The key to attracting foreign investment in Malawi

Hot on the heels of the US-Africa Leaders Summit, President Peter Mutharika has exuded a lot of confidence and unbridled enthusiasm at the prospect of attracting much-needed foreign investment to Malawi. This is well and good and we all need to pull together to do whatever it takes to ensure that Malawi gets back on its feet and undertakes a path of sustainable development. However, we need to build a firm foundation for this to happen and I am a passionate follower of the gospel according to Paul Kagame and Rwanda in as far as creating a right environment for investment.

“The Rwandan Miracle” is something that will, perchance, go down in history as one of the wonders of the world when it comes to how a country can move from a state of hopelessness to being a role model in how to spur economic development. Of course, prior to the collapse of world coffee prices in the 1980s and the 5-year ethnic cleansing-based civil war that ended in 1994 when over 800,000 people were brutally murdered in the Rwandan Genocide, the country had showed much potential for growth.

However, after the harrowing war, the future of the country was in doubt as its past and threat of war and violence cast a heavy shadow over the country. It took radical concerted efforts from the political establishment under President Paul Kagame, the assistance of bilateral and multilateral development partners, extremely wealthy “well-wishers” and the infallible will of the Rwandese – both local and those in diaspora – to bring about the marvel that is Rwanda today.

Mutharika seeks investors
Mutharika seeks investors

There are some striking similarities between Rwanda and Malawi. Both countries are small, have over 70% of their people in rural areas with a high population density, are dependent on agriculture, and are landlocked with, ostensibly, few mineral resources. The level of industry is minimal and there is heavy dependence on one or two crops, tobacco in the case of Malawi and coffee and tea in Rwanda. Rwanda can, therefore, serve as a proxy for Malawi and its successful progress toward recovery and growth can easily be adapted to our circumstances.

Rwanda’s miraculous recovery and growth has been underpinned by an unflinching commitment to make the country a premier investment destination.  This has entailed removing bottlenecks and red-tape and enabling “killer applications” to make it easier to do business. This has also involved revamping, simplifying and harmonizing multiple layers of legislation to create the right investment environment.

If President Mutharika’s desire to attract foreign investors is to be achieved, we need to have an ambitious target considering that Malawi currently stands at 171 out of 189 surveyed economies by the World Bank for its Ease of Doing Business Index. Given Rwanda’s experience, is it not conceivable that we can move up the ladder and be amongst the top 50 rankings, say, within three years?

Rwanda is now ranked number 32 on the World Bank Ease of Doing Business Index for 2014. But how has this been achieved? Essentially, Paul Kagame first set up the Rwandan Development Board (RDB) – modelled on a similar institution in Singapore – to drive policy, legal and regulatory reforms to reduce the cost of business, streamline bureaucracy and enable markets to operate freely. The board recruited both local and foreign expertise to tackle both immediate and strategic issues that would make Rwanda the place to be for investment.

The RDB then focussed on ten key issues on the World Bank Ease of Doing Business Index which cover starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The trick was to lay out clear goals, develop an action plan and timeline for achieving the goals and to hold people accountable for execution. Within two years, Rwanda had moved from position 143 in 2008 to 67 in 2009 and has continued to improve since then to its current position 32. Given Malawi’s 2014 ranking, it is apparent that without revolutionary reforms, it will be a mammoth task to attract foreign investment. Bluntly, Malawi is amongst the worst countries to do business!

Rwanda’s efforts to make it easier to do business have resulted in significant FDI flows and partnerships between local and foreign investors. Consequently, the country has recorded remarkable growth rates of between 5.5% and 8% per annum over the past 5 years. In the process, the country has benefitted from infrastructural development, diversification of the economic base, increased ICT penetration, technological and skills transfers and human capacity development that will provide a platform for further future growth. Malawi should learn from Rwanda and emulate its shining example. Let us appreciate the processes and practices that have led to their success and customise them to our needs and situation. Quickly!

Rwanda has proved that it is possible to overcome an apparently hopeless situation and create a better future. Malawi is currently in dire circumstances but blessed that there has been no war, tragedy, economic, political and social upheaval on the scale that Rwanda experienced. In fact, one wonders why after 50 years of relative peace and tranquillity, our country has failed to develop whilst some countries that have been though nightmarish years of turmoil, like Rwanda and Mozambique and some late-adopters of capitalism like our newly discovered nemesis, Tanzania, have somehow surpassed us. What is wrong with us? We need some serious soul-searching to understand what really holds us back and why we continue to engage in self-defeating, self-destructive behaviour.

Malawi is a distressed nation and “Desperate situations require desperate measures.” Restoring confidence and repairing our image as a corrupt country where the rule of law does not apply or is applied selectively, instituting good governance, transparency and accountability, respect for human rights, civil service reforms and creating a conducive environment for business are all imperative. Therefore, all stakeholders need to understand the gravity of our situation, the need to urgently solve our problems and to tirelessly work together to ensure that Malawi does indeed become one of the top investment destinations in the world on its way to economic recovery. Indeed, a better Malawi is possible.

Even though it is no laughing matter, I would wish to pose a question in the purported, ever-hilarious Idi Aminisque style: “If Rwanda can did it, why can’t we did it too?!”

 Chikavu James Nyirenda is a Senior Lecturer in Banking and Finance at The Catholic University of Malawi (CUNIMA) and an adjunct faculty member on The Polytechnic Executive MBA program. He authors a weeky column ‘Views from the Sunset’ for ‘The Daily Times’ and regularly comments on current socio-economic and political issues. This article appeared in ‘The Daily Times’ of 18 August, 2014.

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