Malawi’s stocks of foreign private liabilities have jumped 24 percent to $1.3 billion from $1.1 billion, a recent foreign private capital and investor perception survey has indicated.
The survey conducted by the National Statistical Office (NSO) and other members of the Balance of Payments Committee (Bopc) dated October 2012 shows that the majority of the stocks emanated from Foreign Direct Investment (FDI), contributing between 83 and 92 percent of total stocks.
“It is evident from the survey results non-residents purchased more shares than they actually sold to residents as total equity liability transactions realised a net inflow of $133.8 million. Nearly all [99 percent] of the inflows emanated from Foreign Direct Equity Investment (FDEI) and totaled $132.8 million,” reads part of the survey report.
It says most of the profits were realised in the manufacturing sector followed by wholesale and retail trade and financial and insurance services sectors.
Further into profitability, foreign shareholders declared more dividends ($30.7 million) than they actually paid out ($19.0 million).
During this same period, private shareholders reinvested almost $97.0 million, representing about 73 percent of the total profits realised ($132.7 million).
The survey is the fifth in a series of annual surveys which are a rich source of information for the compilation of statements on Malawi’s balance of payments (BoP) and International Investment Position (IIP).
The survey was conducted between May and July 2011 and collected information on stocks and transactions and also assessed investors’ perceptions (IPs) on several political, social and economic factors, among others and how these affected their operations at the time of the survey.
The growth in stocks, according to the survey, was mainly on account of net inflows of other foreign investment from unrelated firms totaling $136 million and FDI amounting to $97 million. “While other foreign investment was predominated by payables on other accounts, FDI was predominated by reinvested earnings. The highest share of FDI inflows came from Kuwait (36.2 percent of total FDI inflows), followed by Singapore (14.1 percent), South Africa (9.9 percent), Mauritius (9.8 percent) and Portugal (8.6 percent),” says the survey.
The results indicate that the wholesale and retail trade sector was the highest recipient of FDI inflows ($72 million) most of which was debt financed.
It says the information and communication sector also registered large investment inflows, with the stock of FDI increasing by 63 percent largely due to reinvested earnings.
In terms of external debt, the public sector had more outstanding debt with foreign creditors than the private sector.
The total private sector external debt stock from both affiliated and non-affiliated creditors was pegged at $729.1 million as at end 2010, representing about 83 percent of total outstanding public sector external debt, says the report.
“It is clear from the survey results that the private enterprises preferred external debt financing to equity financing, but changed the pattern as evidenced by the financial leverage or debt-to-equity ratios.”
The survey shows that Switzerland, South Africa and Kuwait were the three major sources of private sector external debt stocks during the review period, and accounted for about 37 percent, 19 percent and 10 percent of the total stocks, respectively.
The FPC and IPs survey was aimed at generating information on private capital flows and stocks for the compilation of BoP and IIP statistics, maintaining a reliable framework for collecting, processing and analysing private capital flows and stocks data, assessing investors’ perceptions on the investment climate in Malawi and assessing the effectiveness of strategies on investment promotion, among others.