The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) said businesses in 2011 faced one of the toughest times in living memory characterised by continued and worsening shortages of foreign exchange, fuel and structural problems in utility companies.
â€œThere is a lot of anxiety among all sections of the society, including the business community following what the country has just gone through,â€ said MCCCI president Matthews Chikankheni at groupâ€™s 118th Annual General Meeting (AGM) in Blantyre on Friday.
But Chikankheni, however, said the private sector is rather comforted because the newly inagurated President Joyce Banda has already won the support of the donor community who withheld budgetary support due to economic and governance concerns last year.
â€œWe all know she [Joyce Banda] has just ascended to the presidency of this country. As such, she has not had time to unveil her governmentâ€™s economic policy yet. We do not know who will be in her Cabinet which is normally a rough indication of policies,â€ he said.
Chikankheni noted that Malawi needs donors taking into account the countryâ€™s low savings rates hovering at 15 percent of the gross domestic product (GDP) because of low per capital income.
Malawi hardly attracts foreign direct investment (FDI) because of unattractive investment climate such as a lack of power, he said, adding that even the developed countries rely on FDI, portfolio investment and other forms of capital transfer for their growth.
Commenting on the performance of the economy in 2011, the chamber president said due to economic turmoil, inflation, which had been on the downspiral, reversed its trend.
â€œInstead of going down, it started climbing and earlier this year reached double digits for the first time in a number of years owing to cost push pressures arising from scarce foreign exchange and the consequent escalation of blackmarket rate of foreign currencies,â€ he explained.
Currently, at 10.9 percent as of February, according to the National Statistical Office (NSO), inflation is forecast to rise in the short to medium term largely affected by non-food items that forms the main component of core inflationâ€”a measure of inflation which excludes certain items that face volatile price movements, notably food and energy.
The shortage of foreign exchange affected Malawian companies and failed to meet agreed terms of external transactions such as on-time payments creating a number of challenges for businesses in the external environment.
The MCCCI said the structural problems in the Electricity Supply Corporation of Malawi (Escom) resulted in reduced industrial production, especially in the manufacturing sector.
During the year, he said, businesses suffered the sudden imposition of such taxes as minimum tax on turnover, excise taxes on manufactured goods and the removal of incentives under the Export Processing Zones (EPZ) such as the introduction of 30 percent corporate tax and the reduction of investment allowances.
In addition, export taxes on some natural based industries and Value Added Tax (VAT) were introduced.
â€œCollection of non-tax revenue, especially by the traffic police reached its height. But these measures have actually resulted in reduced revenue levels due to a slowdown in economic performance,â€ he said.
Malawiâ€™s real GDP growth this year is forecast to ease to four percent, according to the Economist Intelligence Unit (EIU), a 2.6 percentage points shy of governmentâ€™s projected growth of 6.6 percent announced by Finance Minister Ken Lipenga in the 2011/12 Mid-Year Budget Review.