Attractive and steady foreign capital incentives in manufacturing are being touted as key to solve the country’s balance of payment challenges that emanate from low production levels and high foreign exchange demand.
The observation comes at a time Malawi is continuously failing to generate foreign exchange to support her economy which requires $3.2 billion per annum to pay for pertinent imports like fuel, fertiliser, pharmaceuticals, among others.
Some experts have since concluded the country must lure foreign investors who have both financial and technical capacities to significantly invest in export-oriented sectors like manufacturing which could solve forex issues in the long-term.
“We need to recognise the urgency to attract foreign investments in activities that generate forex for the economy to function and grow. Forex generating activities need capital and knowhow that unfortunately Malawi has very little of.
“If we do not open up our economy to foreign capital our trade imbalance (lack of forex) will only get worse and we will be unable to sustain our current GDP, let alone grow the economy,” said Blantyre-based economist who did not want to be known.
The observation also comes weeks after the Mozambican government w o o e d M a l a w i a n businesses to invest there, outlining special incentives in export-oriented sectors as the country wants a vibrant industry to support the growing economy.
I n a n i n t e r v i e w, deputy president of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Arnold M’bwana observed that the government is still assessing the incentives to offer foreign investors as evidenced by the instability of incentives that were offered.
“Go v e r n m e n t i s assessing the incentives on a regular basis because if you look at the incentives, they are not necessarily casting stones where they have been for the last five years.
“The issue we see is that the business environment is generally tough because of for ex shor tage,” M’bwana said.
According to M’bwana, the forex challenge is also a hindrance for foreign investors because such a venture requires foreign exchange liquidity to repatriate some of the profits.
Mzuzu University economics lecturer Christopher Mbukwa said while Foreign Direct Investments (FDIs) play critical roles in boosting the country’s productivity capacity through technology transfer and access to international markets, it should be done alongside the thriving local sector.
He said: “We should not make it difficult for local investors because we are wooing international investors. There must be a balance; as we build a favorable ground for FDIs, we should ensure that our local investors do not find investing difficult.”
Mbukwa has, however, said although he has seen many FDI incentives during budget presentation, he is not aware of their implementation suggesting that most of them might not have achieved their objectives.
Ministry of Trade and Industry spokesperson Patrick Botha was not immediately available for comment but the Malawi Investment and Trade Centre (Nitc) says in its website that the FDI inflow started peaking up in 2022 at $188.6 million (K330 billion) from the Covid-19 period.
It said the recently-launched Malawi 2063 which is anchored on agriculture commercialisation, i n d u s t r i a l i s a t i o n a n d urbanisation; Mitc has re-a l igned i t s inves tment promotion agenda to ensure that the FDI being attracted is responding to attainment of the set objectives.
“Some of the reforms undertaken are; issuance of a wide array of fiscal and non-fiscal incentives which apply equally to domestic and foreign investors; streamlining investment processes to improve the ease of doing business in the country,” it says.
