Malawi is expected to register a 40 percent drop in Foreign Direct Investment (FDI) this year largely due to the economic turmoil caused by the Covid-19 pandemic.
United Nations Conference on Trade and Development (Unctad) latest report shows that FDI—investment made by a company or individual from one country in business interests in another country—will drop to $58.8 million (about K43.5 billion) from last year’s $98 million (K72.5 billion).
The report, titled International Production Beyond the Pandemic, says that developing economies such as Malawi are expected to see a big fall in FDI because they rely more on investment in global value chain.
It further indicates that neighbouring countries, including Mozambique, South Africa, Zambia, Zimbabwe, in total received $7.8 billion (K1.6 trillion) in FDI in 2019, but the inflows are projected to decline by between 25 percent and 40 percent this year.
Globally, the report says, FDI inflows are forecast to decrease by up to 40 percent in 2020, the first time since 2005.
In a statement accompanying the report, Unctad secretary general Mukhisa Kituyi said the sudden and simultaneous disruption of supply and demand-side shocks combined with policy reactions to the crisis around the world, is triggering a series of effects on FDI.
Reacting to the report, Ben Kaluwa, economics professor at Chancellor College—a constituent college of University of Malawi, said the country will suffer a double blow in its quest to attract FDI due to the pandemic and the political environment.
He said: “FDI to Malawi will indeed not be easy in the times where business has been disrupted globally in view of the Covid-19 pandemic.
“The political impasse in this country on the other hand also makes things worse as no investor would comfortably invest in a country with political uncertainties.”
Malawi Investment and Trade Centre (Mitc) spokesperson Deliby Chimbalu could not indicate which sectors will be affected due to the expected drop in FDI and which ones are expected to perform well.
But in an earlier e-mail response, she admitted that the global pandemic has led to a downward trend of investors coming into Malawi.
Chimbalu said in the first quarter of 2020, the country issued investment certificates to seven new companies down from 17 during a similar period last year.
Minister of Finance, Economic Planning and Development Joseph Mwanamvekha is on record as having said that the spill-over from the global recession and border closures in neighbouring countries due to the Covid-19 pandemic will reduce FDI to the country.
Over the years, FDI has been fluctuating due to a number of factors.