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2020: Year to forget

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The political impasse leading to the fresh presidential election on June 23 this year, restrictions on gatherings in the country and the imposition of lockdowns in countries that Malawi trades with weighed heavily on private sector operations.

On one hand, as some sections of society were demonstrating against the May 21 2019 presidential election results, which were marred by massive irregularities, businesses slowed down.

Operators lived in fear as some demonstrators, in some notable instances, could resort to vandalism.

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Some consumers also opted to stay home, dodging scuffles that characterised the demonstrations.

On the other hand, as the government announced restrictions on gatherings as a remedy to curb the spread of Covid-19, even as it contemplated imposing a partial lockdown, there was panic-buying.

Afterwards, business drastically skewed in the country as most people stayed at home due to the restrictions.

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Some companies retrenched some of their staff while others completely shut down.

Trading partners such as South Africa, China, the United Kingdom, the United States and others were on full lockdown, resulting in an abrupt stop to trade between Malawi and such countries.

A major reflection of the developments was when the Treasury, the International Monetary Fund and economic commentators conceded that economic growth prospects were in jeopardy.

Projections point to a gross domestic product (GDP) growth of 2 percent from the earlier projected 6 percent.

Interventions by the Reserve Bank of Malawi (RBM) went a long way in ensuring sustainability of businesses at the pick of the pandemic. But it was not enough to offset the losses.

RBM Governor Wilson Banda said in a recent interview that the central bank continued to witness increases in credit risk on the market, reflected through loan moratoriums extended to borrowers affected by the pandemic.

“Our recent assessment shows a total of 1,900 customers benefitting from this relief with a consolidated balance of K103 billion. This constitutes 15 percent of total gross credit of the industry.

“Banks have restructured some loans and extended repayment moratoriums to some customers affected by the pandemic,” Banda said.

RBM said it had extended the moratorium on payment of interest and principal on the loans to December 2020, after which the agreement will be subject for review.

Fees and charges on digital banking were also to be reduced by 40 percent in a bid to increase customer utilisation amid calls for social distancing.

Malawi Confederation of Chambers of Commerce and Industry President James Chimwaza described the year as challenging.

“Where there are challenges there are also opportunities. Those that focussed on the opportunities that came with the challenge have done well and those that were lamenting the problem have not done well but we thank God that the situation is improving, and from the lessons learnt, Malawians will diversify,” Chimwaza said.

FDH Financial Holdings Chief Executive Officer William Mpinganjira said the Covid-19 pandemic affected customers’ ability to pay back loans, which affected the banking business as well.

“You will probably note that [more customers defaulted than normal] when the Reserve Bank [of Malawi] produces its report but it was expected because countries were on lockdown and Malawi is a trading economy, where people rely on buying and selling goods.

“Then, we had elections and that run-up to the elections brought a lot of disruptions to the economy, in terms of business, so it has not been the optimal year. However, we are at least getting to a situation where everything is calm and [we are] hoping for a better 2021,” Mpinganjira said.

One of the key players in the manufacturing sector Chibuku Products Limited (CPL) said, apart from the pandemic and elections impasse, the general economic environment was not favourable for business.

In an interview, CPL Business Development and Corporate Affairs Manager Gloria Zimba said the company’s sales have declined by 30 percent in the 11-month period ending November 30, when compared to the same period last year.

“For the past three years, our revenue generation and sales have been going down not because of normal competition but because of the effects of smuggled products which are being sold at lower prices as compared to locally manufactured products,” Zimba said.

With fears of a new wave of Covid-19 in the air, there is need for the government to come up with policies that will entail both sustenance and growth of businesses in the new normal.

Industry captains are only hopeful that 2021 brings about the desired stability for them to thrive again.

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