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Industry laments poor environment

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By William Kumwembe:

The Malawi Confederation of Chambers of Commerce and Industry (MCCC) has said the industry is still haunted by the high cost of doing business and energy woes.

MCCCI President, Prince Kapondamgaga, made the observation in Blantyre on Friday during the 2019 MCCCI annual general meeting.

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Kapondamgaga said the business environment is characterised by factors that have for a long time been identified as serious obstacles including high cost of doing business and energy supply challenges.

“The cost of doing business in Malawi is still high and the cost of finance is still structurally high despite the monetary authorities putting in place policies that interest rates must go down,” Kapondamgaga said.

Kapondamgaga blamed financial sector players for what he called exaggerating risks associated with lending.

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He said banks and other microfinance institutions were not responsive enough to policy dictates by monetary authorities, hence, the current situation.

In February this year, commercial banks lowered their base lending rates, realigning them to a minimum of 14.9 percent and maximum of 26 percent following a slash of the policy rate by the Reserve Bank of Malawi (RBM) from 16 percent to 14.5 percent in January.

RBM also lowered the Lombard Rate from 200 basis points to 40 basis points above the policy rate to 14.9 percent.

The MCCCI President also said apart from the high cost of borrowing, electricity was the most problematic factor amid registered improvement in power supply in the past months.

“We do appreciate the positive impact that the rainfall pattern has had on the amount and quality of electricity especially in urban areas.

“However, we should not accept this perennial excuse of water levels in Lake Malawi as permanently justifiable,” Kapondamgaga said.

The MCCCI boss said industry players consider it an illusion when the government pronounces that it is committed to industrial development of this country while industrial companies continue to be heavily penalised for choosing to invest in Malawi through exaggerated tariff rates that subsidise non-developmental consumers.

Kapondamgaga said the Newly Industrialised Countries in East Asia did the opposite in their early stages of industrialisation, subsidising tariffs for preferred growth sectors.

He said the results of such policies were there for all of us to see, saying the world now has world class brands from South Korea, Taiwan and China such as Acer, HTC, Samsung, LG, Kia, Hyundai, Huawei, Hisense, and Lenovo.

“Maximum demand tariff is one of the major sources of the lop-sided pricing in electricity. This, as you all know, involves Escom [Electricity Supply Corporation of Malawi] charging for declared demand of electricity even when the electricity is not supplied.

“We know that electricity supply is a rare commodity in Malawi. So customers such as yourselves end up paying bills for electricity that is not supplied, thus making our operations highly cost ineffective. We continued lobbying against this pricing mechanism during 2018,” Kapondamgaga said.

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