Malawi obsessed with foreign investment
On his return from the Southern African Development Community (Sadc) meeting in Zimbabwe recently, President Peter Mutharika gave ministers a 30-day ultimatum to explore areas of investment in their ministries. Mutharika reiterated the same message when he returned from the US-Africa summit. Apparently when Mutharika was talking about investment, he had in mind foreign direct investment (FDI). His predecessors Bakili Muluzi and Joyce Banda often talked about attracting foreign investment.
FDI is like a panacea for our economic problems or we cannot develop without it. A number of economic commentators have also written a lot about Malawi attracting foreign investment. Some of them have even accused the country of not being investment friendly and that it takes too long for investment to be registered. They have compared Malawi to other countries which have attracted FDI better because it is easy to register a foreign company.
While the observation is valid, registering foreign investment should be done carefully. Procedures must not be compromised. To rush registering foreign companies because you want their money can expose the country to undesirable elements. Some foreign investors are crooks and may have ulterior motives for investment. They are also a huge drain on foreign exchange and their investment does not benefit the local people as expected. Worse still, attracting foreign investment is not as easy as it sounds. Foreign investors look at so many factors before they decide to invest. The question is: are our leaders waiting for foreign investors to develop the country? Suppose the investors are not forthcoming, what next?
The development of Malawi should not depend on foreign investors, let alone donors. Malawi needs to look at local investment. Through the Private Public Partnership Commission (PPPC), government should vigorously look for local investors to unlock the great potential that Malawi has. Being an agricultural country, government should set up agro-based manufacturing industries across the country in partnership with the private sector. So far, the private sector is not doing enough to help government develop the country. Yet, they make billions in profits, which they share as dividends, but are not investing in anything tangible.
It is unbelievable that districts such as Mwanza and Neno do not have a juice manufacturing plant to utilise the abundant tangerine fruits they grow. Equally, it does not make any sense for a country that grows cotton to have no single clothes manufacturing factory. We have a critical shortage of desks in schools when we have Chikangawa forest, which is stripped of trees and exported to Kenya, Tanzania and Somalia. We are unable to make tyres or tubes when we have a rubber plantation in Nkhata Bay. We grow a lot of tobacco, but we struggled to have any factory that manufactures cigarettes.
President Mutharika should ponder on Zimbawe President Robert Mugabe’s advice that African countries and SADC member States should add value to its agriculture produce for exports. He was saying do not export raw materials, but use the raw materials to produce finished goods, which should then be exported.
If government is serious about development, these are the issues to consider; foreign investment should come second. Let’s develop ourselves. The Malawi Revenue Authority (MRA) collects billions of kwacha every month, but a large chunk of the money ends up in individual pockets, misused or stolen through dubious transactions.
Government should use some of this money productively by setting up agro-based industries. They should take a cue from the Chinese government which actively participates in the economy. The Economy Watch reports that “the Chinese economy is dominated by State-owned enterprises (SOEs) which account for 46 percent of its industrial output. As of 2012, large State-owned enterprises produced over 50 percent of China’s goods and services; and employed half of the nation’s labour force. Today, China is the world’s producer of agricultural products-ranking first in the world for rice, wheat, potatoes, sorghum, peanuts, tea, millet, barley, cotton, oilseed, pork and fish”. n
True indeed,Malawi’s development should have a microscope on local industries.When you look at the transformation of South Korea,government had a strong hand in creating large corporations that would drive the Korean economy.It facilitated the sourcing of liquidity funding by acting as the middle player between companies and banks abroad and within.On one hand these corporations such as Hyundai,Daewoo,Kia,Samsung,Hangkook,and others grew in export revenue while on the other, stiff competition from foreign companies was controlled making South Korea bring in more revenue from its domestic companies than losing it from foreign companies. The understanding here is that this Asian country encouraged scientists,engineers,technocrats,and business people to form conglomerates under government’s auspices and be rest assured of funding for the companies’ operations,,and the arrangement worked.Malawi should do the same.I have always visualized that if companies in cotton,coffee,tobacco,soy bean,rubber,gemstones,fruits,rice,maize,tea,and timber were created and involved in value-addition,Malawi would grow beyond recognition.At the same time emphasis should also be on technology companies like the Koreans and Taiwanese have done.
Foreign investment is good especially if it compliments local investment but not when it holds at ransom the country’s GDP.A company can come and invest in Malawi based on current prevailing economic conditions and can decide to pull its resources out for a more conducive environment elsewhere because such a company has only got eyes on profits not development of a country. A local company will only strive to expand and not closing.The Malawian government through Reserve bank has to set parameters for foreign funding of local companies for them to grow large.Government has to identify areas of immediate growth and economic impact and collaborate with local investors to set up companies that would be funded through loans from abroad and within .Malawi needs several companies like Malawi Mangoes company and the country will grow tremendously.