|Investors play a wait-and-see game
ahead of election
by Munetsi Madakufamba
BLANTYRE, 23 May 1999
Investors in Malawi remain cautious ahead of the country-s second democratic elections the date for which is yet to be announced after parliament agreed at an emergency meeting last Friday to postpone it from 25 May to a date no later than 15 June 1999.
Fred Kanjo, the Head of Economic Services at the Commercial Bank of Malawi, said in a recent interview that both foreign and local investors were waiting anxiously for the outcome of the election before they can make firm investment decisions.
"The investors are waiting for the government that will be elected in the forthcoming election to unravel its programme for economic development including the budget for the 1999/2000 fiscal year which begins in July," said the economic analyst.
Kanjo was however, quick to point out that such market behaviour was common everywhere at election time and could not be conceived as lack of confidence in the incumbent government of President Bakili Muluzi. He painted a bright future for the Malawi economy, despite rampant poverty on the ground which he said were unavoidable casualties of an economy in transition.
The country-s economy is projected to grow by six percent in the 1998/99 season. The southern African country has enjoyed average growth domestic product (GDP) of eight percent since 1995.
However, with a GDP per capita of about US$180, Malawi remains one of the poorest countries in the southern African region. The country is in desperate need of foreign investment to uplift the living standard of its estimated 11 million people that has declined by nearly 27 percent since 1979.
The country-s economic base is narrow and highly dependent on agriculture, which is prone to drought and deteriorating terms of trade. Tobacco alone accounts for 60 percent of export earnings.
Government efforts to expand the export base have not been particularly successful. Kanjo blames this on Malawi-s key trading partners, South Africa and Zimbabwe.
"We are being short-changed by these countries (Zimbabwe and South Africa). They are flooding our markets with cheap goods while at the same time they are closing their borders for our exports," said the economist.
Malawi-s manufacturing sector has been shrinking over the years prompting the government to employ tight monetary measures including the recent devaluation of the local currency by more than 60 percent against the US dollar.
"The ordinary Malawian is gradually finding it more expensive to buy from abroad and therefore turning to locally produced goods, which is good for our manufacturing industry," says one central bank employee.
While the devaluation may bear positive results in the long term, it has impacted negatively on the general populace in the short term. Latest figures from the Commercial Bank of Malawi put inflation at 57 percent, which compares with 20 percent in March 1998.
Similarly, the cost of borrowing on the domestic market has become so high that aspiring business people can hardly afford start-up capital. With interest rates at 48 percent, the only hope for investment in the country would be from abroad.
But until the election is held and all parties have accepted the outcome, the Malawi Investment Promotion Agency will have very little work to do. (SARDC)