By Benadetta Chiwanda Mia:
Small and medium enterprises (SME) have described 2024 as a mixed bag owing to persistent economic challenges that came along.
In an interview, Small and Medium Enterprises (SME) Chamber Executive Secretary James Chiutsi said high inflation continued to erode business viability by driving up input costs while access to finance remained a significant problem.
He added that foreign exchange scarcity emerged as another major impediment, forcing businesses to resort to the parallel market for forex, which was found at significantly higher rates.
“The financial sector’s apparent reluctance to develop innovative SME financing solutions has particularly frustrated business owners. Traditional lending requirements often prove too stringent for smaller enterprises, leaving many unable to access necessary capital for growth and expansion.
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“Forex scarcity has severely impacted our members’ ability to import raw materials and essential equipment,” Chiutsi said.
He added that the sector also grappled with operational inefficiencies stemming from inadequate managerial and production skills within the SME workforce.
According to Chiutsi, the most pressing issue has been delayed payments from government and public enterprises, which has had a devastating effect on SMEs, especially those in the construction industry.
These delays create a ripple effect throughout the supply chain, affecting not just the primary contractors but also their suppliers and subcontractors. The persistent fuel shortages throughout 2024 added another layer of complexity to business operations. We saw increased operational costs and reduced efficiency due to unreliable fuel supply, forcing many to either scale back operations or absorb significant additional costs,” Chiutsi said.
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However, Malawi Union of Small and Medium Enterprises President Barbara Banda pointed to several positive developments during the year.
For instance, she mentioned the passing of the Micro, Small, and Medium Enterprise (MSME) Bill in parliament which, she said, represents a significant step forward, promising to address longstanding issues such as payment delays and market access.
“We are seeing encouraging growth in non-traditional sectors such as the UNDP’s green energy projects. The focus on green industries is attracting more investment and creating growth opportunities for innovative SMEs willing to adapt to changing market demands,” Banda said.
She further said the establishment of the Mining Authority had opened new avenues for SME participation in the mining sector.
“A significant number of SMEs are now venturing into mining activities. The new authority will provide crucial support and regulation for artisanal mining activities, potentially creating a more structured and profitable environment.
“We need deliberate policies that ensure fair access to government contracts for SMEs. This could provide a significant boost to the sector and help create a more level playing field,” She added.
Nevertheless, Banda challenged the government to ensure long-term solutions, particularly regarding fuel access and foreign currency scarcity.
In its analysis of the 2024 Business Environment, the Malawi Confederation of Chambers of Commerce and Industry 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 slow down nationwide.
