Mining & Trade News

Malawi’s largest conglomerate Press Corporation Limited (PCL) says its general business remains at a low ebb in light of continuing uncertainties due to the political crisis following the nullification of the May 2019 presidential elections and the outbreak of the coronavirus pandemic (Covid-19).

In a summary of audited results for the year ended December 31, 2019 signed by the CEO George Partridge, the MSE Listed Group says the political crisis and Covid-19 pandemic created an unhealthy environment for its business in 2019 and are likely to continue stifling business in 2020.

Partridge says: “Covid-19is likely to continue to have an impact on the Group’s general productivity and business as supply chains world-wide are severely disrupted.”

“Management is closely monitoring the pandemic and taking all necessary precautionary and mitigation measures.”

Partridge says nullification of the presidential elections and post elections disputes in 2019madePCL’s operating environment a challenging one whereby the dual factors created business uncertainty for consumers forcing them to be spending less on goods and services.

He says the unprecedented low consumer spending impacted the revenue generation of the conglomerate resulting in the Group registering only 3% growth which has generated pressure on working capital and has culminated in a 131% increase in net finance charges.

The Group delivered a profit after tax of MK24.76 billion (2018 MK36.71 billion) representing a 33% decrease from 2018.

However, some of the conglomerate’s subsidiaries performed brilliantly in 2019 including National Bank of Malawi which registered an after tax profit of MK17.1 billion from MK15.97 of 2018 representing a 7% increase.

In the energy segment (ethanol manufacturing), there are also strong results with a 53% increase in earnings.

Partridge says: “The performance was driven by the continued satisfactory performance by PressCane which registered a 10% growth in its earnings and similarly, Ethanol Company (EthCo) registered a 346% growth in its earnings from the loss made same period last year.”

“The loss by EthCo was driven by increased utilization capacity due to the availability of raw materials from carry-over stocks and improved sales volumes.”

But the Group which owns stakes in landline operator Malawi Telecommunications Limited (MTL) and cellular network operator TNM  has recorded a 33% profit decline from the telecommunications sector and a 10% decline in its net earnings following the a once-off restructuring expenditure of MK104 billion, a stock write-off of MK450 million and increase in depreciation expenses as a result of heavy capital investment made over the past three years to reposition the companies for sustainable growth.

“Plans are underway to identify a strategic partner in MTL,” he says.

In the consumer goods segment in which PCL owns a retail chain People’s Supermarket, the conglomerate has reported losses of up to 44% as a result of 21% decline in sales revenues due to closure of a number of stores following restructuring of the business, attendant restructuring costs, and a 61% increase in interest costs.

“Directors are weighing various equity re-capitalisation options to deal with the company’s unstable debt position. The search for a strategic investor is continuing.”

Partridge pledges to continue with the Group’s efficiency drive and initiatives that will help to turnaround the companies that have under-performed.

He says: “During the year, a diagnostic study revealed that part of the underperformance of these companies is on account of severe under-capitalization which requires urgent attention.”

“Management has already drawn up plans to remedy this. In respect of previously reported loss making companies, it is pleasing to note that Press Properties Ltd and EthCo have completely turned around and are profitable while Food Company Ltd is now significantly moving in the right direction.”

Ecobank Malawi says political conflicts in the aftermath of the 2019 presidential elections and the global impact of the Corona Virus Disease (COVID-19) pandemic have created waves of uncertainties to the local economy.

In the bank’s audited financial statement for the year ended December 2019 signed by MD Charles Asiedu and Chairman Leonard Chikadya, the Bank says despite the challenges, it remains committed to delivering on its mandate in Malawi.

It says: “In the year 2020 and beyond, the bank will accelerate the sale ofits world class digital solutions targeting every Malawian.”

“It will provide more convenience to its customers by improving on its existing product lines and introducing new ones. It will also continue to play leadership role in the key sectors of the economy by leaving its partnerships around the world.’’

Ecobank says it is cautiously optimistic about the future and will continue to make the appropriate investments to bring more value to its customers and other stakeholders.

‘’We are pleased to present the audited summary financial results of the Bank for the year ended December 31, 2019. These summary statements supersede the version that was published on March 23, 2020,’’ says the Bank.

The report indicates that the Bank continued growth trajectory in 2019 despite the economic conditions of the year which were characterized by the low interest rate regime and uncertainties in the operating environment arising from effects of the general elections.

The Bank’s operation income grew by 14% to k19.7billion both funded and non-funded sources. Due to continued strategic cost management, operating costs increased by a lower rate of 7% to K8.7 billion resulting in a better cost to income ratio of 44%.

Impairment losses on loans and other assets reduced by 26% to K1.5billion mainly arising from improved risk management practices. Consequently,profit before tax grew to K9.5 billion representing 33% growth while profit after tax increased by 42% to k7.1 billion.

The total assets remained stabled at k262 billion principally driven by the funding from borrowed funds which grew by 37% to K82 billion. The loan book increased to K43 billion representing growth of 13% which underlined the Bank’s commitment to support the growth of the economy.

The Mbelwa District Council has closed second hand clothes and cattle markets in the district as one way of preventing the spread of the global corona virus disease (COVID-19) pandemic into the district.

In a memo addressed toMzimba residents,the Councilsays the ban follows Malawi Government’s declaration ofthe state of disaster due to Coronavirus threat.

“In light of the declaration, Mbelwa District Council, in its full council meeting on March 25, 2020, has introduced a ban to prohibit operations of Salaula markets and cattle markets within the boundaries of Mzimba District forthwith,” reads the memo from the Council.

The ban has been received with regret by vendors in Mzuzuwho have expressed concern over loss of business.

“The ban is a big blow to my business as I usually go to different areas of Mzimba to sell second hand clothes to make money to take care of my family,” says Maria Gondwe, who sells second hand clothes.

Malawi is yet to record a case of the COVID-19 pandemic, which was discovered in the People’s Republic of China in 2019.

COVID-19 is affecting 199 countries and territories around the world and one international conveyance (the Diamond Princess cruise ship harbored in Yokohama, Japan).

Information from the World Health Organisation indicates that most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment but older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness.

The best way to prevent and slow down transmission is to be well informed about the COVID-19 virus, the disease it causes and how it spreads.

To protect oneself and others from infection, it is recommended to wash hands or use an alcohol based rub frequently and avoid touching the face. 

The COVID-19 virus spreads primarily through droplets of saliva or discharge from the nose when an infected person coughs or sneezes, so it’s important that one also practices respiratory etiquette (for example, by coughing into a flexed elbow).

Currently, there are no specific vaccines or treatments for COVID-19. However, there are many ongoing clinical trials evaluating potential treatments.

Standard Bank Group says it expects macroeconomic stability to continue in Malawi in 2020 on the back of normal agricultural season that would support the local currency and sustain low and stable inflation and interest rates.

“We remain committed to ensuring customer satisfaction in all we do. The Group will continue to focus and drive digitisation in order to improve customer experience,” says the Bank in its audited financial results for the year ended December 31.

The Group says it will continue investing for the future while prudent management of risk and liquidity, diversifying balance sheet and maintaining a healthy capital position remains at the core of its operations.

Standard bank registered a profit of about MK15.9-billion for the year, 50% more than the profits for the previous year due to an increase of 12% in the net interest income.

Growth in customer loans and advances was at 32% year on year while financial investments grew by 18%.

“Customer deposits grew by 6% which has contributed to the growth of interest earning assets,” says the Group.

The Group has, however, experienced subdued net interest income due to the declining net interest margins as a result of a decrease of the base lending rate in 2019 to 12.55% from 23% in 2018 while non-interest revenue was at 3% above the prior year due to growth in transaction volumes.

Credits impairments were 62% below prior year due to the declining in the size of the non-performing loan book.

It says: “The decline in credit impairments was due to the Group’s focus on robust credit risk management practices.”

“The group will continue to place emphasis on recoveries of loans previously written off.” On economic highlights, headlines inflation averaged 9.4% in 2019 which was higher than 2.9% registered in the previous year while food inflation remained in double digits and closed in December 2019 at 19.3%.

The Malawi Kwacha continued to lose ground against the United States dollar during 2019 on the back of excess local demand for the foreign currency as the policy rate remained relatively stable in the year closed at 13.5%. As the Standard Bank Group continued to focus on diversifying its revenue base and cost management, earnings per share for the year increased from MK45 to MK68 in 2020.

Illovo Sugar Malawi has registered a 61.2% Net profit decline for the year ended August 31, 2019 with the company recording K10.08-billion profit against K16.45-billion profit recorded in previous 2018 financial year.

This was revealed during the company’s annual general meeting held on Thursday, February 27, 2020 at Ryalls hotel in Blantyre.

MD Mark Bainbridge told Mining and Trade Review that challenging market conditions, such as pre- and post-election unrest and continued illegal sugar importation has exacerbated the decline in cash flow.

Bainbridge said: “Fundamentally we have faced a stiff market environment in domestic sales in the year ended, as there has been increased competition on the market base due to influx of low priced sugar illegally imported from bordering countries.”

“Despite intensive support from the Malawi Revenue Authority (MRA) which had run several search and confiscation operations coupled with sensitisation programmes aimed at halting illegal practices, export quality and pricing constraints have also impacted the company’s operations throughout the season”.

However, he said that in a quest to counter some of the registered and projected business shocks, the firm’s commercial and logistics teams adapted a revised strategy to enhance sugar direct deliveries to customers and have also embarked on consumer promotional and activation initiatives and optimised portfolio.

On prospects, Bainbridge said the company is expecting normal weather patterns and improvements in power generation to have a positive impact on the agricultural output and factory throughput, as the company is also set to enact strategies to turnaround financial and operational stability to the smallholder sugarcane farmers.

“The business will continue its various initiatives in the local direct consumption market and extend the delivery footprint to the wider consumer market,” he said.

During the AGM, the company also announced that it has opted not to pay dividends to its shareholders for the year ended because management has prioritised debt reduction and other initiatives such as revenue and volume enhancement strategies to secure business development and sustainability through reduction in the overall cost of sugar production.

But a representative of Minority Shareholders Association in the firm Frank Harawa argued that the company has registered a decline in profit because the selling price of the commodity is high on the local market as compared to on the export market.

“To us, it is not reason enough for locals to be paying more for the same commodity which is being sold at a cheaper price on foreign markets, I therefore suggest management lowers prices on the local market allowing many to afford of which in turn it will cushion up business returns and recover costs incurred during exportation process, ” he said.

According to the company’s 2019 report, exchange rates, inflation and interest rate movements and the debt levels of the company continues to have a marked effect on the overall business profitability.

There is need for the Malawi Government to enter into partnerships with private sector players in order to develop decent public infrastructure which will facilitate economic growth.

Governor of the Reserve Bank of Malawi Dalitso Kabambe made this observation when he launched a high level public private partnerships conference at Bingu International Conference Centre in Lilongwe.

“Government needs a hand from the private sector to build infrastructure for the country’s economic development. For example, the public can build a school with limited hostels and a private company can intervene by building more hostels and start generating business from the same school by renting out the hostels to students,” said Kabambe.

He said good infrastructure is required in different sectors of the economy including education, health, transport, agriculture, tourism, energy and mining in order to attract international investors.

The public private partnership conference, which was held from February 24 to 26, was organized by the Public Private Partnership Commission (PPPC) under the theme ‘’Malawi`s Next Big Thing.”

Kabambe, who launched the conference on behalf of State President Arthur Peter Mutharika, said PPPs are crucial in eradicating poverty through developing the country’s education sector by providing necessary infrastructure to increase the number of people attaining tertiary education.

 ‘’It is sad that only 2.3% of Malawians have university degrees while 70% from the age of 15 have a Primary School Leaving Certificate of Education [PSLCE], 11% have the Junior Certificate of Education [JCE] and 6% have the Malawi School Certificate of Education [MSCE] as highest qualifications,” he said.

On the health sector, Kambambe explained that there is a need for private investors to partner government in procuring equipment for specialized treatment of a number of diseases which prompt patients to seek treatment in hospitals in foreign countries.

“We have many patients travelling to countries like India and South Africa for medical attention. Government needs the support of the private sector to provide equipment to treat such medical cases,” he said.

On the energy sector, the Governor cited development of the Mpatamanga Hydropower Plant as a role model of how PPPs can work to develop the energy industry.

Power utility Electricity Generation Company (EGENC0) is currently scouting for a strategic equity partner to develop the Mpatamanga Plant on the Shire River through a PPP arrangement.

In the tourism sector, Kabambe said the private sector players need to partner government to construct more hotels in the country’s places of tourism attraction to attract international tourists who bring foreign exchange into the country.

The conference attracted foreign delegates from Africa, Europe, Asia and USA, and officials from World Bank and United Nations Economic Commission for Europe (UNECE). 

In her speech, a Ugandan national Beatrice Ikilai who represented UNECE said Malawi stands to adequately benefit from PPPs if it embraces an appropriate model, and her organization is ready to assist Malawi on the course.

Director General for the Nation Planning Commission[NPC] Dr Thom Munthali commented that Malawi can move out of the poverty trap if it commercializes its activities.

Munthali said: ‘’For instance, we have initiated a programme called Agricultural Transformation Initiative, and under this initiative we are educating the farmers to modernise farming practices and commercialise the trade.”

‘’We are almost ready to start the project in Machinga District, the Liwonde area, the area which has been selected because of its suitable soil status.’’

Greg Toulmin from World Bank also commented that the Malawi Government needs to implement new strategies that takes on board private sector financing when developing public infrastructure.

‘’There is need for the private sector to support government by playing a major role in improving the lives of people of Malawi in different angles of life including energy and trade,’’ said Toulmin.

There is need for transparency in the procurement process for Malawi government projects to ensure that selected groups such as the women and youths have the opportunity to successfully bid for the contracts.

Assistant Director of Public Procurement and Disposal of Assets Authority (PPDA), Timothy Kalembo said this at a training for women on open contracting which Civil Society Agriculture Network Malawi (CISANET) in partnership with Hivos held in Mzuzu.

Kalembo said: “The training was very important because women cooperatives and the youth are part of Micro, Small and Medium Enterprises (MSMEs).”

“The role of PPDA is to promote targeted procurement, where procurement and disposal of entities is focused on certain selected groups of people be it women or the youth with an aim of developing the group.”

The women were drawn from from the media, Purple Innovation and Mzuzu women entrepreneur cooperatives.

The training dwelled on open contracting, and the Public Procurement and Disposal Act and its provisions.

Executive Director of Purple Innovation Patricia Ntengela described the training as significant in terms capacity building as imparted skills and knowledge on the participants.  

“The training has helped in empowering women to ensure that they have the competencies and capabilities to take part in competitive bidding processes which are dominated by their male counterparts.” she said

CISANET and Hivos Malawi conducted the trained as part of the Empowerment of Women in Agriculture in Malawi Project.

The project will also provide women cooperatives with startup capital for agricultural related businesses.

Facebook on Sunday, February 9,2020 wrapped up its Community Leadership Circles (CLC) program, an initiative aimed at uniting social media administrators, in Blantyre.

The program offered opportunity to local admins of Facebook groups, pages or events to connect and share knowledge.

CLC Blantyre lead Frank Kamanga said the goal of the program was to build stronger communities by supporting local leaders online and offline and to strengthen their role in the world.”

“The program provided the highly involved administrators the opportunity to share their best practices and participate in leadership development meetings,” he said.

Kamanga also said the program has helped local young entrepreneurs to expand their marketing base as they were taught on how to run digital adverts to reach out to Global audience through the meet-ups.

“The platform has proven to be an efficient and cost effective means of disseminating business information, and over 200 local entrepreneurs in Blantyre have benefitted from the program”.

Anna Malewezi, Founder of a local enterprise AG Malaika and beneficiary from the program, hailed the initiative for creating a platform to discover other innovative ways of advertising various enterprises through the social site, as well as networking avenue it brought about.

“The program has opened a new window for us especially startups to maximize our profits and boost our capital through cost-effective means of marketing our products and services, as through Facebook we are able to reach out to wider audience”.

She urged young entrepreneurs to make use of the social media site citing saying there is more to be done in Malawi to ensure full utilization of the social media in this digital era.

Malewezi said sound policies to increase Internet accessibility and lower prices for data usage, are among other factors to be considered to enhance social media usage in Malawi.

The CLC program has impacted the lives of over 11-thousand attending admins in 50 countries with nearly 400 in-person events hosted globally.

The Tobacco Commission (TC) has warned tobacco traders against purchasing the crop from farmers without a buyer’s licence and cross-border tobacco trading saying such practices contravene the Tobacco Industry Act of 2019, which has now come into force.

The new Tobacco Act, which became effective in February last year, seeks to bring sanity and curb major constraints for the industry including high cost of production and bad agricultural practices.

TC’s Corporate Planning and Development Manager Hellings Nasoni told Mining & Trade Review in an interview that the Commission is now enforcing the law to address illegal practices in the tobacco industry.

He said: “Illegal tobacco vending has been a problem for Malawi for a long time and it has contributed to the downfall of the local market for the gold leaf.”

 “Therefore, we are issuing a timely warning to alert potential perpetrators against the illegal acts.”

“The Commission has been receiving reports of malpractices such as exporting unprocessed tobacco without written permission from TC and, importing tobacco to sell it on Malawi Tobacco Licensed Floor which is contrary to Section 96(2) and section 87(1) of Tobacco Industry Act 2019.”

Nasoni described the New Act as a vital instrument that will protect farmers from being exploited by vendors who buy tobacco from growers without a valid buyer’s license which is in breach of Section 67(1) of the Act.

The Act states that any person contravening these sections shall upon conviction be liable to a fine of K10- million and 5-years imprisonment.

Tobacco buying companies have expressed interest to buy 154.3 million kilogrammes (kgs) of tobacco this year, 3% higher than the aggregate demand of 149.6 million kilograms in 2019.

Tobacco is Malawi’s main foreign exchange earner which rakes in about 60% of foreign exchange earnings for the country, and contributes about 13% to gross domestic product.