As a fishing village in China, Shenzen, turned into the world’s largest tech hub, Malawi hopes to replicate the concept by turning a bare land at Magwero Village in Lilongwe District into a catalyst of the country’s export drive.
For the Minister of Trade and Industry Sosten Gwengwe, the launch of the first-ever industrial park under Special Economic Zone (SEZ) framework on June 1 2024 will culminate into actual factories in a year’s time on its five-year journey to full-scale.
“By this time next year, we will bring you back here on a tour of the first factories at this place,” Gwengwe promised President Lazarus Chakwera at the event that marked the beginning of the project that is expected to transform the bare land into an industrial town.
African Export and Import Bank (Afreximbank) president Benedict Oramah said in an interview that within weeks, works on the site will start with the laying of bricks in what he believes is the beginning of the country’s industrial revolution.
Malawi’s manufacturing sector only accounts for about 10 percent of the country’s gross domestic product (GDP), according to the Reserve Bank of Malawi.
Exports have dropped from a record $1.5 billion over a decade ago to around $1 billion, letting the trade deficit to widen to about $2.5 billion as demand for imports continues to grow, so is the population that drives it.
The Afreximbank is spending $900 million in facilitating the development of industrial parks across Africa and others have already been established in Benin, Togo, Ivory Coast, Nigeria and Chad, among other countries, with statistics in some cases showing exports quadrupling.
The Magwero Industrial Park is being implemented in partnership with a company called Arise, an industrial parks specialised firm that Oramah said will not just operate the facility by providing logistical services to manufacturers, but will also invest in some of the first factories to be set up at Magwero.
“We have added Malawi on the list of countries where we are practically demonstrating what is possible, developing industrial infrastructure that will help us deliver that mandate of transforming Africa from a mere raw material source that exports jobs to an economy with value chains that create jobs,” he says.
In the next five years, Magwero Industrial Park is expected to attract over $685 million in foreign direct investment (FDI) for manufacturing ventures that are expected to generate additional foreign exchange amounting to about $600 million, creating about 15 000 jobs.
For Arise, this project intends to bring a facility that will enhance industrialisation, supporting small, medium to large-scale enterprises in the manufacturing space.
“With project components ranging from industrial zones to residential areas and plug-and-play infrastructure for small and medium enterprises, the park is poised to generate substantial economic growth and employment opportunities,” said Gogan Gupta, the chief executive officer of Arise.
According to Afreximbank regional chief operating officer Humphrey Nwugo, chief to successful SEZ as observed in Japan, China and Singapore, is policy consistency and State approach in the industrialisation with establishment of a well-functioning export trading company.
The Afreximbank has pledged to move with Malawi in the implementation of the Magwero Industrial Park, being developed with local partnership of Export Development Fund (EDF) and Nico Holdings plc, until it starts bearing fruits.
With all this confined at an area of 440 hectares, there is something special that qualifies it as a SEZ, so are the other ones to be developed at Chigumula and Matindi in Blantyre and Dunduzu in Mzuzu.
A SEZ law that was passed by Parliament in December 2023 sets off the country towards realisation of the SEZ-based industrial parks after Afreximbank supported a feasibility study five years ago, according to the bank.
The law provides flexible operating conditions, according to Deputy Reserve Bank of Malawi govenor, McDonald Mafuta Mwale, who outlined the incentives at the Business Round Table event.
He says the incentives also spread to commercial banks which will not be constrained on land exposure limits and credit concentration limits when it is about borrowers operating under the SEZ framework.
He says the SEZ Act, section 41, provides that the SEZ developer, in this case, Arise, SEZ operator or enterprises shall be exempted from quotas, trade restrictions, or trade prohibitions on all imports or exports that they are trading in.
“This includes exemptions on trade control requirements for the 30 percent mandatory retention for export proceeds, reconciliation conditions and all the requirements that apply when it comes to exchange controls,” says Mafuta Mwale
Section 33 of the Act also recognises any purchase from the SEZ as an import and all sales to SEZ as exports.
“Section 51 of SEZ provides that money may be moved into the SEZ and out to the rest of the world without having to obtain any approvals,” he says.
However, there are still more measures and systems to effectively operationalise the SEZ and ensure the intended results start to show.
“Malawi needs to expedite the work that is going on that is being spearheaded by the EDF to establish Malawi Export Trading Company, said Nwugo.
He adds: “The first action that we did with our partners, Arise is to start with the market. That is the first thing that we need to do.
“You don’t start with the supply side. We have seen a number of countries, including Malawi starting from supply side and the end is not good.”
Afreximbank also urges establishment of public private partnerships (PPPs) while investing in local farm inputs manufacturing to ensure reduced cost of production in agriculture to help lower prices of manufactured goods under industrial parks SEZ.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) feels there is still need to properly identify priority products while facilitating a lot of collaboration among players, suggesting skills and research development is vital to ensure quality of manufactured products.
“When you talk about exportation you want to match it with what others are making outside so yo u need people from universities to be part of it,” says MCCCI president Wisely Phiri.
“To be honest it’s a brilliant idea and we look forward to be part of it and we will fully support it.”
However, according to Arise, the park will have its own skills development and product testing centres to support manufacturers, which will also enjoy 24- hour connection to power, water and other utilities for uninterrupted operations.
