K500 billion investment deals?

Hon. Folks, having messed up donor aid, bankrupted emerging local businesses by accumulating K150 billion arrears on supplies, exacerbated suffering by heavily taxing poverty, government charm offensive to woo foreign direct investment (FDI) could be the game changer.

But that depends on whether Malawi has good enough potential to make a private investor—who is probably more sceptical, more sensitive, more demanding and more neo-colonialistically exploitative than the donor—to go beyond offering the un-binding promises to actually off-load their sweet-smelling dollars on our shores.

Which is why we should not read too much into the K500 billion ($1.1 billion) so-called investment deals announced at the end of the Malawi Investment Forum (MIF) on Tuesday evening.

The actual investment could be anything from zero. Certainly it would be something of miraculous proportions if K500 billion capital is invested in various Malawi-based enterprises as a result of MIF.

It is not as if attracting K500 billion investment in a year is an impossible feat. Rwanda, which is landlocked like Malawi, is ranked 9th in attracting foreign capital inflow in sub-Saharan Africa.

Last year, FDI in Rwanda was estimated at $1.6 trillion and the figure is expected to rise to $1.8 trillion this year. Ghana, Kenya, Uganda are some of the countries who are sharing the limelight with sub-Saharan giants—Nigeria and South Africa—in attracting foreign capital.

All our neighbours—Tanzania, Zambia and Mozambique—are also way ahead of us even in attracting the so-called “cross border” FDI that comes as firms such as Shoprite and Game Stores seek new markets in the region.

The point I am trying to make here is that almost every country in Africa is scrambling for FDI. There is no denying that Malawi’s beauty makes her stand out in the pack, but that is an attraction more for back-packers than investors.

Ironically, even back-packers trickle in in numbers that make a us a flop in tourism and the responsible minister blames it on outdated law (Business Review, The Nation, July 2 2015, page 2).

So, what should be the next step after MIF to make FDI a reality for Malawi? Obviously, MIF has shown one strength— Malawi, though land-locked, has great potential to attract foreign investors in various sectors.

Buoyed by the prospects of belonging to a single free trade area comprising Sadc, Comesa and EAC (East African Community)—an advantage equally applying to all member countries—we can attract investments hitherto considered too big for our domestic market which keeps on dwindling ever since the 2012 reforms collided with the 2013 Cashgate, resulting into a spiral of declining buying power for the worker.

While the donor demands good economic and political governance, the investor will take that as basic. Creation of a conducive business environment is much harder.

For example, investors are averse to red tape, exactly the problem that made JIT walk out on us last year. Investors also don’t like rigid labour laws that can make them stick up with deadwood by making it too risky to fire.

The cost of doing business, corruption perception rate, world competitiveness, economic freedom and human development index (HDI) are also some factors any investor but more so big investors will consider when deciding which country to invest in.

Fortunately for us, our lesson has not been limited to a case where an investor changes mind after being incensed by too much bureaucracy. We have also witnessed big companies such as Unilever and BAT either downsizing or relocating their operations to another country.

That should teach us that attracting investment is one thing, “nurturing” that investment is another challenge.

Of course, much of what matters in attracting FDIs is the burden of the public sector, a headache for APM and his team at the Capital Hill. These are folks who must do what it takes to assure the investors that there shall be political stability, the rule of law, no corruption and generally a low risk environment.

But the unrealistic expectations of the people, often fanned by some politicians or members of the civil society, can also serve as an impediment to investment. Are we, for example, surprised that after the hostility shown to Paladin at Kayelekera in Karonga, Globe Metals are now saying they can continue with the niobium mining project in Mzimba only if government shoulders 90 percent of the K180 billion ($400 million) capital required?

Where on earth do communities demand whole development of their communities—schools, hospitals, potable water, jobs, etc—from an investor? Aren’t these the reason why government is there to collect our taxes?