Malawi is back on track and open for business

His Excellency Bernard Sande, High Commissioner to the UK for Malawi:
In Malawi we have a new president who came to power in April, Mrs Joyce Banda. When she came to power, she inherited a country, which had very serious governance and economic problems.

She moved quickly to institute some reforms, starting mainly with the political reforms. She went to parliament and reversed some bad laws which the previous government had enacted – laws to restrict mainly freedoms, freedom of speech, freedom of the press, human rights.

As a result of the fact that the previous government had followed a bad economic policy, two things happened. One, we’re miles off track in the IMF programme. And other development partners followed suit and cut aid.

The problem was aggravated by those bad economic policies that the (previous) government was following, including fixing the local currency. Now as a result of that there were serious economic problems, there was a shortage of foreign exchange and serious fuel shortages.

President Banda also instituted some sweeping economic reforms in order to ensure micro-economic stability and to transform the economy. Some of the major economic reforms were that the currency was floated, to ensure that its value is determined by the market.

Key sector approach
The government has developed an economic programme which identified five focus sectors for development and general investment. These are: agriculture, energy, mining, tourism, and physical infrastructure including ICT.

In addition to that, government has prioritised private sector development. And with that there is a two-pronged approach. One, to attract foreign direct investment, and two, the government is working on improving the investment climate.

The president is determined to improve the business environment. The future of Malawi lies in exports. She wants to build capacity for exports. And in that respect the mission is focusing on promoting trade, investment and tourism – apart from of course mobilising aid, including humanitarian support.

Investment prospects
I think the usual question that an investor would want answered themselves is why should I go to Malawi? I think Malawi has certain characteristics, which I think auger well for private investment, particularly for British investors.

First of all, as you know, Malawi was a British colony. The culture in business and commerce is rooted in British tradition. English is the official language. English is the medium of instruction in Malawi schools.

There are some schools that do the Cambridge School Certificate of Examination. The legal system is based on English common law. And business in Malawi is dominated by British interests. In addition to that Malawi has historically been a peaceful country. There has never been any civil conflict since independence.

Along with the political stability, Malawi is very strong on the rule of law. The judicial system is independent, and directly relevant to business are the commercial courts for arbitration.

Government is working on strengthening the commercial court by having more chambers, so that as many commercial cases [as possible] are handled and dispensed with quickly. And Malawi is also a member of the Multilateral Investment Guarantee Agency (MIGA).

I think it’s important to mention Malawi is a liberalised free-market economy, with access to regional and international markets. The common market for Eastern and Southern Africa, it’s a member of that, it’s also a member of SADC. It’s a party to the EU Cotonou agreement. And it is also a beneficiary of the African Growth and Opportunities Act of the US.

GTA: Presumably you or the president would be able to facilitate directly certain aspects of trade, if there are any issues?

His Excellency Bernard Sande: If it’s a legal issue it’s for the courts. If it’s a question of investment incentives, some of them are subject to discussion, negotiation I should say.
Since we are open for business, we as government, are ready to listen any concerns about doing business in Malawi.

In agriculture the opportunities are there in terms of investing in the actual production, farming, livestock, agri-processing, and agri-business. Right now Malawi’s major exports are tobacco, sugar, and tea. The tobacco trade is dwindling and this is having an adverse impact on the economy. Government has taken a decision to diversify its [agricultural] exports. One of the pillars of that initiative is to bolster the production of what we have come to call special crops.

Energy
The government as part of its efforts to improve the business environment, has taken some measures in order to ensure that there is adequate power. We are embarking on one project, a $350m project funded by a grant by the US, to improve power generation and transmission. We’re also connecting with the power from Cahora Bassa hydro, we’re discussing with Mozambique to connect that power. So in the short and medium-term we should have all the power that we need.

Government has identified eight sites with the potential to generate hydro-electricity. But there is also big potential to generate thermal power because we have coal, a potential for wind energy because we have a lot of wind from the lake, and of course solar, and an abundance of water. The Chinese are planning to invest in a thermal plant.

Mining
Malawi has traditionally not been known to be a mining country, but now there is a lot of international interest in mining prospects in Malawi. First of all, the first major [Uranium] mine was opened by an Australian company called Paladin, in 2008.

And the company has identified another site where there are prospects for Uranium in economically exploitable quantities. And there are also indications that there could be uranium in other parts of the country.

GTA: Hasn’t Malawi been fully prospected?

His Excellency Bernard Sande: No, but next year there will be an airborne geophysical survey of the country. That should help to determine where in the country particular minerals are.

The World Bank has funded that project. It’s a big operation, it’s a big survey. So I talked about Uranium, but there is also another company called Global Metals, which is also about to start mining Niobium. There are prospects of gold and tracings of many other minerals.

Bauxite is established, it’s on the highest mountain in the country called Mulanje, this has not been exploited because of a shortage of power…It requires a lot of power.

GTA: So mining is taking off, but presumably the Uranium is a game changer?

His Excellency Bernard Sande: Yes, actually it’s the Uranium that made the international community, or at least the investors start looking a Malawi. When you have Uranium, I believe you inevitably also have certain minerals, so I think that was as you put it, a game changer.

Tourism
GTA: What about tourism, everybody knows Malawi is famous for its lake.

His Excellency Bernard Sande: It’s an attractive tourist destination as you know. The lake has long sandy beaches and more than 600 species of fish. There is also a big variety of birds, apart from the scenic mountains and valleys.

And because of the uniqueness of Malawi and the friendliness of the people, that’s why you call it the warm heart of Africa.

Now in terms of investment in the tourism sector, naturally you have prospects for holiday resorts and other recreational possibilities, along the lake and in the game reserves. The government has plans to develop a tourist park in some parts.

Along the lake you have various possibilities for [new] hotels, casinos, golf courses. Government is also concessioning the game reserves. One has already been concessioned and they will operate that for 30 years. The operators have invested in it, by making sure that the game is restocked. They built some lodges within the game reserve and other facilities. If an investor is interested, they could go in there and the government’s role would simply be to promote the country as a tourist destination.

Direct flights
GTA: What about the regional connectivity and lack of direct flights.

His Excellency Bernard Sande: I think it was just neglected. At some point it used to be very viable, and the direct flights used to help. But you know we are talking to various airlines, because we want direct flights from Europe and some tourists have cited that as one of the things that undermines tourism to Malawi, lack of a direct flight.

One of the investment prospects that we have, when it comes to physical infrastructure, is the construction of an airport close to the holiday resorts along the lake.

This is up for grabs really in terms of investment because we are looking at a Public Private Partnership (PPP) or whatever arrangement that an investor may find convenient to them, really at the end of the day it depends on the investor, it’s what they want.

And when it comes to infrastructure, I’ve talked about these specific projects along the lake, but we’re also talking about roads, water, power, physical infrastructure and telecommunications, if anybody wants to invest. Of course we have a number of mobile phone operators, but there is no harm in having more.

It depends on what an investor wants. An investor may decide to go solo, it’s up to them. [If] they decide to partner with government it’s up to them. They may decide to partner with local private investors… because Malawi is open for business

Jeremy Kuper 2013