The Malawi Economic Empowerment Action Group (Meeag), a grouping championing the empowerment of small and medium enterprises (SMEs), has commended Malawi Government for showing positive signs to improve the welfare of SMEs.
Meeag executive director Temson Chinjala, commenting on the performance of the 2012/13 budget, zeroed in on the passing of Business Registration Bill 2012, relocating of Chinese businesspeople from rural areas to cities and the launch of the National Export Strategy 2013-18 in December 2012 as some of the commendable strides.
The Business Registration Act facilitates the establishment of an electronic business registration to improve efficiency in business registration.
The computerised data base will ensure reduced time and cost of registering businesses in Malawi, and also help government’s efforts to improve electronic government services and business delivery.
Before the bill was enacted into law, business registration used manual data base making it difficult to verify names of businesses, resulting in some businesses registering a business several times.
“The current government has shown positive strides to improve the living standards of Malawians and small businesses,” says Chinjala.
But he says SMEs in Malawi are not that developed because, over the years, government has not put much effort to create a conducive environment for businesses to operate in.
Elsewhere, countries such as Japan and China, according to Meeag, have developed because of SMEs who play a critical role in the development of their economies.
Chinjala says the group has observed that the recently launched NES is a step designed in a such a way that it is concentrating on the need to build Malawi’s productive base and export capacity by creating an enabling environment and empowering the powerless and also to diversify the agriculture sector.
Over the years, the country has heavily relied on tobacco which is currently facing pressure from anti-smoking lobbyists; hence, the urgent need to move towards finding an alternative.
The grouping reflected on the allocation of K1.6 billion in the 2010/11 budget which attracted a number of farmers, resulting in increased output of the strategic crop to more than 100 000 metric tonnes. According to Meeag, the same can be done with other crops that have the potential for the export market.
The agriculture sector has, over the years, enjoyed one of the largest allocations in the budget. The sector, which contributes about 30 percent to the gross domestic product (GDP), is usually the driver of economic growth since Malawi is an agro-based economy.
Over the years, robust performance in the agriculture sector propelled Malawi growth to notable levels, growing at 7.5 percent on average, but this growth was not inclusive to result in meaningful reduction in majority of Malawians’ poverty.
The grouping, however, observes that economic empowerment should not just be a lip service, but should involve the poor to participate and be part of development programmes.
“There has always been little financial commitment to SMEs and, as a result, foreigners are dominating even in simple businesses that could benefit the poor,” he says.
The grouping has called on government to ensure that concentrated efforts is put to build a vibrant productive base of the economy to boost the country’s export capacity; hence, increasing tax revenue which will guarantee better services from government.
The type of export commodities the country concentrates in will determine the amount of foreign exchange generated and the number of jobs created.
A recent study by International Finance Corporation (IFC) indicated that the private sector in developing countries including Malawi can create jobs at a faster rate if policymakers and development institutions make it a priority to remove the key obstacles to growth that they face, according to a new study.
The study concludes that four obstacles pose a particular challenge to job creation in the private sector.
These are; a weak investment climate, inadequate infrastructure, limited access to finance for micro, small and medium enterprises; and insufficient training and skills.
Malawi’s private sector has largely been facing the challenges cited in the report, and successive governments have made pronouncements to improve the climate for doing business, but to no avail.
Currently 200 million people are unemployed globally, and the unemployment rate for youth is more than 2.5 times higher than that of adults, according to the World Bank Group, and that by 2020, 600 million jobs must be created in developing countries—mainly in Africa and Asia—just to accommodate young people entering the workforce.