Malawi’s investment inflows continue to move at a snail’s pace with figures showing only 35 companies out of 105 2018 investment pledges have materialised, a move Malawi Investment Trade Centre (Mitc) has linked to a challenging business operating environment.
Available figures indicate that Mitc received investment pledges worth $1.4 billion (K1.083 trillion) from 105 companies in 2018 and $234.7 million (K175.5 billion) investment pledges at August this year.
But in a written response to an emailed questionnaire on Thursday, Mitc public relations manager Deliby Chimbalu was upbeat that the remaining companies would soon take off as most firms are completely new and are still setting up to operationalise their investments.
According to Chimbalu, out of the 105 companies, some were already operating but were only expanding their investments which means that group of investors made up close to 16 percent of the total investment pledged figures for 2018 and it is these that are fully operational.
“There are some in the energy sector which are working on a number of agreements such as getting power purchase agreement [PPA] while others are still getting equipment and other personal effects. Once everything is done, we should have more operational,” she said.
However, Chimbalu disclosed that investors meet different challenges as they set up their companies depending on the sectors and nature of investment. She said the common challenges center on the business operating environment.
“Investors cite various challenges which they encounter with the most common ones being those to do with the unreliable power supply to support production, access to land for investment, delays in getting sectoral permits and high transportation costs for their raw materials,” she said.
University of Malawi (Unima) Chancellor College economics professor Ben Kaluwa said on Thursday though Malawi’s macroeconomic environment has improved lately, other factors key in doing business are still not favourable.
“With relatively lower lending rates, inflation and most importantly a stable currency, the expectation is that investment would pick up at a fast rate but if you look at issues to do with electricity which is key in establishing a business, you will see that investing in Malawi is not that easy.
“Further to this, the election conflicts that are in this country could also be another factor affecting investment levels as no investor would comfortably invest in a country with political uncertainties,” he said.
The 2019 United Nations Conference on Trade and Development (Unctad) World Investment Report rated Malawi among countries in Africa with the lowest levels of Foreign Direct Investment (FDI) in the region.
The report shows that in 2018, the country raked in $102 million (about K75 billion) in FDIs, an increase from $90 million (about K67 billion) in 2017, but a decline from 2016s $116 million (about K86 billion) and $510 million (about K377 billion) in 2015.
In the 2018/19 financial year, government has championed a number of regulatory and institutional reforms focusing on reducing the regulatory and institutional burden, attracting FDI and improving effectiveness of public agencies in service delivery to the private sector.
These reforms include Immigration Electronic Permit (e-permit) System, improvement in workplace registration and operationalisation of the Warehouse Receipt Systems Act 2018.