Why is our investment climate gloomy?
Yet another survey on investment destinations and businessenvironment in general has poorly ranked Malawi.
Through its banner headline last Thursday, Business Review said it all: ‘Malawi riskiest investment destination in the region’. Now this is serious. In fact, it is no laughing matter.
Perhaps, a good starting point to see where, as a country, we are getting it wrong is to find out why the Euromoney Country Risk Survey has rated our neighbours, notably Mozambique, Zambia and Tanzania as better investment destinations alongside Kenya, Angola and Namibia with Botswana and South Africa as the best in the region.
What is it that the “shining stars” are doing which Malawi is failing to do to impress the forum of 400 international economists Euromoney used to analyse over 185 economies?
In the survey, Malawi is grouped in tier five—the worst among five categories. Now that is not an enviable category as tier five economies are described as those often economically unstable and underdeveloped, and that their major indicators of economic health show persistent negative characteristics.
They say truth pains, but if truth be told it is no longer news that 50 years after independence, Malawi is characterised by underdevelopment and economic instability.
Looking at indicators including inflation, GDP per capita and interest rates which are the worst in the region.
Recently, the Malawi Investment and Trade Center (Mitc) indicated that in 2013, investment levels into Malawi dropped by 19 percent to $965 million (K434 billion). The data compiled by the centre also indicated that Malawi earned foreign direct investment (FDI) inflows worth $1.2 billion (K540 billion).
Besides the poor showing in the Euromoney survey, Malawi has also consistently tumbled on the ease of doing business and global competitiveness surveys. For example, Malawi dropped 10 steps to 171 out of 189 economies on the 2014 World Bank Doing Business Report.
And in 2013 Malawi crashed seven steps to 144 out of 148 conomies on the World Economic Forum (WEF) Global Competitiveness Index with foreign currency regulations, access to financing, tax rates, corruption, and theft and crime as problematic indicators.
These statistics make gloomy reading and makes one feel embarrassed to be a Malawian.
High lending rates averaging 40 percent, ever rising inflation rate, unstable local currency, unreliable power and water supply, bureaucracy in terms of registering businesses, and corruption among other factors, has often let Malawi slide on the ladder.
These factors have been raised in every survey that has ranked our country poorly. There have been efforts to discuss how to improve the landscape, but sadly, at the end of the day, as it has been the tradition in Malawi, such for end up being talking shops whose recommendations are left to gather dust on book shelves at Capital Hill and other offices.
Unreliable power supply has increased the cost of doing business in Malawi as existing companies are forced to engage in non-core businesses such as investing in alternative power generation through standby generators that run on diesel. The companies pass on the otherwise avoidable extra costs to consumers.
Now, which investor would put their money in a country where the business environment is risky? Certainly not me!
I have always maintained that with some level of seriousness among our political leaders, there is no reason why we should fail to improve the investment and business climate. For example, the recent budget aid freeze by donors which unfortunately will negatively affect investment could have been avoided and could indeed not have been a big deal as donors contribute 40 percent to our national budget whereas we put in 60 percent and, at the same time, “steal” close to 30 percent of the resources allocated in the budget.
Our hope, however, lies in that we are in an election year when our voter registration certificates will enable us, through the ballot, to “employ” a President and 193 Members of Parliament (MPs) to run the affairs of our country. It is my prayer that we vote wisely and employ leaders with vision to transform our country.
