Private sector role in post-Covid growth

Until the Covid-19 pandemic struck, Malawi was on the move. With the right policies and investments, the country could get back on track faster and even stronger than before.
Thanks to recent, significant public and private investments in key sectors, Malawi is today more connected to the global economy, with improved access to critical infrastructure and services.

However, Covid-19 might have ushered in years of economic malaise, according to forecasters.
But Malawi is already looking ahead to an economic recovery. To achieve it, the country will need the private sector to play an outsized role, transforming domestic value chains, seizing opportunities for regional integration and investing in the productivity and innovation needed to compete in global markets.

A recent report from the International Finance Corporation (IFC) and the World Bank outlines how targeted economic reforms that make it easier for private businesses to enter the market and trade across borders could jumpstart growth, helping to create new and better jobs.
The Malawi Country Private Sector Diagnostic Report identifies opportunities and barriers in strategic sectors: Energy,

digital infrastructure and services, agribusiness and transport and logistics.
Power is essential for all types of economic activity, yet Malawi has one of the world’s lowest electrification rates at only around 18 percent of the population. To connect the rest of the country by 2030, it requires capital investments of about $2.5 billion in both on-grid and off-grid solutions.

This is a major opportunity for the private sector to step in and step up. Indeed, private funds are already filtering into Malawi’s energy sector, including in support of the country’s first solar plant for the local grid due to come online later this year.
The report also highlights how Malawi can attract more independent power producers by continuing to improve the management and performance of power distribution and transmission.
Increased public-private collaboration in Malawi could also help expand digital infrastructure and lower the cost of data and broadband services.

As more Malawians connect online, entrepreneurs and bigger firms will have more opportunities to grow Malawi’s digital economy, especially in e-commerce and digital financial services.
While digital technology will help Malawi grow, agribusiness will remain a central pillar of the country’s economy. About 80 percent of households in the country still rely on rain-fed farming for an income.

Malawi is a valued exporter of prized foodstuffs—including sugar, tea and coffee—and is a linchpin producer in the global supply chains of many multinational firms.
These multinationals

are already investing in diversification and new technologies to support climate-smart agricultural practices and even more can be done here to help the thousands of farmers in their supply chains. Malawi would also see gains from further diversifying into more sustainable and lucrative crop production.
Overall, agriculture’s role in the economy can be further enhanced by improving productivity, irrigation systems and leveraging agritech solutions.
Of course, the agribusiness sector won’t develop without tapping into new sources of demand and efficiently accessing new markets.
Transport and logistics are, therefore, critical to Malawi’s development puzzle.
This has continued to make progress facilitating trade at its borders, improving customs procedures and investing in better infrastructure at border posts.
Still, more could be done to automate processes and harmonise regulations with neighbouring countries to reduce the time and cost of trade.
Meanwhile, hundreds of millions in public and private investment have poured into regional transport projects to improve road and rail connectivity.
As these connections open up, so will opportunities for Malawi’s logistics service providers. To compete, these firms will need to invest in newer fleets and the latest technologies, such as digital software to optimise freight management.
The opportunities here are abundant, yet as the report indicates, the needs are great and clear challenges remain.
The priority for Malawi’s largely informal economy is to survive the pandemic and recover from its heavy impact.
For most businesses, both large and small, the pandemic has constrained their resources and stalled investment plans.
Foreign direct investment has also slowed, and the global economic outlook remains uncertain.
Now is the time for the government to act decisively on economic reforms and initiatives that can best position Malawi to return to sustainable private-sector-led growth.
IFC and the rest of the World Bank Group remain committed partners with Malawi, including through the challenges of Covid-19. n