Investment and portfolio management firm, Alliance Capital Limited, has asked government to consider the current economic environment together with stipulations set up for businesses if the country is to diversify the economy which would ultimately lead to development of new industries.
In a published market analysis report, the local portfolio management firm noted that the Malawian economy does not provide a favorable environment that allows for businesses, mostly Small and Medium Enterprises (SMEs) to thrive under.
Recently, the World Bank Group ranked Malawi as the third topmost reformer in Africa on the Doing Business Rank, having implemented four reforms that improved the business environment in the areas of dealing with construction permits, getting credit, trading across borders and resolving insolvency.
On the overall, the country jumped 23 steps from position 133 last year to position 110 this year, getting closer to the 100 on the index.
However, the firm notes that while the ease of doing business has various implications for direct investment, local businesses are no exception to the processes, rules and regulations set by government.
“Rules and regulations should help in promoting a friendlier business environment. However, as far as Malawi is concerned, they tend to have the opposite effect and instead hold local businesses back from their entrepreneur ambitions,” reads the report in part.
Malawi continues to have a dualistic economy, with very large and very small business and a missing ‘middle-size’ which has affected progress. According to the World Bank’s Country Economic Memorandum (CEM), the absence of mid-size firms in Malawi indicates that systemic constraints are holding back private sector development.
“The policy environment in Malawi is biased toward larger firms, partly due to the enduring legacy of heavy state intervention, further exacerbating the limited entry and success rate of new companies that would contribute to the diversification of exports and of the economy,” reads the CEM in part.
In an interview, Small and Medium Enterprises Association (Smea) president James Chiutsi urged the need to develop strategies that maximises the efficiency of SMEs as well as cooperatives and other business groups.
“We need the bigger firms to create business linkages with SMEs and we need to link SMEs with the international environment so that they can access skills and ultimately markets,” said Chiutsi.
But director of SMEs and cooperatives department in the Ministry of Industry, Trade and Tourism Wiskes Nkombezi is on record as saying government plans to continue engaging all stakeholders to ensure that financing to SMEs using innovative means is facilitated and that the cost of borrowing is reduced.
“The ministry will continue working with cooperating partners and other stakeholders to improve financial inclusion and access to finance,” he said. n