The year 2025 was one of the most challenging periods for Malawi’s private sector in recent memory.
Both large companies and small and medium enterprises (SMEs) faced a fragile and constrained business environment.
While some macroeconomic indicators suggested slight stability compared with 2024, the reality on the ground was that businesses continued to operate under heavy strain.
Persistent forex shortages, high inflation, weak consumer demand and rising operational costs defined the year.
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For SMEs, 2025 tested their resilience and adaptability, exposing both vulnerabilities and potential.
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The broader economy grew modestly, with real GDP projected at 2.7 percent, up from 1.7 percent in 2024, driven by agriculture, mining and parts of the services sector.
However, growth was insufficient to ease pressures on businesses. Forex scarcity remained the most critical challenge, affecting 74 percent of firms surveyed by the Malawi Confederation of Chambers of Commerce and Industry (MCCCI).
For both large companies and SMEs, limited access to forex caused delays in importing raw materials, spare parts and machinery.
Manufacturing, construction and agro-processing firms were hardest hit, with many reporting production interruptions and operating at below 50 percent capacity.
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SMEs bore the brunt of these challenges. Weaking consumer demand, eroded household purchasing power and high interest rates constrained operations and borrowing.
Many businesses relied on short-term expensive credit facilities. Fuel scarcity and intermittent electricity supply further raised production and transport costs.
In Lilongwe, vendors protested outside Parliament Building, demanding solutions to forex shortages that crippled their ability to procure merchandise.
The demonstrations reflected widespread frustration among small traders and SMEs excluded from policy responses.
Large companies faced similar constraints. Even with stronger financial buffers, rising input costs, delayed procurement, and policy uncertainty created operational challenges.
The election year added complexity as donor support and foreign investment slowed, reducing liquidity and limiting expansion opportunities.
Many firms shifted focus from growth to survival, prioritising cost containment and working capital management.
Despite difficulties, SMEs demonstrated remarkable resilience. Many turned to local sourcing and import substitution, while agro-processing and light manufacturing firms explored value addition using locally available materials.
Digital platforms became vital for online marketing and sales and associations and cooperatives enabled collective procurement and market access. These adaptations showed that SMEs could innovate even in a constrained environment.
The enactment of the MSME Bill in 2025 boosted the SME ecosystem by providing a framework for advocacy, collaboration and structured dialogue with government and stakeholders.
While its impact is still unfolding, the Bill offers hope for more systematic support of SME concerns.
Challenges extended beyond forex and inflation. Businesses struggled with access to finance, equipment procurement, delayed government payments, fuel scarcity, damaged roads, intermittent electricity and skills gaps in specialised sectors such as mining and emerging fields like artificial intelligence.
The outlook for 2026 is cautiously optimistic, with projected GDP growth of 3.8 percent supported by structural reforms, improved sectoral productivity and easing supply-side constraints.
SMEs anticipate better harvests to improve food security and reduce inflationary pressures. Forex availability is expected to improve gradually, though challenges may persist.
Access to finance is expected to expand, with affordable credit tailored to SME needs. Collaboration with universities and higher education institutions could support local machinery fabrication and import substitution.
The Small and Medium Enterprises Development Corporation is expected to improve sector standards by accrediting business development service providers.
K e y recommendations for resilience include prioritising SMEs in forex allocation, expanding access to affordable finance, stabilising the macroeconomic environment, strengthening public – private dialogue and supporting local production, skills development and digitalisation.
Large companies will also need to adapt, with collaboration between SMEs and larger firms offering potential synergies, particularly in supply chains.
The lessons of 2025 are clear. Economic instability, forex shortages, and inflation can cripple businesses, but resilience and innovation can sustain them.
SMEs showed adaptability in the toughest conditions, while large companies focused on efficiency and survival.
As Malawi moves into 2026, building a stronger, more inclusive business environment is essential.
Addressing forex shortages, improving finance access, supporting local production, and fostering dialogue can unlock the private sector’s potential.
The road ahead will be challenging, but the determination shown in 2025 provides a foundation for cautious optimism.
