As the world bids farewell to 2024 Tuesday night, private sector mouthpiece, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), has said business challenges outweighed positives in the 12 months of the year.
But Trade and Industry Minister Sosten Gwengwe Sunday said the government remained committed to improving the business environment.
In its analysis of the 2024 Business Environment, MCCCI says the business environment was challenging for the private sector, primarily due to ongoing macroeconomic imbalances.
The chamber says the downward revision of the projected economic growth rate from 3.2 percent estimated at the beginning of the year to a mere 1.8 percent in the third quarter review highlights a pronounced slowdown nationwide.
MCCCI President Wisely Phiri said the economic landscape was further complicated by weather shocks, a tight monetary policy, scarcity of foreign exchange, low credit availability to the private sector and elevated inflation rates.
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“The scarcity of foreign exchange was one of the most significant obstacles to conducting business in 2024, leaving many businesses unable to import essential raw materials.
“The situation became increasingly pronounced from the end of the third quarter, exacerbating issues such as the scarcity of fuel, which caused significant disruptions in the logistics and transportation sectors, hampering the movement of raw materials and finished goods across the economy,” Phiri said.
The MCCCI President further said high inflation rates, resulting from the lagged effects of currency devaluation at the end of 2023 and the low supply of goods in the market, especially food items, drove up production costs and eroded consumers’ disposable income, subsequently dampening aggregate demand across various sectors.
According to Phiri, the supply disruption for food items was due to the fact that El Nino weather largely affected the agricultural sector lowering production.
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“El Nino effect also affected the manufacturing sector since it heavily relies on raw materials from the agriculture sector.
“Access to credit for the private sector emerged as another significant hurdle, with many small and medium-size enterprises (SMEs) finding it increasingly challenging to secure financing for their operations,” he said.
Among the positives, MCCCI says businesses benefitted from relatively stable electricity supply and a conducive political landscape.
“The private sector also witnessed a robust tobacco market characterised by favourable prices that bolstered profitability. The government made significant strides in enhancing the business environment for the SME sector by passing the MSME Bill and signing a Simplified Trade Regime agreement with Mozambique.
“Additionally, the launch of key policies in the agricultural sector, such as the National Agricultural Policy and the National Irrigation Policy, is expected to enhance investor confidence in commercial farming.
“Positive developments were also observed in transportation and logistics, including the rehabilitation of roads damaged by Cyclone Freddy, the restoration of railway infrastructure and a strategic agreement with Mozambique regarding use of Nacala Port,” MCCCI says.
The chamber notes that the initiatives are anticipated to improve the movement of raw materials and finished goods, further stimulating a conducive environment for the private sector.
“However, the challenges encountered throughout the year significantly impacted businesses’ production capacity, overshadowing the positives that existed in the business environment.
“A survey conducted by MCCCI among 105 businesses nationwide revealed that 87 of them reported an average capacity utilisation rate of 75 percent or lower, representing 82.8 percent of the sample.
“Looking ahead, according to the survey, 57 percent of businesses expressed optimism for 2025, anticipating that their average capacity utilisation would surpass 75 percent,” he said.
In an interview yesterday, Industry Minister Gwengwe said the Extended Credit Facility programme with the International Monetary Fund had started delivering lower inflation and that once the exchange rate stabilises, a lot of pieces would fall into place.
“Productivity will improve and industry capacity enhanced,” Gwengwe said.
