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Home Business Business News

Malawi tea industry hails economic reforms

by Johnny Kasalika
28/08/2012
in Business News
2 min read
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Kalinga aug28 | The Nation OnlineThe Tea Association of Malawi (Taml) says the recent economic reforms, which have resulted in the resumption of budgetary support, have given hope to the industry.

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Taml chairperson Atu Kalinga said this on Saturday during the association’s annual general meeting (AGM) in Mulanje.

A number of businesses over the past two years or so suffered greatly due to the shortage of foreign exchange which came about because donors froze budgetary support. Also the revenue from tobacco, which brings in about 60 percent of foreign currency earnings, dwindled.

The lack of foreign currency made it hard for importation of fuel which saw motorists queuing for the commodity in service stations, thereby affecting businesses.

“We are happy that the government has restored donor confidence and that relations are back to normal,” said Kalinga who added that despite the challenges in the industry, prices have remained firm.

But he said challenges still remain citing the intermittent power supply and the recent hike in the bank rate—the rate at which commercial banks borrow from the central bank—which has triggered a reciprocal increase in base lending rates in commercial banks.

Commercial banks have increased their base lending rates to an average of 31.50 percent from around 18 percent since the Joyce Banda administration took over.

Since April this year, the Reserve Bank of Malawi (RBM) has twice increased the bank rate from 13 percent to 16 percent and raised it again to 21 percent in early July.

Analysts argue that high lending rates may result in reduced private sector investment and growth.

High borrowing costs may also result in increased risk of defaults of existing liabilities.

Investors are likely to be more willing to invest in short dated paper.

The AGM also provided a platform for other players in the industry such as the Tea Research Foundation Central Africa (TRFCA) to share their research findings regarding the crop.

TRFCA director Dr. Albert Changaya said scientists at the research centre are working on finding new cultivars that are resistance to diseases, pests and drought.

He said climate change is posing a big challenge to the industry, observing, among others, that it has brought with it strange pests and diseases for the crop.

Changaya also said because of climate change, the rainy season has reduced which has affected the crop’s yield over the years.

Tea is one of Malawi’s major foreign currency earners. In 2011, the crop’s revenue dipped 1.8 percent to K10.7 billion out of 44.9 million kilogrammes of the crop.

This is against K11 billion realised in the year before out of 48.6 million kg, largely affected by unfavourable weather conditions.

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