Potential investors seem to prefer neighbouring countries as Malawi continues to struggle to attract foreign direct investment (FDI) in a situation experts attribute to a hostile business climate for investors. African Export-Import Bank (Afreximbank) data published on Monday show that at $220 million (about K385 billion) FDI in 2024, Malawi is lagging behind regional peers such as South Africa at $2.5 billion, Tanzania at $1.7 billion, Zambia at $1.2 billion and Zimbabwe at $597 million in terms of attracting FDIs. The data shows that despite sustained increases, Malawi is yet to recover from the pre-Covid-19 pandemic inflows recorded at $252 million (about K441 billion) in 2020.
In an interview on Monday, economist Paul Kwengwere observed that narrow investment base, macro-economic volatility, foreign exchange scarcity and policy incoherence and regulatory friction are discouraging potential investors. Kwengwere, who is Malawi Investment and Trade Centre former chief executive officer (CEO), said: “In Malawi, we have persistent forex shortages and there is widening spread between official and black market exchange rates that createsa repatriation risk. “Investors fear that even if they make a profit in kwacha, they cannot convert it to US dollar to pay dividends, pay back external loans or buy raw materials.” He said Malawi’s limited FDIs have hindered the transfer of skills and technology, prevented the country from participating in emerging regional value chains and perpetuated negative perceptions among investors that confine Malawi to low-value production.
In an interview on Monday, Malawi Confederation of Chambers of Commerce and Industry CEO Daisy Kambalame said foreign currency shortages continue to persist with import cover deteriorating, worsening business environment and further weakening the local investment climate, thereby hampering long-term growth and FDI. She said there have been instances where investors have withdrawn their capital entirely, seeking more stable and predictable economic environments in neighbouring countries. In an analysis on FDI trends published in September this year, Export Development Fund (EDF) noted that Malawi’s FDIs remain below the 10-year average and that fundamentals remain less attractive to investors compared to its peers even within the vulnerable economy group.
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“The lack of consistent FDI inflows into Malawi partly reflects the limited pipeline of bankable, investment-ready projects in sectors with strong export potential,” reads the analysis in part. United Nations Conference on Trade and Development secretary general Rebecca Grynspan is quoted in The Nation of June this year as having said that geo-economic fragmentation is reshaping the landscape of global investment, creating both obstacles and isolated opportunities with some countries benefiting from investments in global value chain-intensive manufacturing while others struggle to participate in the global economy. Malawi operates a one-stop service centre and provides after-care services to investors through the Malawi Investment and Trade Centre. In its recent Country Private Sector Diagnostic Report, the World Bank said Malawi has one of the lowest investment rates in the region due to external factors
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