Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says the country has sufficient domestic capital to support economic recovery, but warns that investment will remain locked in government securities unless credible reforms are implemented. MCCCI chief executive officer Daisy Kambalame made the remarks on Friday during a panel discussion on the sidelines of the launch of the policy note titled ‘No time to waste: Policy priorities for Malawi’s recovery’. She said capital is already available domestically, but is being channelled away from production due to unattractive risk-return dynamics.
Kambalame said local investors prefer government instruments such as Treasury bills and Treasury notes, which offer higher and more predictable returns. She said: “If you look at where private sector money is going, it is going into government instruments. “Fund managers would rather buy government bonds because the alternative, putting money into production, offers lower and riskier returns.” Kambalame decried that most firms are operating below capacity.
MCCCI Third Quarter Business Climate Survey found that companies are running at less than 70 percent efficiency over the past year. “That already shows that companies are shrinking, laying off workers or cutting production, reducing taxes government collects,” she said. Kambalame argued that unless reforms address governance weaknesses and create investment models suited to Malawi’s economic context, capital will continue flowing into Treasury instruments instead of productive activity.
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Presenting the report during the meeting, World Bank country manager for Malawi Firas Raad said structural weaknesses in the financial system continue to constrain private sector investment and undermine competitiveness. “Nearly 80 percent of domestic credit is absorbed by government borrowing, crowding out financing for the private sector and leaving businesses reliant on costly short-term loans,” he said. The policy note further observes that elevated inflation, currently at 27.9 percent and among the highest in the region, foreign exchange distortions and surrender requirements continue to deter investors and exporters. Reads the report in part: “Underdeveloped capital markets, fragmented development finance institutions and excessive collateral requirements further restrict long-term financing.”
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