Foreign exchange shortage has taken a toll on employers, with an average of three companies per month seeking guidance on downsizing.
According to Employers Consultative Association of Malawi (Ecam), the development is attributed to reduced production and demand for goods.
In an interview on Thursday, Ecam executive director George Khaki said companies are unable to import raw materials and finished goods while those able to source the forex from “other sources”, are buying at extremely higher rates
He said: “Forex shortages mean that companies are unable to import raw materials and finished goods; hence, not producing to full capacity and hence they have to downsize due to reduced production capacity.
“For companies that are able to source the forex from other sources at extremely higher rates than the official rates, they have to adjust prices of their goods and services accordingly. This makes the goods and services less affordable and less people are buying these.”
Khaki said low demand for goods and services makes companies reduce production, leading to downsizing of staff to match the productive capacity.
In terms of jobs lost due to retrenchments, he said the Ministry of Labour would be in a better position to provide the figures.
A recent Malawi Confederation of Chambers of Commerce and Industry (MCCCI) survey shows that over 80 percent of businesses have reported access to forex as one of the key challenges affecting their operations, leading to operating capacity of 50 to 75 percent below optimal levels.
The 2024 Malawi Business Climate Survey revealed that the scarcity of foreign currency and exchange rate volatility were the top challenges, scoring 9.43 out of 10, highlighting the critical nature of foreign exchange issues in facilitating effective business operations.
As a result of these challenges, MCCCI data shows that only 34.8 percent of businesses reported positive performance in 2024, compared to 42 percent in the 2023 survey.
Meanwhile, 35 percent of businesses rated their performance as fair while 29.4 percent indicated poor performance, an increase from the 23 percent recorded in 2023.
Ironically, Reserve Bank of Malawi (RBM) has instituted several short-term measures to support the importation of strategic commodities in the face of forex scarcity, including the introduction of foreign exchange auctions and the reintroduction of the mandatory sale of 30 percent of export proceeds effected in August 2021.
The government introduced the Foreign Exchange Control (2024) regulation in December 2024, which requires public institutions to hold foreign currency accounts at RBM with a mandatory conversion of 80 percent.
However, in a brief interview yesterday, Labour Commissioner Hlalerwayo Nyangulu said the ministry has not received any communication from firms regarding downsizing due to forex challenges.
However, Minister of Finance and Economic Affairs Simplex Chithyola Banda is on record as having said government is in bilateral negotiations to unlock foreign currency inflows.
RBM Governor MacDonald Mwale earlier encouraged enterprises and individuals to utilise credit reporting and asset-based lending, saying this could enable access to capital as private sector players could easily borrow for production using movable assets like livestock as security.
