MCCCI says growth requires broader reforms

Malawi’s sustainable economic growth must be founded on comprehensive reforms that address the economy’s structural constraints, Malawi Confederation of Chambers of Commerce and Industry chief executive officer Chancellor Kaferapanjira has said.

The economy has, for a number of years, been dogged by underperformance in utility companies such as Electricity Supply Corporation of Malawi (Escom) and water boards, a lack of skilled labour force and poor transport infrastructure, among others.

This year, the Reserve Bank of Malawi (RBM) has put real gross domestic product (GDP) growth at 1.6 percent, down from an initial projection of 4.3 percent, largely due to negative growth in agriculture and manufacturing sectors.

“Sustainable economic growth requires structural transformation of the economy which implies increased industry contribution to gross domestic product and declining contribution from agriculture in value terms,” suggested Kaferapanjira last week, in his presentation at the quarterly MCCCI chapter meeting for the Southern Region in Blantyre.

He said the structure of Malawi’s GDP has remained relatively static between 2002 and 2010 dominated by the agriculture sector, while the industrial sector, especially manufacturing, has remained subdued.

“This should be of concern to policymakers given the economy-wide impact of industry sector and the ability of manufacturing to transform an economy. Reliance on rain-fed agriculture exposes the economy to exogenous shocks of price volatility of primary commodities and exigencies of drought,” explained Kaferapanjira.

Malawi experienced robust real economic growth during the decade to 2010, according to figures, reaching a high of 9.8 percent in 2008, second only to oil-rich Qatar, but this feat failed to translate in improved living standard for the majority of Malawians.

This GDP growth rate was well in excess of population growth, which averaged 3.2 percent during the same period, expanding the GDP per capita—the approximation of the value of goods produced per person in the country.

Data show that during the same period, gross national income (GNI) per capita in Purchasing Power Parity (PPP) terms, rose to $870 (K274 050) in 2011 from $550 (K173 250) in 2002.

The growth in per capita GDP and per capita GNI represented an increase in disposable income, said Kaferapanjira.

While agriculture continues to dominate the country’s GDP, with over 25 percent contribution, the sector’s productivity levels are very low.

Kaferapanjira observed that productivity in agriculture can be achieved by reducing quantity of labour engaged in the sector while increasing the degree of mechanisation, increase the usages of fertilisers and other chemicals, and the amount of irrigated land.

“The one option to increase productivity in agriculture is through targeted government interventions which are effectively monitored. Labour offloaded from agriculture should be absorbed in industry, where productivity levels are higher,” he said.

GDP growth in Malawi between 2002 and 2011 has been propelled by the success of the agriculture sector despite the services and industry registering appreciable growth rates.

But the chamber says given the current technological conditions and the structure of production in the agricultural sector, pushing the production limit further will be difficult without improvement in productivity.