A new column is born on Nyasa Times. Warning! This is a fast and rough lane, not for the faint-hearted. If you decide to race with us, you are most welcome. But once you get into the lane and are coy to press on the accelerator you will be knocked off or by the traffic. We guarantee to be on the run way every Monday and Friday, but gasoline permitting we could be on the highway on more days, ruminating and reflecting on many topical issues. Some would say, leave it or love it. But we say enjoy.
The past week we have heard, should we say, sometimes to near boredom, about the U$1 billion (K500 billion) worth of foreign direct investment (FDI) flowing to Malawi following the hosting of the Malawi Investment Forum (MIF). Thanks to the organisers of what was billed as the first-ever high level and high profile investors’ forum on the land which brought together potential investors from around the world.
We have been told the prospective investors will in the coming two weeks be committing pen to paper to seal these all-important deals which promise to transform Malawi economic landscape. Well, maybe not too bad for a start. As we wait for the deals to be concluded as promised, we give kudos to government and those who supported it. This is what Malawi needs to be doing to develop.
For starters, Malawi is one of the top 10 poorest countries in the world with over 39 percent of its population living below the poverty line of $1 a day. The country is committed to the Millennium Development Goals (MDGs) which seek, among other things, to eradicate extreme poverty and hunger. Over the past two decades, government has pursued poverty reduction efforts through various strategies emphasising economic growth, infrastructure development and the provision of basic social services. These strategies have included: the Poverty Alleviation Programme (1994); the Malawi Poverty Reduction Strategy (2002—2005); and the Malawi Growth and Development Strategy (MDGS) 2006—2011 and 2011—2016. But despite these initiatives Malawi is undeveloped. One reason for this is because the country has one of the lowest investment levels on the continent, measuring at only 8.1 percent of the Sub-Sahara GDP average.
As pundits have rightly said, Malawi would be kilometres ahead of where it is today in terms of its socio-economic development if it had the right environment for investments. Simply put, the problem is that we have collectively not done much to create the right environment on the ease of doing business. We should, therefore, be asking ourselves why as a country we have not done enough to be an attractive destination for outside business investments, to establish businesses to survive, and let alone make profits.
For example, economic experts have noted that Malawi’s mining sector has the potential to grow to become the country’s largest foreign exchange earner ahead of tobacco. The question then that we ought to be asking ourselves is: is our energy sector developed enough to allow us to develop the mining sector? We know that no economy can meaningfully develop without energy supplies. Until January 2013, when we commissioned phase 2 of Kapichira Hydro-Power Station in Chikwawa in January 2013, our economy was operating for nine hours only. Because of lack of electricity, many projects such as the heavy mineral sands in Salima, and the Bauxite Project in Mulanje, to name but a few, have been put on hold. The Kayelekera Urainum mine in Karonga, for example, was using diesel engines for the entire period it was operational.
While in the area of electricity, due to inadequate investment and maintenance, there was inadequate capacity to generate, transmit and distribute electricity; and consequently, there was intermittent supply of electricity evidenced by blackouts. But even after adding the 64 megawatts from Kapichira which brought national total output to 351 megawatts, challenges still exist because the problems are structural in nature and require huge levels of investment. The country’s power generation capacity is still below the peak demand and still growing. That is why we still have experience extensive load-shedding.
But my main concern here is not about the country’s undeveloped mining and energy sectors. It is about our agriculture sector which is a significant source of the country’s gross domestic product (GDP) employing 85 percent of the population. The country’s high dependence on agriculture makes the economy vulnerable to adverse weather since most of the agricultural activity is rain-fed. Changes in weather cause fluctuations in agricultural output and hence national income. High dependence on agriculture also makes the economy vulnerable to changes in demand and prices in foreign markets where its agricultural products are sold.
There is also limited or inadequate access to land. This is compounded by environmental degradation due to rapid population growth. Cropland holding per capita is 0.176 hectares in the Southern Region, 0.276 hectares and 0.275 hectares in the Central and North, respectively. The inadequate access to cropland poses a major threat to food security which is in turn a serious threat to better life as it increases subsistence farming. The maize that each family grows on their small plot of land is the food that must feed them the entire year. But it rarely does. As a result, Malawi endures a food shortage from the hungry months, December to March, the single growing season. Because the country is also extremely vulnerable to drought especially as the majority of the population relies on rain-fed farming, the answer lies in developing the irrigation sector.
Just by way background, during the first three years of the (2000—2002) of the new millennium, the rate of GDP growth averaged -0.6 percent. The main cause of this recession was unfavourable weather. In 2003 and 2004, Malawi experienced better weather conditions. Agriculture benefited from this improvement in weather and recorded positive rates of growth in both years. In turn, the recovery in agriculture stimulated agro-industry and demand for other sectors of the economy. As a result, the economy achieved an average growth rate of 4.3 percent. Of course, other factors contributed to the growth.
However, due to the drought which adversely affected agriculture production in 2005, the rate of growth of GDP declined to 2.3 percent. This year, drought and floods have affected crop yields by over 27 percent, a development that is likely to affect the rate of economic growth as well. All this clearly shows that irrigation should be the next biggest focus of investments.
Unfortunately, not a single dollar out of the U$1 billion (K500 billion) pledged investment from the just-ended MIF is on the irrigation sector. That the irrigation sector is not attractive to investors should be a matter of serious concern about the country’s investment opportunities and their potential to spur economic growth.
Admitted, the investors’ lack of interest in the irrigation sector is understandable. Investing in irrigation is not just about the huge infrastructural capital outlays that are required. There is also the issue of land. We know for a fact that a paltry 4 percent of the country’s irrigable land (about 200,000 hectares) is irrigated. The questions are: what is the country’s land policy? And how does it promote foreign direct investment? This should be food for thought for economic planners. There is need for political will to change the status quo. We either go the irrigation way, which economic experts say has the potential to quadruple harvests per hectare, or we continue to wallow in poverty because of the unpredictable weather patterns.
- About the author: He is a PhD candidate in Business Administration. He also holds qualifications in journalism education and agriculture.