My entry this week was inspired by a WhatsApp conversation I had with a portfolio and investment manager I am privileged to personally know and whom I regard as one well of wisdom worth preserving.
It all started with a list making rounds on social media platforms about companies that have folded up since the first multiparty administration in 1994.
The list has about 30 companies, including Lever Brothers (later Unilever), Brown & Clapperton, British-American Tobacco, Mulanje Canning Factory and David Whitehead & Sons Malawi Limited, which at their peak produced goods for both the local and export markets besides providing employment as well as livelihoods to thousands. For the record, David Whitehead is still operational, but not at the same scale it was back in the days.
Today, some of the companies in the manufacturing sector are engaging more in importing semi-finished products than starting from scratch to produce export quality products from locally-sourced raw materials such as cotton lint or sun flower and soya.
If you check in the households of most Malawians, you will find that the cleaning detergents commonly in use are made in Zambia.
What happened for Malawi to be in this situation where literally everything, including toothpicks and some vegetables, have to be imported, in the process draining foreign exchange reserves?
To get to the bottom of it, one needs to analyse the mindset of a local Malawian investor—both individuals and corporate. Risk taking is a problem.
For individuals, many opt to stay in the comfort zone of employment while some home-grown enterprises have struggled to survive, thereby allowing foreign nationals to take control of the proceedings. This is where the problem starts as the foreign “investors” have little or no interest in the country’s development,
Risk taking demands knowing and understanding that investing is a 50-50 affair where one can hit or miss, but still proceed.
From our conversation, I learnt that most Malawians, including some corporates, want 100 percent success rate, as such, they prefer safer avenues such as investing in construction of shopping malls and town houses as well as Treasury Bills than to set up a manufacturing entity for fertiliser, for instance.
This got me thinking aloud on what, for instance, have some of our home-grown “big” conglomerates have invested in the past 10 or so years? Off my head, I noted that some of them survive on Treasury Bills earnings while others simply dispose off struggling subsidiaries instead of devising business turn-around strategies.
Not all is lost, though, as a few others such as Old Mutual Malawi seem to be on the right path through initiatives such as macadamia farms, public university accommodation investments and interests in telecommunications. FDH Financial Holdings Limited, majority shareholder in FDH Bank, is also coming of age and promising.
Ironically, while the Asian business community supports each other’s growth, many indigenous Malawians work hard to pull each other down, kusapatsana ma cross. Examples abound of successful Malawian-owned ventures being brought down either based on political affiliation or otherwise, the tifanane syndrome.
From the look of things, there also appears to be big egos among both corporate and individuals alike, thereby contributing to the poor showing. The big egos are manifested by a lack of partnerships within sectors that can make a difference.
In every investment an investor exposes themselves to different types of risks such as market risks where value declines due to economic developments like currency devaluation or other events that affect the entire market. The other factors include interest rates on loans used in the investment, when there is a change, currency and equity risks.
There is also liquidity risk where a business is unable to sell investment at a good price to get money as and when one wants it. This situation forces one to let go at a give-away price.
If the Malawi economy is to grow, everyone should play their part. We cannot continue expecting others to develop our economy while we fail to put our own money in any project. Tame the egos, team up in good faith and make a difference.
Data from the Reserve Bank of Malawi shows that the country requires $3 billion per year to finance its imports bill. Now this is a colossal amount that begs the question: How much of the $3 billion to cater for imports does Malawi generate? The answer is that it is just about $1 billion, meaning there is a $2 billion deficit or shortfall. This is where the problem begins!
Each month, Malawi spends an average of $250 million on imports. Thus, at $187 million last year in annual revenue from tobacco, the country’s major foreign exchange earner is not even enough to cover one month’s import bill.
To some extent, the perennial forex shortages reflect our authorities’ penchant for quick-fix solutions to resolve complex issues at the expense of sustainable lasting solutions. This is not helpful as it only briefly eases the pain, but does not heal the wound.