When fragile economy has shortness of breath
Mustafa Makunganya has been operating a curio business in the Central Business District of Malawi’s administrative capital, Lilongwe, for the past couple of years but has never seen a business dry-spell like this.
“Things have become extremely tough for our business. With Covid, we are now going days or even a week without a single sale,” he says as he wipes out sweat from his forehead.
Faced with a growing number of Covid cases last year, government imposed a number of measures to combat the spread of the pandemic such as airports closure, social distancing, transport and passenger travel restrictions, closure of schools, limiting hotel and restaurant operations, restricting non-essential trade, government ‘work-from-home’ orders and reduction in operating hours.
All these measures led to reduced business activities and workforce productivity.
According to industry mouthpiece, the Malawi Confederation of Chambers of Commerce and Industry, during the first wave of the pandemic, larger manufacturing firms were the most affected owing to their stronger reliance on supply of raw materials from global and regional supply chains as opposed to smaller firms.
“Most firms closed down or scaled down production thereby rendering thousands of people underemployed or unemployed. The most affected were less-skilled, lower-income and informal workers and the majority of the casualties came from retail/wholesale businesses, transport sector and entertainment/hospitality industry,” MCCCI says.
Even the World Bank agrees that Malawi’s economy has been heavily affected by the pandemic, with gross domestic product (GDP) growth projected at 1.0 percent in 2020, down from earlier projections of 4.8 percent.
In its latest Malawi Economic Monitor, the World Bank says, with population growth around 3.0 percent, this represents a 2.0 percent contraction in per capita GDP.
“Poverty reduction in Malawi has stagnated in the last 15 years and is expected to worsen with the pandemic. An estimated 12 percent of the economically active population have experienced job losses due to the crisis. Although this labour market impact is moderate compared to some other countries in the region, this comes after more than 15 years of Malawi’s poverty rate stagnating at high levels.
“Poverty has declined more slowly in Malawi than the rest of sub-Saharan Africa. Malawi’s poverty rate based on the $1.90 threshold has declined by 3 percentage points from 2004 to 2016, from 73.4 to 70.3 percent. This compares to an 11 percentage point drop for sub- Saharan Africa, from 53.2 to 42.3 percent,” the bank says.
According to the Employers Consultative Association of Malawi (Ecam), job losses were estimated at 274,000 and 680,000.
Ecam Executive Director George Khaki says the lower figure assumed that Covid would have been contained by third quarter of 2020. He says the 680,000 figure was assumed that the pandemic would be over by the first quarter of 2021 in which we are now.
“So, generally, on the impact the figures still stand. One thing that stands out from this wave is that, this time around, the strain is very contagious and we therefore expect more people to get the virus including in the workplace. This poses an additional danger that offices could be paralysed as more employees may get sick which in turn will affect productivity,” Khaki says.
The pressure exerted by Covid has been felt even by the fiscus, which has seen revenue generation falling short of the desired targets in the first half of 2020/21national budget, a development that has threatened to throw the K2.2 billion financial plan off balance.
And Finance Minister, Felix Mlusu, says he is counting on development partners’ support on Covid to help Treasury save the budget from collapsing.
“Obviously the emergency spending will affect the national budget but we are receiving very good support from our development partners.
“We believe that they are still going to hold our hand to make sure that our budget is not derailed,” Mlusu said.
Even President Lazarus Chakwera has admitted that the Covid-19, especially the second wave, which has claimed hundreds of Malawians, including two senior Cabinet ministers, Transport Minister Muhammed Sidik Mia and Local Government Minister, Lingson Belekanyama, has brought a shocking dark moment for the nation.
Chakwera says Malawi needs resources amounting to about $220 million to fight the pandemic.
Looking ahead, the country’s economic growth prospects for 2021 look hazy.
According to Reserve Bank of Malawi Governor Wilson Banda, as a result in the jump in Covid cases, domestic economic activity, which started to rebound in the second half of 2020, has moderated.
“Economic growth for 2021 will, therefore, depend on how fast the second wave of the pandemic dissipates. In general, domestic economic growth could remain subdued in 2021,” Banda says.
But, whatever the situation, it is critical to keep the wheels of the economy moving.