Small, medium businesses rue devaluation

Small and medium-scale business owners say the 44 percent devaluation of the kwacha is likely to slow down the growth of their businesses and result in job losses.

In separate interviews, they said the devaluation means spending more money on products and labour, but getting less in return.

However, some of the businesspersons told Nation on Sunday that the devaluation has the potential to expand their customer base depending on the type of businesses and services they offer locally.

Bvumbwe-based MD Metal Works managing director Protazio Chinawa said in an interview the devaluation has brought anxiety among them.

Chinawa, who owns the metal welding shop and has close to 15 employees, said devaluation has led to higher prices on the market.

He said: “At the moment, the devaluation has escalated prices of materials. They have more than doubled.

“To me as a small-scale business person who is also trying to create employment for my fellow Malawians, it means that my business will not grow as I envisioned because more will be spent on production, but not get profits.”

Chinawa said he might be forced to reduce the workforce to sustain his business.

He described the devaluation as unfortunate despite government calling it a necessary evil.

Chinawa doubts the cushioning mechanisms would rescue such small-scale businesses in the long  term.

Founder and director of Zomba Woodworks furniture manufacturing, welding and fabrication, Charles Tikhiwa, said in a separate interview that medium-sized businesses are still in shock following the devaluation.

Tikhiwa, who is into farming and hospitality business and also owns Chapter Three Enterprises, said the timing of the devaluation was wrong.

To him, Tikhiwa said the best time for the devaluation could have been towards the harvest period instead of the current farming season when people are buying farm inputs and at the same time some are struggling to buy food during a lean season.

“I don’t know how I will be able to move on from the situation. Let’s say, for example, I was paying my labourers K60 000, which means I have to start paying them at least K90 000 so that they can also survive. But then how will my business survive?” said Tikhiwa.

Similarly, co-founder of Cubix Robotics, a digital manufacturing company of 3D machines, Chisomo Thezhi Kanthema, said in an interview that the devaluation has ballooned their spending.

“[The devaluation] has affected our budgeting so much because we now have to dig deeper to purchase certain products,” he said.

But Kanthema said they see an opportunity with the devaluation as it may make their products competitive compared to imported ones.

Following the devaluation, President Lazarus Chakwera on Wednesday evening unveiled a tranche of austerity measures in a televised public address.

Among others, the austerity measures include freezing all international travel and cutting by 50 percent top public officers’ fuel entitlements to counter the economic slump.

During the public address, Chakwera also announced that the International Fund (IMF) approved a $174 million (about K295 billion) four-year Extended Credit Facility (ECF) for Malawi, which he said would unlock foreign aid necessary to revive the ailing Malawi economy.

But governance commentator Mavuto Bamusi faulted  Chakwera in an interview with Nation on Sunday, accusing him of deliberately skipping practical hardships that will come with the devaluation, such as a rise in school fees, shortages of medicines in hospitals, increased uncertainty for businesses, higher bus fares and the cost of living in general.

He said: “He could not mention how the devaluation, ECF and austerity measures will push more people into poverty, hunger and deep inequalities.”

In his statement, 2025 presidential aspirant Milward Tobias, said Chakwera should foster accountability and efficiency in public service and ensure projects, especially those that are donor funded, are expedited stressing that they are a source of foreign exchange.

“Further, creation of an economic and governance environment that inspires confidence in people and business entities is fundamental for the development interventions to materialise,” he said.

Tobias, who is leader of Nzika Coalition, said clear reforms must be announced specifically on removing wastefulness so that resources are freed up to support production.

He said: “A national marketing strategy should be developed which will guide identification of markets and their respective requirements on which basis production will be made.”

Reserve Bank of Malawi governor Wilson Banda justified the move to devalue the kwacha on the basis that there was a supply-demand imbalance and mismatch in the exchange rates in cash and telegraphic markets.

Following the devaluation, the kwacha is now selling at K1 700 against the United States dollar in authorised dealer banks from K1 180.

Before the 44 percent devaluation, the kwacha was devalued by 25 percent in May 2022, and since January this year, the local currency has depreciated by 13.1 percent through forex auctions, losing about 82.1 percent.