Shocks haunt Malawi FDIs

External and climate-induced socks continue to negatively affect Malawi’s bid to attract foreign direct investments (FDI), a situation that is giving regional counterparts advantage, the Malawi Investment and Trade Centre (Mitc) has said.

Mitc’s explanantion follows published United Nations Conference on Trade and Development (Unctad) data showing that FDI inflows to the country continue to fluctuate, with Malawi’s FDI stock below that of its peers.

In a written response, Mitc chief executive officer Paul Kwengwere said because of the back to back shocks, Malawi’s  attractveness to restrictiveness in FDI remained low as the country was pushing to get the economy back on track.

He said: “Malawi experienced various shocks from 2020 to date, from Covid-19, to cyclones in the recent years. This had an impact on our economy; hence, giving our regional counterparts an advantage.

“Various international agencies conduct country scorecards that measure country restrictiveness in attracting FDI. This is usually the first point of call for investors when they want to invest in any particular country. If the score is low, the less likely a country will attract FDI.”

Kwengwere said in addition, most of the country’s regional counterparts are advanced in the development of special economic zones (SEZ), which essentially drives their economies by attracting investors to the zones. 

“The SEZs tend to have specific incentives to attract FDI, in addition to normal incentives. Malawi has just had its SEZ Act in place early this year,” he said.

Meanwhile, Malawi has launched SEZ in Lilongwe with the ones in Blantyre and Mzuzu undergoing development phase.

Among others, the Act empowers Mitc to request land from the Minister of Lands to be developed into SEZs and also prescribes that the land acquired can be used as agriculture and food zones, business parks, dry ports, export promotion zones, information and communication technology parks and science and technology parks, among others.

The SEZ Act is in addition to the Investment and Export Promotion Act, which empowers Mitc to enhance the role of One Stop Service Centre in investment facilitation.

Mitc is also banking on government’s strategic focus on the Agriculture, Tourism and Mining (ATM) strategy, including energy as an enabler, supported through deliberate policy reforms that will enhance and improve the business environment in the country.

Last week, Unctad data showed that FDI inflows to the country continue to fluctuate, with figures showing that from $77 million (about K134 billion) in 2018, the inflows peaked at $252 million (about K441 billion) in 2020 and then eased to $206 million (about K361 billion) at the end of 2023.

The data, contained in the World Investment Report, also showed that at $1.6 million (about K2.8 billion), Malawi’s FDI stock is below that of peers South Africa at $124 million (about K217 billion), Mozambique at $57 million (about K99 billion), Zambia at $15 million (about K26 billion) and Zimbabwe at $7 million (about K12 billion).

Earlier, National Working Group on Trade Policy chairperson Frederick Changaya said while the small market size of Malawi and endowment levels of natural resources do not help matters, the economic environment has made it even worse to attract more FDIs while in its recent Country Private Sector Diagnostic Report, the World Bank said Malawi has one of the lowest investment rates in the region in part due to exogenous factors.