Industry rates first half as tough
Players from various sectors of the economy have described the first half of 2021 as tough for businesses in the country, as the landscape remained volatile and susceptible to effects of the Covid pandemic.
The first six months to June 2021 have largely been characterised by volatile exchange and inflation rates, low foreign exchange reserves position due to dwindled forex inflow coupled with subdued performance for most businesses.
The pressure exerted by Covid was felt even by the fiscus, which has seen revenue generation falling short of the desired targets in the first half of the 2020/21 national budget.
Industry players who spoke to Business Times say they were still feeling the pangs of the Covid pandemic despite a relative drop in cases during a greater part of the period under review.
The banking sector, which is deemed among the most resilient, was not spared as the rate of non-performing loans was reported to have been on the increase.
Bankers Association of Malawi (Bam) Chief Executive Officer Lyness Nkungula said the operating environment remained challenging in the first half of 2021 with persistent effects of Covid, although there was a moderate improvement in economic activity compared to the same time last year.
She said despite the challenging environment, banks remained resilient and profitable, with sufficient capital and liquidity.
“Credit and deposit growth continue to recover following subdued growth in 2020. The growth in credit is, however, largely supported by rising public sector financing needs while private sector credit grew, albeit moderately. Liquidity was a concern due to growth in investments in long-term assets, which are funded by short-term liabilities.
“We expect the banking industry to remain resilient and profitable for the rest of the year,” Nkungula said.
She, however, said improvements in the operating environment are expected to continue in the second half as the forex and inflation situation moderately improves.
Another sector hard-hit by the pandemic is tourism, where, in 2020 alone, over 300,000 people lost their jobs due to the impact of the pandemic.
Malawi Tourism Council Executive Director Richard Mdyetseni, however, said the sector’s performance started picking up gradually as Covid slowed and businesses opened up especially after the rolling out of Covid vaccines.
“The challenges were mainly cash flows to sustain businesses, keep up labour and supplies and quality aspects. Many companies closed or laid off employees. Some are on half pay or getting a fraction of the pre-Covid levels,” Mdetseni said.
Micro and small-scale business operators also described the half year as challenging owing to a low sales perpetuated by a deteriorating buying power.
National Association of Small and Medium Enterprises Chairperson William Mwale said challenges faced included slow loan recovery from clients and myriad bottlenecks faced by players when importing equipment for production.
Malawi Confederation of Commerce and Industry (MCCCI), an umbrella body for industry players rate the period as a mixed bag.
MCCCI President James Chimwaza said businesses continued to struggle as the environment remained volatile, making it difficult for players to plan.
“Outlook for the next six months will be determined by how we weather the Covid third wave, review of the highlighted challenges of power and fuel costs and how exportable bumper harvest is quickly translated into forex earning,” Chimwaza said.
The prevailing challenges continue posing a great threat to gross domestic product growth prospects for the year.
Minister of Finance Felix Mlusu said the economy was expected to grow by 3.8 percent in 2021 and 5.2 percent in 2022 on the assumption that there will be gradual lifting of containment measures and that business will slowly return to normal during the second half of 2021.