positively impacted on the livelihood and incomes of people.

2.1.1 Monetary policy

The Malawi Kwacha was pegged to the Special Drawing Rights (SDR) of the IMF between rune, 1965 and January, 1984 Subsequently, the currency was pegged to a basket of seven world currencies: the lips Dollar. Sterling, Rand, Deutsche mark, Yen, French Franc and the Dutch Guilder, in order to represent the country's external trade balance. Before the region-wide economic reforms, Malawi was rated one of the few African countries that maintained its currency close to the market value However, in response to balance of payment pressures, and in order to restore export competitiveness and to support import liberalization, a series of devaluations were effected resulting in a significant drop in value of the currency.

On 7th February 1994. the Kwacha was floated against the United States Dollar, and overall, the exchange rate continues to drop (Fig. 2.3). The deterioration of the Kwacha has led to an increase in money supply, which in turn fuelled inflation. These inflationary pressures have contributed to income inequalities, with the poor being relatively adversely affected.

2.1.2 Fiscal Policy

Between the 1960s and the 1970s.total government expenditure ranged between 25% to 30% of the GDP. However. it rose to 35%-40% in the early 1980s, before falling to 29% by 1986 and to about 25% in the early 1990s.  Prior to the SAPs, the Government faced declining revenues mainly resulting from the closure of trade routes through Mozambique. Subsequently, between 1989/90 and 1991/92, recurrent expenditure as a proportion of the GDP was reduced from 21.6% to 17.4% Correspondingly, the share of development expenditure allocated to agriculture declined from 21% in 1977 to 13% in 1986/87 but allocation to the estate sector increased at the expense of the smallholder farmers.

To-date. a tight monetary policy continues to be practised.  This has, however, resulted in increased unemployment, increased squatting in the main urban areas and increased pressure on the environment and natural resources due to reduced allocations
 
 

2.2 Effects of macro-economic policies on natural resource sectors

2.2.1 Effects through agriculture 

Although budgetary allocations to economic services were generally higher than for social services over most of the years (Fig 2 4), the bulk of these funds went to transport, and in agriculture, funds were targeted at the export-oriented estate sub-sector.  The smallholder sub-sector was neglected and it experienced low access to credit and extension services (World Bank, 1992, Mkandawire. 1993) Furthermore, implicit taxation of the smallholder crops created disincentives for intensive cropping and farmers shifted to low taxed cereals.   As returns to farm labour declined, smallholders took to low wage labour on the estates and this exacerbated their income and food security problems even further, as estate wages fell (Gulhati, Mkandawire, Jaffee and Bertoli, 1990). Thus, under-investment and discrimination against smallholder agriculture contributed to stagnation of productivity and adoption of technology (e.g. hybrid maize).

Low agricultural low returns and low estate wages have all resulted in increased income inequality and increased poverty for the bulk of the population. Furthermore, heavy investment in and bias for, the estate sub-sector and subsequent expansion of tobacco farming have contributed to environmental degradation, especially deforestation since tobacco production uses a significant amount of wood for barn construction and (wood-fuel) for curing.

2.2.2 Effects through social services

The effects of under-investment in social services have been quite adverse. Malawi has an illiteracy level of 50% and 60% of the population still lives below the poverty line. In the education sector, these effects are portrayed in high pupil to teacher and pupil to classroom ratios and high-class repetition rates. This situation is in general worse than the averages for SSA. However, the 1990s have seen tremendous growth in school enrolment in Malawi with change in government policy and increased investment in social services (Fig. 2.4).

Secondary school enrolment almost doubled between 1990/91 and 1993/94, and primary school enrolment has more than doubled between 1990/91 and 1994/95 with the introduction of free primary education in 1994. The USAID funded programme for free secondary education for girls' (GABLE - Girls Attainment in Basic Literacy Education) will undoubtedly boost these figures even further. In the area of health, facilities and qualified personnel are inadequate, heavily constrained, poorly equipped and not within easy access to people, particularly in the rural areas. National health and nutritional indicators are still below the average for SSA. However, the Increased emphasis on social services is Improving the health delivery sector through increased health training facilities, and provision of population control services.

Low government budgetary allocations to social services, compounded by high inflation rates that have continued to erode the purchasing power of incomes, declining real wages, inaccessibility of credit and increasing food prices, have all worked together to increase poverty. The expenditures of poor households allocated to health, nutrition and education have fallen considerably since insufficient incomes are directed to meeting food requirements. The correlation between poor health/nutrition, low education and poverty are obvious.

2.2.3 Alternative livelihood strategies for the poor

Faced with low and declining incomes and a shrinking resource base, the poor have had to devise strategies for survival. Extensification of agricultural land in the smallholder sub-sector and cultivation of marginal areas has been one of the alternatives. But this has been limited by the shrinking customary land base due to population pressure and alienation of customary land by estates - average smallholding size has dwindled from 2 ha in 1970 to 1 ha in 1990.

Livelihood strategies of the people to cope with this stress have included a rise in informal sector activities, tenancy, estate employment and encroachment on estate and public land. The mushrooming of small businesses in both rural and urban areas is a testimony to the increased informal sector activities.

It is evident that the informal marketing of firewood and charcoal has increased over the years. The dependence on initially cheaper but in reality, more expensive wood-fuel for energy has been increasing. This development is directly linked to poverty and high population growth. Removals of subsidies and rising tariffs on paraffin and electricity have contributed to the Increased dependence an wood-fuel in urban areas.
It may be concluded that Malawi s macro-economic policies have varied over the years with diverse effects on the livelihood strategies of the population. The stable fiscal and monetary situation of the l 960s and early 1970s were short-lived and structural weaknesses and external shocks worked together to create an unstable economic scenario in the later years. Huge fiscal deficits were met by foreign loans (Fig. 2.5) that drained the economy as debt-servicing requirements increased.
 
 

2.3 sustainable development

Development aims at improving the quality of human life in respect of health, education, and access to resources needed for a decent standard of living (IUCN/UNEP/WWF, 1991) (see Box 2.1). Many Malawians are unable to meet their basic needs such as food, health and education and employment opportunities. Despite a positive rate of economic growth, the population has not been able to significantly improve their livelihood. According to a recent study, 43% of smallholder households did not have enough income to acquire their most basic needs, and 30% had insufficient income to meet their calorie needs (World Bank, 1995).

2.3.1 Poverty and human development

It is universally recognized that poor people are not able to meet the minimal nutritional and essential non-food requirements equivalent to US $40 per capita per annum, defined as the poverty line In Malawi, poverty in rural areas is estimated at 60% and it affects about 65% of urban dwellers.

The economic indicators are supported by social indicators that confirm Malawi's status among the ten poorest countries of the world. UNDP (1987) estimates Human Poverty Index (HPI) on the basis of the following indicators. 

• number of people not expected to survive to age 40; 
• adult illiteracy rate;
• population without access to safe water and health services; and underweight children under the age of five.

The following poverty related indicators are evident for Malawi (SSA figures are listed in brackets):

• one in every four children die before the age of five.
• infant mortality is 134 (97) of 1,000 live births
• maternal mortality rate is 620 (971 ) per 100,000 live births;
• Iife expectancy is 44 (50 9) years.
• 48% of all children are stunted due to malnutrition, half of them severely stunted while wasting and underweight stand at 7% and 30%, respectively.
• 71 No of adult women are illiterate

The Human Development Index (HDI) which is reported annually in the Human Development Report of UNDP is based on three indicators:

• Iife expectancy at birth;
• educational attainment, measured by a combination of adult literacy and combined primary, secondary and tertiary enrolment ratios, and
• the standard of living measured by real GDP per capita using purchasing power parities.

2.3.2 Population growth

Over the period 1931 to 1987, the population of Malawi increased from 1.5 million to 7.8 million, an increase of about 4.2 times within 56 years. The fastest population growth rate was experienced over the 1926-1931 period where the rate reached 4.5%. The lowest growth rate was experienced during the Second World War when it sharply declined to 1%.

At the present annual growth rate of 3.2% (Table 2.1), the population is expected to double in about 21 years. The present estimated population Is 12 million (Fig 2.8)

The major cause of high population growth in Malawi is the high total fertility rate (TFR) which is the average number of children a woman will give birth to during her lifetime. Malawi's TFR of 6.7 is one of the highest in Africa. This high TFR is due to several reasons which include early marriage, early age at first pregnancy, relatively short birth intervals and little knowledge of, and access to modem contraceptive practices.

Given Malawi's limited natural resources and the present stage of development, the rapid population growth is exerting extreme pressure on land, natural resources, employment, education and health facilities and hence the nation's ability to satisfy basic human needs. Under these conditions, the number of households under the poverty line is likely to increase.

2.3.3 The smallholder subsector

About 80% of the total population living in the rural areas rely on agriculture as their main source of livelihood. Most rural farmers in Malawi have very small land holdings from which they strive to derive their livelihood. The land tenure is primarily subsistence oriented, providing the bulk of the food production for household consumption.

Smallholder agriculture accounts for 80% of Malawi's food production, 10% of the total value of exports and 90% of agricultural employment. The subsector contributes 25% of the real GDP and 65% of agricultural GDP (IFAD, 1995).

The major characteristics of smallholder production systems are use of simple and outdated technologies, low returns, high seasonal labour fluctuations, and women playing a vital role in production. Besides other family labour obligations, women contribute 70% of the total agricultural labour supply.

Until 1991 when tobacco production was liberalised, smallholder farmers were not allowed to grow high value cash crops such as burley tobacco. As a result, they concentrated on growing low yielding maize varieties that accounted for more than 75% of the total cultivated area in the smallholder subsector. Other important crops grown by smallholder farmers include sorghum, cassava, sweet potatoes, groundnuts, rice, cotton and pulses. Combined effects of small land holding sizes, declining soil fertility, use of unimproved crop varieties, negligible fertiliser usage, high post-harvest losses and limited access to credit facilities and agricultural extension services limit the productivity of smallholder agriculture (MoALD, 1995).

In Malawi, 41% of smallholder farmers have less than 0.5 ha; 31% have between 0.5 and 1 ha; 21 % have between 1 and 2 ha; and 6% have more than 2 ha. The average cultivated area of all smallholders has been estimated at 0.81 million ha (National Sample Survey of Agriculture, 1992/93). A recent land utilisation study showed that the customary land allocated to farming households is intensively utilised. Only 1.2% of the customary land is under fallow (CLUS, 1997).

Customary land is allocated to a family or a lineage and is considered quite secure. The families have the right of using the land allocated to them almost in perpetuity. It is expected that in the long term a landless labouring class will develop if land is no longer available for redistribution. Most communities have access to adjacent communal land which is used for firewood, building materials, herbal medicines, fruits, wind break and shade, wood for furniture and handicraft, bee-hives and control of soil erosion (CLUS, 1997).

The small land holdings and the push into marginal and infertile land are among the main reasons for the abject poverty and environmental degradation The most vulnerable groups include smallholders with less than 1 ha of land, estate workers and tenants, the urban poor, female headed households and children. A significant proportion (30%) of the poorest households are headed by women, most of whom reside in the impoverished rural areas (UNDP, 1997).

2.3.4 The estate subsector

The estate subsector takes up more than 9% of the total land area either as leasehold or freehold tenure and is mainly used for growing cash crops. Most of the estate land (60%) is used for growing tobacco while tea and sugar occupy 20% and 18% respectively. The balance is used for growing other cash and food crops. Recently, some estates have diversified their production to include high value crops such as vegetables, paprika and cut flowers for international markets.

Estate agriculture accounts for about 90% of the country's foreign exchange earnings and generates about 45% of formal employment in the economy. As a result of using high level technology and having relatively easy access to inputs, credit, agricultural services and markets, the c state subsector realises higher crop yields than the smallholder subsector.

Recent data shows that there are about 20,000 estates covering more than 1.0 million hectares (CODA and Partners, 1994). Studies have showed that a big part of the estate land (24-67%) is unutilised or under-utilised (Ng'ong'ola, 1992; GOM, UNDP, 1993). The unutilised/under-utilised land is neglected and may develop gullies. Most of the estates do not plant trees on 10% of their total land as required by law (Ng'ong'ola, 1992; Mkandawire et al., 1990).

2.3.5 Source of degradation

The high rate of population growth has created a growing imbalance between population and the natural resource base, significantly impacting on the overall context of the Malawi economy in general, and the environment in particular. All the resources are threatened by the demands placed on them by the very poor who, because of a very low level of literacy have little access to information on sustainable agricultural and environmental management practices.

Many farmers are forced to cultivate on steep hillsides and other marginal lands and in many cases with inadequate soil and water conservation practises. The marginal areas on which some people depend require a high level of management skills, capital and technical investments which in most cases are difficult to obtain or not available at all.

The economic growth enjoyed in Malawi has so far been achieved at the cost of the natural resource base. Serious environmental degradation problems such as soil erosion, declining soil fertility, increased run-off end siltation are being experienced as more land is opened up for cultivation. In some parts of the central region, for example, there has been a rapid increase in tobacco production resulting in considerable land pressure due to competition between tobacco and food crops.
 
 

2.4 Development and environment

Development is considered the prime objective of government policies. Recently, the Government of Malawi has developed and is implementing the Poverty Alleviation Program (PAP), with an overall objective of transforming the economic structures to ensure that the economic infrastructure contributes positively toward raising the living standards. This would result in improvement of people's access to basic needs and services such as food, shelter, health services, safe water, infrastructure (good road and communication networks), education and equal access to gainful employment.

The majority of poor Malawians are agents through which PAP aspirations could be achieved. This development will invariably continue to depend on the environment, through: (1) the utilisation of resources as raw materials for development such as land, water, energy, minerals, etc. and, (2) the provision of living conditions for the people. Therefore, the state of the environment has repercussions on the quality of society and its development. As poverty is characterized by the lack of productive means to fulfil the basic human needs of food, shelter, water, education and health a larger share of the total government development budget is allocated to the social services sector (education, water and sanitation, health and community development).

Recognising that rising populations, agricultural development and environment are linked, the conservation and management of natural resources depend on an educated population. In order to improve students' enrolment, free primary education has been introduced in the country. This has inevitably necessitated the provision of classrooms for the growing number of primary school boys and girls. The World Bank has supported the Malawi Government to implement the "Malawi Social Action Fund" for the construction of additional school blocks.

Development and environmental problems tend to benefit and affect groups of people differently. Government policies and legislation can be directed toward specific sectors and problems with the aim of assisting people in coping with environmental problems. As population trends cannot easily be reversed over the short run, the challenge is for the country to achieve correspondingly high levels of economic growth to at least raise the average standard of living and ensure equitable sharing of resources. At a regional level, high population growth may increase the pressure on small districts to a level where space may not provide the majority of population with opportunities in agriculture.

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