Covid-19 dampens FDI inflows—survey

Findings of a joint survey by three government institutions show that the economic slowdown due to travel and other restrictions occasioned by the Covid-19 pandemic negatively affected the country’s foreign direct investment (FDI).

The 2021 Malawi Foreign Private Capital Survey was jointly carried out by the National Statistical Office, the Reserve Bank of Malawi and the Malawi Investment and Trade Centre (Mitc) from April 25 to May 20 2022.

The survey found that due to Covid-19, total pledged new investment declined by 85.8 percent to $174.8 million (about K181 billion) in 2021 from $1 231.1 million in 2020 (about K1.3 trillion).

During the review period, FDI net inflows or the value of inward direct investment made by non-resident investors in the reporting economy, declined by 55.3 percent from $209.4 million (about K217 billion) in 2020 to $115.9 million (about K120 billion) in 2021.

Reads the survey in part: “The electricity, gas and water supply industry was projected to attract the most investment in 2021 with 41.4 percent of the total investment pledges.

“This was followed by the manufacturing and wholesale and retail trade industries with 33.8 percent and 9.8 percent of total investment pledges, respectively.”

Mitc chief executive officer Paul Kwengwere said they are working towards adapting to new ways of doing investment promotion and advocating for more business reforms to attract quality FDI even in the midst of such business disruptors.

He said: “We understand that Covid-19 has completely changed the business landscape, especially in investment promotion. On top of that, the current war in Ukraine is also impacting the flow of FDI.

“We are doing more investor-targeted initiatives this year and we have prioritised to facilitate more business-to-business meetings as well as undertaking targeted investment missions.”

Catholic University of Malawi head of economics Hopkins Kawaye said in an interview on Tuesday, the country is losing out on the benefits of increased FDI inflows, citing job creation, provision of tax revenue to government and increased exports.

He said: “The country needs to make sure that the business climate is not challenging by ensuring that energy [electricity] is readily available as it is a catalyst for production, interest rates are low and that corruption is reduced as it increases transaction costs.”

Categorised by country of origin, most of the pledges of FDI registered in 2021 came from the United Kingdom at $81.3 million (about K84 billion), representing 46.5 percent of the total for the year followed by Canada at $12.46 million (about K12.9 billion) and South Africa at $12.32 million (about K12.8 billion) representing 7.1 percent and seven percent, respectively.

During the review period, major sources of FDI net inflows into Malawi came from Mauritius at $49.6 million (about K51.4 billion), South Africa at $43.8 million (about K45.4 billion) and Mozambique at $19.1 million (about K19.8 billion).