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2012: Tough year for Malawi businesses

Experts have described 2012 as a difficult year which saw some businesses in Malawi downsizing, others closing shop altogether.

Business Consult Africa executive director Henry Kachaje said the general macroeconomic climate has been a challenging one in 2012.

He said shortages of fuel and foreign exchange in commercial banks destabilised the economy.

“Due to the shortages, some businesspeople resorted to buying expensive fuel and forex on the parallel market,” he said.

Kachaje said the problem of forex was worsened by low tobacco production this year.

This year, Malawi only produced 79.8 million kilogrammes of tobacco which is 66 percent shy of 236 million kilogrammes produced in 2011.

Tobacco Control Commission (TCC) regional manager for the Centre, Richard Chinthunzi, described the 2012 output as the least Malawi produced in 18 years.

“The low tobacco production was mainly due to poor prices the leaf fetched in 2010 and 2011 which discouraged farmers from producing more tobacco.

“This resulted in dwindling foreign exchange reserves, causing government to have some challenges to make critical imports such as drugs, fertiliser and fuel,” he said.

Countrywide Car Hire director Mike  Mlombwa, who is also president of Indegenous Business Association of Malawi (Ibam), described 2012 as a year of uncertainty.

“The general business climate in 2012 was clouded by uncertainty normally associated with an election year. This caused some businesspeople to lose direction.

“The year also saw indigenous businesses being sidelined in major projects such as the Farm Input Subsidy Programme [Fisp] at the expense of foreigners.

“If you critically analyse this year’s Fisp, you will see that few Malawians took part in the programme. This is not healthy for our economy. Malawians should be empowered to grow their businesses,” said Mlombwa.

He said government should come up with a deliberate policy to protect and empower businesses owned by Malawians.

Mlombwa said most businesses in the country have gone to foreigners which he described as sad.

“Spare parts and stationery businesses have been hijacked by foreigners. I should say almost all businesses are going to foreigners. The year 2012 was a bad one,” he said.

Mtalimanja Holdings Limited (MHL) director Napoleon Dzombe also described 2012 as the worst year he has ever seen since he started business in the early 1980.

“This year was tough for businesses that trade in local currency since it lost value.

“I should say this year favoured those who trade in US dollars because they made huge profits every time the kwacha tumbled,” he said.

Tobacco farmers are some of the people who made a killing out of the devaluation of the kwacha.

This has encouraged most farmers to go back to tobacco farming.

As at October 5 2012, TCC had doubled the number of people willing to grow tobacco to 24 193 from 10 660 registered during the same period last year.

In fact, experts fear that farmers may overproduce leaf and push down its prices.

“Our prayer is that next year, the economy should be stable because businesses are failing to plan because every time they want to replenish their stocks, they find that prices of things have changed,” said Dzombe.

The Joyce Banda administration devalued and floated the kwacha, reintroducing the automatic pricing mechanism on fuel, introduce high interest rates, deregulated water and electricity tariffs to resuscitate the ailing economy.

While some experts contended that the reforms are working, an investigation by Weekend Nation revealed that the measures are hurting businesses.

According to the newspaper, since government introduced the reforms in May, 70 firms filed notice with the Ministry of Labour to retrench their staff.

While Henred Fruehauf, Beehive and Metal Works Limited have indicated their intentions to fire their employees, National Bus Company declared 100 employees redundant,  FMB 19, Deloitte declared all its residential guards redundant and Bakemans Confectionaries Limited fired six.

But National Bank of Malawi chief executive officer George Partride last week pleaded with government not to abandon the reforms, saying they have started bearing fruit.

The Malawi Chamber of Commerce and Confederation and Industry (MCCCI) and the Economics Association of Malawi also asked government not to backtrack on the reforms.

Finance Minister Dr Ken Lipenga has on several occasions assured businesses and donors about government’s commitment to retain the reforms.

Lipenga has since pledged with the Consumer Association of Malawi (Cama) to be patient with government which he said is working hard to address their concerns.

Cama is mobilising people to protests against government’s economic reforms which they said have made life unbearable.

Whether the reforms are working or not, most Malawians are yet to benefit from government’s austerity measures.

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