Malawi’s currency shortages continue to impact local manufacturers, with Chibuku Products Limited and Food Lovers Market Gateway Mall being the latest casualties.
In a press statement released on February 21, Chibuku Products Limited , the producer of Super Maheu, announced that supply disruptions caused by forex shortages have hindered the company’s ability to import straws, which are included with bottles of Maheu.
In an interview, Chibuku Products Limited marketing and trade execution manager Henry Mbweza further revealed that attempts to secure forex through local banks have been obstructed by the high parallel market exchange rate, currently averaging K5 000 per US dollar.
“Despite our efforts to source locally, we’ve found that no local supplier produces straws,” he said
He added that parallel market rates would significantly raise production costs, forcing the company to increase the retail price of Super Maheu beyond the recommended K1 050.
“Furthermore, the unavailability of flavors and [packaging cartons for Chibuku] may compel us to halt production, which would unfortunately lead to staff layoffs. The gravity of this situation is profound,” said Mbweza.
On their part, OneStep Trading (Pty) Ltd, operators of the Food Lovers Market franchise at Gateway Mall, announced yesterday that they will be winding down their operations compounded by the prevailing and challenging trading environment, including the severe forex shortages and diminishing consumer disposable income.
In a statement, the firm said despite management’s best efforts to navigate these challenges, “the business has become unsustainable, incurring significant financial losses at an unsustainable rate”.
“As a result, the shareholders have passed a resolution to wind down operations in an orderly manner,” reads the statement in part.
The development comes just a week after the African Development Bank identified the Malawi kwacha as the worst-performing national currency among countries that do not rely on natural resource exports.
Ironically, the gap between exchange rates in formal and informal markets has continued to widen, with the dollar selling at K1751 on the formal market and as much as K4 000 on the informal market.
Some suppliers report purchasing the greenback at rates as high as K6 000. The forex shortage stems from Malawi’s heavy reliance on imports, which has intensified demand for foreign currency while export earnings remain limited.
The perceived instability of the kwacha has led local small and medium enterprises to call for aligning of the formal exchange rate with the parallel rate to increase forex supply in the local market.
However, Reserve Bank of Malawi Governor McDonald Mafuta-Mwale stated in an exclusive interview with Zodiak Broadcasting Station that the central bank would not pursue the parallel market to stabilise the local currency or increase forex supply in the formal market.
Mzuzu University economics lecturer Christopher Mbukwa supported the RBM’s stance against aligning with the parallel rate, stressing that the only way to stabilise the kwacha against major foreign currencies is to achieve a balance where “the supply and demand for forex are equal.”
In a separate interview, Scotland-based Malawian economist Velli Nyirongo observed that speculative prices in the parallel forex market could create a self-fulfilling prophecy, encouraging people to hoard forex and, in turn, exacerbating shortages and widening the gap between official and parallel exchange rates.
To stabilise the kwacha without directly targeting the parallel market, he urged the government to consider adopting a more flexible exchange rate policy. However, he noted that this option does not appear to be under consideration.
