AfDB strategy targets private sector growth
The African Development Bank five year country strategy will support the foundations for private sector-led growth by investing in public infrastructure to unlock private investment, promote diversification and build economic resilience, the bank said.
In its Country Strategy Paper for 2018 to 2022 published on Monday, the AfDB said to reduce Malawi’s fragility and strengthen resilience to exogenous shocks, the new interventions lined out in the strategy will address infrastructural bottlenecks that limit private sector and business development, and drive economic transformation and small industries to support diversification and job creation.
The Strategy proposes two pillars, to expand and improve infrastructure and broaden economic development.
The investment in infrastructure development through energy and transport will help expand and close infrastructure gaps and strengthen regional connectivity, market access, and private investment, the report reads.
While investment in economic transformation is expected to strengthen agriculture value addition and develop water infrastructure with the objective to broaden diversification, support agro-processing and small industry development to build and strengthen resilience.
“The strategy is therefore designed to address issues of economic, social and climate resilience,” reads the report in part.
Compared to the previous strategy, the target sectors have been reduced from 7 to 4.
Currently, Malawi has a weak infrastructure platform, which hinders private sector development. The country was ranked 28 out of 54 countries according to the AfDB Africa Infrastructure Development Index in 2016.
In addition, the country’s infrastructure score of 18.4 is far lower than the SSA’s average of 35. While Malawi has performed relatively well in improving water and sanitation delivery, comparisons across sectors reveal that there is still a huge backlog in the ICT, transport and electricity sectors.
This points to the fact that clear prioritisation and decisive actions followed by investments are required in these areas to increase economic growth in the country, according to the report.
“Development is constrained by the high cost of transport. It is estimated that the ratio of transport costs for imports for low value goods is 55 percent of the landed cost, compared to the sub-Sahara average of 20 percent, and the cost of transportation for exports is as high as 60 percent.
“Main drivers for high transportation costs are attributed to poor infrastructure; long distances to sea ports; long wait-times and unwieldly formalities at ports and border crossings; lack of competition due to small haulage industry; protective policies in neighboring countries; poor logistics services; and use of old vehicle fleets,” the report reads.
Low investment in infrastructure means the economy has remained largely services-based, and the level of industrialisation has slowed down.
According to the bank, employment in industry has steadily declined while that of the services has increased.
“The concern is whether the service sector, which is normally high-skill intensive, is able to absorb the labour released from the industrial sector. The fall back, will be the agricultural and the informal sectors, where most of the unskilled labor may find itself,” the report notes.
Finance Minister Goodall Gondwe has often spoken on the need for government to move fast if to realise the full potential of industrialisation to reduce poverty.
Last year he said he feels ashamed every time he goes to his village to see people living in grass-thatched houses and drinking water from same water sources with animals.
“It is shocking. I can have a television, good furniture in my house, but if the majority cannot access the basics, then we are failing in our job. This is how people lived 40 years ago,” said Gondwe. n
