Mining & Trade News

Youths in the country have been challenged to develop bankable and solution based businesses in an effort to spark Malawi’s economic growth in line with vision 2063.

The challenge was made by Wealth Malawi MD Harry Chima during the opening of “The Eagles Nest Entrepreneurs Start up Masterclass aimed at equipping entrepreneurs with marketable skills on how to excel in their endeavours amidst the current economic hardships held at Mount Soche Hotel in Blantyre.

At the meeting, participants were drilled on how to position and package themselves to meet the required standards to secure finances from prospective financial institutions.

Chima observed that entrepreneurs are the driving force behind any economy, as they set up new businesses and industrial units which help with regional development.

He said: “These forums are aimed at bringing together entrepreneurs aspiring to endeavour in various sectors so that we empower them with vital tools required for them to excel in their business as we bring in relevant topics to meet the needs of start-up enterprises.”

“In these workshops we also make sure we bring experts in different fields so that they can share hands on industrial experiences in order for the entrepreneurs to know what to expect from the industry and how to dive through opposing currents in business.”

In his remarks, one of the participants Kelvin Dimba highlighted that the masterclass has helped him to attain more insight on how to advance his operations.

Dimba said; “The workshop has been an eye opener for me as a start-up entrepreneur, because there are many challenges on our way being at an infant stage ranging from financing, teabuilding, decision making and marketing among others, hence the workshop has helped to elaborate on all important areas. And it has also helped us to network with likeminded individuals on how to grow our businesses.”

Approximately 50% of Malawi’s GDP is from income generated from both formal and informal small and medium enterprises (SMEs), and 89% of employed people work in the informal sector.

As the country navigates away from overreliance on tobacco as its main forex earner, the Foundation for Smoke Free World (FSFW) has cautioned stakeholders in the local tobacco production value chain to tread carefully so as not to overlook key components essential for Malawi’s economic growth.

The warning has been made in FSFW’s report, which analyses Malawi’s tobacco production trends and other critical factors related to the leaf’s value chain.

In the report, FSFW observes that global tobacco production has, in recent years, undergone significant changes with tobacco production functions moving from high-income countries to low- and middle income countries.

The effects of such shifts has been very pronounced in sub-Saharan Africa in countries like Malawi, arguably the most tobacco dependent economy in the world.

FSFW notes that as interest to diversify in order to minimize effects of tobacco production, there is need to understand the macroeconomic, policy, and political landscapes in a country because the risks in these spheres can hinder the adoption of even the most technically efficient, economically sound, and farmer-friendly alternatives for diversification.

 “A closer look at the tobacco value chain within Malawi reveals that smallholder tobacco farmers are often the most disadvantaged and vulnerable link in the chain, with tobacco production often coming at their expense, literally and figuratively,” it says pointing out that the day-to-day work and exposures associated with tobacco farming are harmful to the health of those who carry it out as well as to the surrounding environment.

“Such observations underscore the extent to which the existing value chain harms the economic well-being, health, and environment of smallholder tobacco farmers and helps make the case for shifting away from tobacco dependence, particularly as the global demand for tobacco declines,” the report further notes

In Malawi, tobacco pricing, which has recently hit new lows, is unpredictable and has forced government to consider reducing the country’s overreliance on tobacco, as evidenced by its new focus on diversification and sustainable agricultural transformation outlined in its key policy frameworks, including the Malawi Vision 2063 and other initiatives

FSFW suggests the need for sustainable, and investment-friendly crops, livestock, and other sources of livelihoods.

“Ultimately, the success of these livelihoods options will depend on addressing the many structural obstacles currently facing the economy in general and the agricultural sector, including limited access to inputs, barriers to reliable financing and sustainable investments, deficits in infrastructure, creation of markets for alternative high-value crops and gaps in knowledge, policy, and institutional capacity.”

Although tobacco continues to be a major crop and accounts for about 12% to 15% of the country’s gross domestic product (GDP), the number of tobacco farms have decreased from nearly 400 thousand to a little under 178,000 in 2019 and tobacco’s contribution to the total value of crop production has also decreased from 39% in 2004 to 18% in 2019

An environmental expert has described the increased soaring of fertilizer prices as a blessing in disguise for Malawi.

Godfrey Mfiti says farming without chemical fertilisers will provide the country with better, efficient and effective alternatives methods that will end up nourishing the country’s farming land which have been degraded by the fertilisers.

His comments were made following the continued skyrocketing of chemical fertilizer prices in the country. The cost of fertilises in the country have jumped from MK38,000 last year, to around MK45,000 and MK50,000 this year.

According to authorities the price build-up is just knock-on effect for Malawi following the rise in global fertilizer prices due to a combination of strong demand and high input costs. The poor 2020 maize and soybean harvest in South America has also contributed to the global fertiliser price increase as major growers reacted by increasing acreage for farming these commodities, a development which also triggered an increase the demand and use of fertilizers.

On other hand, apart from the depreciation of the Malawi currency, the Kwacha, refinery curtailments due to COVID-19 restrictions and high energy prices limited supply of raw materials used in fertilizer production, especially sulphur and ammonia has also exacerbated price hikes.

International Food Policy Research Institute (IFPRI) has since reported that in Kwacha terms, global fertilizer prices have increased by 98 percent, and to make matters worse, bulk shipping rates have more than doubled in the 12 months ending July 2021, which has further increased the landed cost of fertilizer in Malawi.

But speaking to Mining and Trade Review Publication, Mfiti hinted that Malawi needs to contemplate on investing more on production and use of organic fertilizer with a sole aim of increasing sustainable crop production, enhancing long-term soil fertility for better farmer livelihood, as well as alleviating rural poverty and reduce foreign exchange drain on chemical fertilizer imports.

Mfiti said; “There is an opportunity in the soaring chemical fertilizer prices, we can call it a blessing in disguise as it paves way for local manufactures of organic fertilizer to seize this moment by intensifying their operations on the much demanded fertilizer. There are different kinds of organic fertilizers that can be adopted and there is need for local citizens to be trained on how to make these in order to minimize intense imports of fertilizer.

“And when we think of fertilizers, we are talking about feeding the soil, unfortunately, continued use of chemical fertilizers destroys soil structure. Therefore there is a need to teach our local farmers on the use of organic fertilizers such as composite manure which has proved to be environmental friends as well as effective.”

Mfiti further asked government to review the Affordable Input Programme (AIP) if it is still relevant and viable considering the numerous setbacks registered in implementing the program.

“AIP is no longer viable for government to continue implementing it, because if you look closely it only encompasses on maize alone which is a low value crop since it is only meant for consumption,” he said.

The Malawi Revenue Authority (MRA) has identified the transport sector as a key element that promotes smuggling of goods into and out the country.

A meeting between the tax regulatory body and transporters in Malawi’s southern region held to discuss customs and excise processes, procedures relating to importation and exportation of goods noted the existence of a criminal syndicates in the rail, air, river, maritime and mostly in the road transport sectors.

According to MRA’s Taxpayer Education Manager, McHizzal Kawanga, smuggling remains one of the bottlenecks that deprives government import and export tax revenue that would otherwise have helped it to fulfil its financial obligations.

The meeting was aimed at acquainting transport sector players with relevant legal processes required to be followed when importing or exporting different goods.

“We are aware that some of the players are not familiar with laws involved in their businesses and may be vulnerable to manipulation or cohesion to smuggle goods using unchartered routes or to provide false information to tax authorities.

“We appeal to transporters desist from such acts and ensure that their drivers are well warned against the malpractice,” he said

Commenting on the influx of foreign transporters getting more transportation deals as compared to local transporters, Kawanga said that despite MRA not being the responsible body that facilitates transport contracts, it would be commendable if local players are prioritized since it’s the local players’ value chain that contributes significantly in taxes.

In his remarks, Mike Missi, a representative for Zagaf Transport, commended MRA for engaging them on taxation issues regarding importation and exportation of goods, saying the transport sector is indeed vital in tax evasion through combating smuggling.

In a bid to minimize haulage losses incurred as a result of encountering empty return trips, one of the local players in the transport sector, Fast Express Logistics and Courier (FASTEX), says they have introduced an exchange and backhauling management system that will help address the problem.

According to Patrick Chatangwa, Fastex CEO, the backhauling management program is saving transport companies from accruing lots of empty miles, which significantly contribute to unaccounted for wear and tear as well as soaring transportation costs.

“The major challenge that transporters in the country face include lack of an organized digital platform that can link them up in real time with companies or individuals who are seeking their services at a given time,” Chatangwa says.

“Fastex has come as a solution that will facilitate freight exchange by encouraging individuals and companies to register their transportation needs or enquiries on our platform,” explains the executive adding: “They can advertise empty trips and spaces in their vehicles at competitive rates.”

The platform, whose database currently has more than two hundred plus transporters exchanging market information, facilitates load sharing and back hauling, which are new concepts in Malawi but have significantly helped transport operators to fill empty trucks on their way back to a depot.

Chatangwa adds that companies that want to outsource transportation of their goods can as well capitalize on the concept and pay less than they would if they were to hire vehicles on their own.

“An empty truck is a loss to a company considering the skyrocketing fuel prices,” emphasises Chatangwa.

The program is very efficient and provides advance payment to assist transporters procure necessities such as fuel for the trips while the balance is paid on Cash On Delivery (COD) basis upon production of proof of delivery (POD).

Th Fastex CEO claims that their strong financial muscle is supported by financial instruments predominantly offered by their primary banker First Capital Bank (FCB).

Chatangwa highlights that a well consolidated freight exchange management programme is an ideal way to minimise high carbon emissions as advocated by environmental activists since it will reduce number of vehicles on the roads.

“As fleets face increasing pressure to decarbonise and local authorities look to reduce urban congestion, the benefits of consolidation become more apparent,” he points out adding he expects more transporters and shippers to subscribe to this management system, which currently targets two thousand transporters by mid this year.

Established in 2021 Fastex is a subsidiary of Chatangwa enterprises which was established in 2009 and incorporated in 2016.

Agricultural experts have advised government to consider reintroducing wheat production in an effort to mitigate against the economic impact of importing the cereal which has seen a drastic rise in the prices of bread and other confectionaries cross the country.

Lilongwe University of Agriculture and Natural Resources (LUANAR), Professor of Plant Breeding and Genetics, Moses Maliro, says the consumer price index for local bread continues to widen due to forex scarcity and the on-going Ukraine and Russia war, which are major global wheat exporters.

Wheat is a cereal crop consumed by over 2.5 billion people globally. The current demand for wheat in Malawi is estimated to be 200,000 tonnes per year with a projected growth in consumption of 3%–6% annually.

Bread prices in Malawi have doubled in the past few weeks to K1, 000.00 with the 50 kilogram bag of bread flour now selling at K48,000.00 from K36,000.00.

According to Prof. Maliro, the current wheat supply and demand gap is wide with 99% of the wheat being imported due to low domestic production. The imported cereal is spread throughout the value chain from the importers to millers, bakeries, biscuit manufacturers, wholesalers and retailers.

“45% of milled flour is utilised by commercial bakeries, 46% is distributed to rural and urban outlets and biscuit manufacturers utilise 9%,” he says

Maliro notes that lack of stable markets and a national wheat development strategy are some constraints suffocating wheat production in the country.

“Production constraints include the lack of a national wheat development strategy, lack of stable markets, unavailability of improved varieties, low input use and limited knowledge in the management of wheat crop,” he says adding that currency devaluation and limited forex reserves further affect the annual import volumes and prices of wheat flour on the domestic market.

The professor suggests that domestic production and broad value chain opportunities could be increased through policy support, including research for development, expansion of production into non-traditional wheat growing areas, investing in irrigation and developing market systems.

Meanwhile, LUANAR, in partnership with University of Nottingham, UK, are supervising a local PhD student who is magnifying the local wheat production in a quest of developing ideal wheat varieties suitable for local malnutrition population.

Statistics indicates that wheat imports are projected to rise to 63 MT by 2028. Although total production increased from 19.6 MT in 2008 to 29.2 MT in 2019, and the total area under wheat increased from 8.5 to 10.2 million hectares, domestic supply is still much lower than demand.

A 2018 USDA report on global wheat imports shows that the sub-Saharan Africa (SSA) region has been a major driver of rising global wheat trade over the last decade. The year-over-year growth in wheat imports for SSA is greater than any region across the globe. Current annual production in SSA is approximately 7 MT which accounts for only 28% of total annual demand.

Agricultural systems of Malawi are dominated by maize and the wheat value chain is driven almost entirely by imports, which currently represent greater than 99% of demand.

After 7 years of launching and implementing the Buy Malawi Strategy, Government and Malawian business operators will March 18 commemorate the initiative by showcasing a wide spectrum of locally produced products at the Gateway Mall in the capital city, Lilongwe.

The Malawi Government through the Ministry of Trade and Industry introduced the strategy as a way to promote production and consumption of locally produced goods and services.

Led by the Minister of Trade and Industry, Mark Katsonga, government is calling on local residents, visitors and travelers to celebrate the day, which has become an annual event, by buying and consuming locally produced goods products and services.

“The Buy Malawi Day is an important foundation of the Buy Malawi Strategy, which boosts the production and consumption of locally produced goods and services,” says Katsonga.

The minister points out that apart from instilling patriotism, the culture and lifestyle of embracing local products ”will substantially stimulate competitiveness of local firms, industrialization and, job creation.”

Katsonga advises local industries to intently seek produce or service feedback from both their individual and corporate customers in order to get relevant input so that they keep improving and building their competitiveness and satisfying the needs of their local and export markets.

As one way of showcasing local identity and oneness, Katsonga urges all private firms and all institutions to set aside a particular day or days of the commemoration week to wear locally made clothes to foster the Buy Malawi Strategy as well as to empower local designers and tailors, who make up a good proportion of local micro, small and medium entrepreneurs.

He calls on commercial banks to take a vigilant role in the promotion of the strategy by facilitating affordable financial services to innovative enterprises that produce goods and services locally.

He further appeals to land authorities across the country to prioritize allocation of pieces of land to enterprises and investors that intend to promote local products for both the local and international markets.

“Public servants should continue wearing clothes designed and manufactured in Malawi every Friday,” the minister says adding wholesalers, retailers and general distributors must ensure adequate stocks and visibility of local merchandise in visible shops.

According to a draft report of the Malawi FinScope 2019 indicates that Micro, Small and Medium Enterprises in the country continues facing challenges including low information technology penetration and low investment in research, science and technology.

Despite the challenges faced in the sector, the report show that the MSMEs in Malawi contribute a significant share of employment.

The overall Malawi MSME sector is estimated to consist of 1,141,784 business owners registering an increase of about 50 percent from 758,758 in 2012.

About 11 percent of the population own MSMEs and employs approximately 1,825,219 people 1,260,118 in 2012.

Standard Bank has forecast that Malawi’s economic recovery will continue in 2022 with growth forecast to reach 4.1% driven by rebounds in manufacturing, mining and quarrying, construction, transportation and electricity, gas and water supply.

In a statement announcing financial results for the year ended December 31, 2021, the Bank, however, says despite the economic growth prospects, the pressure on the exchange rate will likely continue on the back of weak foreign exchange supply.

“Upward pressures on inflation rate will likely remain in the first half largely driven by supply constraints,” states the Bank.

In the year under review, the group says it continued to operate in a challenging operating environment as the demand for foreign currency continued to outweigh supply.

“This resulted in the depreciation of the Malawi kwacha and the expectation is for the Kwacha to depreciate further as we head 2022. Covid-19 also continued to affect business which in turn impacted credit growth and transactability,” reads the statement

The domestic economy is estimated to have grown by 3.9% in 2021 from 0.9% in 2020 following solid performance in the agriculture, mining, quarrying and construction sectors.

 In response to rising oil prices, global supply chain constraints and seasonal fluctuations in domestic food prices, global supply chain headline inflation picked up in the year and averaged 9.3% compared to 8.6% in 2020.

 The Kwacha depreciated against the United States dollar by close to 6% in 2021compared to about 3% in 2020 owing to weak foreign exchange supply.

Standard Bank’s profit after tax of MK24.8 billion was 4% above the prior year, and total revenue grew by 31% year on year driven by growth on both net interest income and non-interest revenue

Nyika Solar Technologies Limited, a new local player in renewable energy industry is looking for an investment partner to take up 30 percent equity shares from a US$500,000 investment into its proposed affordable solar water heaters manufacturing project.

Nyika Solar Technologies C.E.O Rev David E. Gondwe says the project is geared to promote local industrial production, increase renewable energy production and save investments in electrical power generation while reducing deforestation.

He says the company’s operations will be undertaken through its Lilongwe ofice, with sales and installation centers in Malawi, Zambia, and South Africa.

Gondwe revealed that Nyika Solar Technologies has so far already spent over US$175,000 in the technology sourcing and research for the past three years while US$20,000 has been spent during the past 1.5 years on development costs.

Meanwhile an environmental impact assessment was conducted and a certificate of approval was granted by the Environment department.

According to the CEO, the new capital expenditure of US$500,000 is required to send technicians for training in the Caribbean and pay for technology supply agreement

He added that investors or the banks will have to service a 5–7-year working capital loan of US$1,060,000.

The production of heaters is expected to reduce electricity costs, increases people’s financial savings, a development which will significantly  improve their living standards

Gondwe expects that reduced power demand on the electricity networks will enable countries to supply power to the growing industrial areas of their economies, without having to invest further in new power generation capacity.

“We also eye to reduce the current practice of charcoal and firewood consumption across the Southern African region hence mitigate the negative effects of global warming that is emerging as a result of deforestation,” says Gondwe adding that the project will also be a catalyst of job creation

Gondwe believes that being centred in Lilongwe, Malawi;s capital city will boast its local and international outreach