By Chimwemwe Mangazi & Taonga Sabola:
The business operating environment remained mixed and murky in first half of 2019, attracting mixed comments from operators and commentators.
During the months under review, key macroeconomic indicators registered mixed performance.
Headline inflation, seen at 8.9 percent in May 2019, has been within a single digit band.
Interest rates have been going down after the Reserve Bank of Malawi slashed its policy rate twice this year alone to stand at 13.5 percent.
However, some of the indicators have taken a u-turn in recent weeks, posing a threat to sustainability of the registered gains.
The local unit, the kwacha, for example has been depreciating, now trading at around K789 to a dollar, posing threats to inflation and foreign exchange reserves.
Chamber for Small and Medium Business Association (CSMBA) has since rated the first half of the year as challenging for doing business amid registered improvements.
CSMBA Executive Secretary, James Chiutsi, said there had been mild growth of most businesses, being an election year.
“Since the dust has, somehow settled, businesses are back to normal and while appreciating the low interest rates, it’s still difficult for SMEs to access finance,” Chiutsi said.
Malawi Stock Exchange-listed National Bank of Malawi Chief Executive Officer, Macfussy Kawawa, said the kwacha slip might have offset some gains registered in the first half.
“We can characterise the period as one where interest rates dropped and inflation was stable. However, being an election year, a lot of decisions pended therefore the kind of activity that we would ordinarily see in the first half of the year wasn’t to be true.
“It is our expectation that things will pick up a bit in the second half of the year,” Kawawa said.
The capital market, however, remained resilient in the first six months of 2019
The stock market has been bullish in the first half, registering a slight increase of 3.3 percent in Malawi All Share Index (Masi), with 627 million shares been traded at a total value of 29 billion.
Alliance Stockbrokers Limited Operations Manager, Thoko Saulosi, said the slight increase in Masi was due to price gains in most of the counters listed in the Domestic Share Index (DSI) despite huge price drops especially in FMBCH and OMU which has led to a 14.14 percent decrease in the FSI.
Increasing supply of shares on the market has also contributed to price drops.
“However, we expect that, in the second half, despite the uncertainty that has engulfed the economy due to the political environment, the stock market will still remain bullish and more active than during the first half.
“The efforts by the Reserve Bank in enforcing companies to remit pension have and will also continue to boost the stock market in addition to the low interest rate which has made the stock market the alternative profitable investment avenue,” Saulosi said.