Business, economic and general development news from the landlocked Republic of Malawi

Population - 2009 estimate 15,028,757
GDP (PPP) 2009 estimate - Total $12.325 billion

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capital city, Lilongwe, population just under 1 million
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start with some old news
Malawi: From Basket Case to Food Basket - Lessons to Make Hunger History

Njongo Ndungane

2 July 2009

Without a doubt I vote H.E. Bingu wa Mutharika, the President of the Republic of Malawi, one of the best performing African Presidents. And the reason for it is simple; in 2004 when he came into power he made a pledge: “I will not be a president who goes around begging for food”. Unlike other rhetorical commitments we have often been treated to, he has put his words into action.

Malawi is an agriculture-based economy where agriculture contributes over 80% of export earnings; 38% GDP and supports 85% of the population. Smallholder farming (3.42 million households) contributes 75% of agricultural production. Maize is the staple food, grown by 97% of farming households and consumed by every Malawian. Prior to 2004, Malawi was forced into massive importation of maize for a number of consecutive years due to bad weather and low input uptake, among other factors.

In the 2004/5 season, many parts of the country were hit by prolonged dry spells. Yields in that year dropped to around 0.8 tons/ha, one of the lowest on record. The national production declined to less than 1.2 million Metric Tons, representing a decline of 24% from the previous year, approximately 60% of the estimated national maize food requirement. The whole country, and smallholder farmers in particular, were thrown into high risk and vulnerability.

In a space of three years, between 2005 and 2007, a miracle took place: the country has gone from food deficit of 43% to a food surplus of 57%; productivity increased two-fold from a ton per hectare to over 2 tons. Maize production nearly trebled from 1.23 million metric tons to 3.44 million metric tons. Malawians had enough and to export. As shown in the graph below, in 2009 the miracle is continuing.

How did the miracle take place?

The government doubled its expenditure on agriculture from 7.4% to 14%; scaled up access and affordability of farm inputs through rapid up-scaling of agro-dealers and a smart subsidy programme (through non-transferable coupons) for a whole range of farmers from vulnerable households through hard-working ones and adapters of new technologies.

From food exports and sales to the World Food Programme through the Purchase for Progress Programme, the country has been generating in excess of US120 million annually. This is then ploughed back for further scaling-up of the programme. And to ensure that smallholder farmers graduate faster from reliance on subsidized input for food security the government has embarked on a manure-making campaign; intensified extension and research in agriculture and the Greenbelt Initiative.

In 2003, in what is commonly referred to as the Maputo Protocol, African governments were supposed to have worked towards a similar miracle across the continent. They committed to spend 10% of their national budgets to agriculture in order to ensure food security to their citizens by 2015. However, so far only 6 countries are coming good on this political commitment. Besides Malawi, they include Burkina Faso, Mali, Senegal and Ethiopia. Nearly 7 years after making the political commitment, 17 countries still spend less than 5% of their national budgets on agriculture.
Malawi Leads Africa in Agriculture Sector

Malawi has restored faith in Africa by demonstrating that the continent need not become the world’s basket case. Effective ways to improve agriculture and combat food insecurity are no longer a secret. In fact they are quite simple: scale up access and affordability of high yielding farm inputs through scaling up agro-dealers; put in place a smart subsidy programme for farmers; close the resource gap by leveraging commercial banks to lend more to agriculture through risk-sharing arrangements; build Africa’s capacity for evidence-based policies by strengthening policy institutions; and make operational policies to promote agro-processing and value addition.

However, the one ingredient that pulls all these solutions together is political will to deliver on commitments that have already been made. As in the case of Malawi, donors may be resistant at the beginning but if the country hangs in there, in the end, as long as the programme is well run and corruption-free, everyone will want to associate with success as did the donor community in Malawi which provides budgetary support: DFID, EU, NORAD, Irish Aid, and World Bank among others. It is time that Africa took the initiative to make hunger history.

Archbishop Njongo Ndungane is the founder and president of African Monitor.

United Nations Development Programme (New York) Malawi: Nation on the Road to Fighting Poverty

20 September 2010

Five years ago, Mwandama village in the Southern district of Zomba, Malawi's former capital city was a hunger prone area. Although they are a predominantly farming area, the yields were very low. Few people could afford fertilizer and seeds to grow their own food.

The village, with a population of 35,000 people was generally characterized with high poverty levels, malnourished children, and no access to clean water.

But a lot has changed in the last five years, since the introduction of the Millennium Villages Project -MVP- in the area. The Project is a partnership between the UNDP, the Earth Institute at Columbia University and the Millennium Promise. It has been implementing practical interventions in rural areas including Mwandama, to alleviate poverty and provide access to education and other basic necessities.

When the project started in 2005, every household was given seeds and fertilizer worth US$ 110 thousand. This improved harvests the following year. Over the years, with the continued use of fertilizer subsidies, hybrid seeds and improved farming techniques, the village now produces more than five metric tons per hectare of crop a year, exceeding the national average of 1.2 metric tones per hectare.

Through sale of crops like corn, soya beans and brown beans, the village has generated a combined income of US$155 thousand in the last five years. A village grain bank with a capacity of 1,500 metric tones to store surplus corn and ensure food security throughout the year was recently constructed and helps villagers who are struggling to feed their families. This income has also enabled the villagers to buy essential commodities such as sugar, salt; clothes and build iron sheet for the roofs of their houses, items they could not afford a few years ago.

Through sale of crops like corn, soya beans and brown beans, the village has generated a combined income of US$155 thousand in the last five years. A village grain bank with a capacity of 1,500 metric tones to store surplus corn and ensure food security throughout the year was recently constructed and helps villagers who are struggling to feed their families. This income has also enabled the villagers to buy essential commodities such as sugar, salt; clothes and build iron sheet for the roofs of their houses, items they could not afford a few years ago.

In addition, each farmer contributes two 50kg bags of corn for the school feeding programme to ensure that children who go to school have a meal every day, just in case they are not able to eat properly at home. Corn is Malawi's staple food and various meals are made out of the dry seeds.

Matias Rajab a villager in Mwandama grew cabbages for sale and used the proceeds to open a small grocery store, where he sells food.

"The profits from my grocery store made it possible for me to build an iron roofed house and buy a TV set," said a proud Rajab. My dream though is to work extra hard and get enough money to pay for my secondary education. I dropped out in the second year of high school because I could not afford school fees.

Generally life has changed in the village since the inception of the project. Over 70 boreholes have been drilled, enabling communities to drink safe water. The project also incorporates an immunization programme, which reaches 95% of children, and provides health care to those who needs providers to make household visits.

The village was visited by UN Secretary General Ban-Ki-Moon during his trip to Malawi in May this year, where he described it as a model for achieving the MDGs. He also promised to take Mwandama's success to the world.

"The good news is that people's lives are far better, The vast majority of families now have enough food. I saw that for my self at the community grain bank. Thanks to the new fertilizer and seeds, the areas small farmers produce a surplus of the grain. Today I call upon every country to look closely at this success. It is a case study on what possible in even the poorest places in the world," said the Secretary General.

A port is under construction along the Shire river in the southern town of Nsanje. Quite exciting for a landlocked country. Any photos on the project?
United Nations Development Programme (New York) Malawi: Nation on the Road to Fighting Poverty

A port is under construction along the Shire river in the southern town of Nsanje. Quite exciting for a landlocked country. Any photos on the project?

No photos yet but but here is the latest development regarding the port

Malawi opens trade waterway to Mozambique

By Felix Mponda (AFP) – 1 day ago

NSANJE, Malawi — President Bingu wa Mutharika on Saturday inaugurated a waterway linking inland Malawi to the Indian Ocean and opening up trade opportunities for neighbouring Zambia and Zimbabwe.

The 238-kilometre (148-mile) Shire-Zambezi river waterway, navigable from the Nsanje inland port in southern Malawi to the Mozambican coast at the port of Chinde, will bring economic benefits to the land-locked region, said Mutharika.

"This is a regional project. We will turn it into a model port that will benefit land-locked countries," he said at the ceremony attended by his counterparts Rupiah Banda of Zambia and Zimbabwe's Robert Mugabe.

Mutharika said the Shire-Zambezi waterway, composed of the two rivers and once used by explorers and missionaries, will improve the import and export trade of the impoverished state and its neighbours.

"We want to move goods cheaply across international borders," he said, after cutting a ribbon to officially inaugurate phase one of the port.

The project will cost six billion dollars to complete and includes funding from the African Development Bank, World Bank and the European Union.

"The waterway is now operational. It means barges and vessels can now start docking at the port," Dennis Mzembe, a spokesman of the Nsanje inland port told AFP.

A 2005 study found that Malawi could save a total of 175 million dollars of its annual import transport bill through the waterway, which is country's shortest link to the sea.

The route follows the Shire river which flows out of Lake Malawi, Africa's third largest body of water, and joins the Zambezi river in Mozambique.

"This project is important to all of us ... it will help in lowering the cost of living and we will be an immediate direct beneficiary," said Banda whose country is connected by rail to Malawi.

Zimbabwe's veteran leader Mugabe also welcomed the project.

"We of SADC (the regional Southern African Development Community) look at this as our project. We will facilitate it as our project together. We will enable it to function ... and not stand on its way," he said.

"This is a dream come true ... dreams are becoming a reality. This is a much needed piece of infrastructure. It will benefit our region."

The Nsanje port, which lies near Malawi's border with Mozambique, has a 50 year lifespan.

The waterway's maiden voyage was delayed after Mozambican authorities impounded a barge that was due to make the trial journey carrying 60 tonnes of fertiliser.

"The barge was expected to arrive at the official opening of the Malawi port but it is delayed because of the impounding. But it's on its way and it should arrive in the next two days," said port spokesman Mzembe.

Local media in Maputo this week reported the government saying that use of the Zambezi was dependent on the completion of an environmental viability study and project draft.

"The Mozambicans are co-operating on this project although they have always insisted on the feasibility study to be launched," said Mzembe.

The study will assess the depth of the two rivers.

^^ We want our 2 islands in the lake that they took from us.

United Nations Development Programme (New York) Malawi: Nation on the Road to Fighting Poverty

The "free"-marketeers must be ashamed now. ^^

Nation Turns to Private Investors to Solve Power CrisisMalawi is seeking investors to inject $2bn in power projects aimed at improving generation and supply. The country aims to increase capacity from the current 282MW to 3 407MW by 2020.

Malawi experiences major power outages due to existing shortcomings in power generation. Lack of adequate power supply - currently at 282.5MW against a demand of 344MW - has undermined the country's ability to attract investment and speed up economic growth.

95% of the power is generated by hydroelectric power plants on the Shire river in the southern region and the remaining 5% by a mini plant on Wovwe river in the north. The planned investment in phase II of Kapichira hydropower plant and also the interconnection of the electricity grid with that of Mozambique in 2011 is expected to help boost supply.

The government is inviting private investors to invest in short and long-term projects worth $2-billion, which will see power supply reach 3 407 by 2020. Feasibility studies for the development of hydroelectric power stations on the Shire, Songwe, Bua, Dwambazi, South Rukuru and Ruo rivers have been undertaken.

Other natural resources that could be exploited range from uranium reserves, which could be used as fuel for nuclear power plants, and coal reserves that could be exploited for use in coal-fired power plants.

Short-term investment opportunities

Development of Kapichira II hydro electric power station

Project description: Kapichira hydroelectric power station is located on Shire river. The first phase of the project has been commissioned and the government is now seeking investors to undertake work on phase two. This will involve the installation of two Francis turbines and two generators with the capacity to generate 64MW of electricity, auxiliary power station electro-mechanical equipment, CIS switchyard and approximately 30 km of 132kV transmission line to Blantyre West substation. The planned investment in Phase two of Kapichira hydropower project is expected to help reduce capacity shortages, load shedding and improve supply reliability.

Project cost: US$60-million

Estimated completion date: 2013

Installation of stand-by diesel-powered generators

Project description: The Electricity Supply Corporation of Malawi (ESCOM) intends to acquire three diesel generators to act as peaking and standby plants embedded within the distribution network. There are two peaks in the mornings and evenings that can be supplied by a peaking plant. The proposed generators will be for use in Mzuzu, Lilongwe and Blantyre and will have a maximum capacity of 46 MW.

Project cost: US$40-million

Location of existing hydropower plants

Modernisation of Nkula hydroelectric power station.

Project description: Nkula hydroelectric power station is located on the Shire river in Blantyre district and has an installed capacity of a total of 124MW. There is need to rehabilitate, expand and modernize the power station.

Project status: Feasibility studies to ascertain the generation capacity need to be conducted.

Project cost: An estimated US$140-million.

Installation of hydro matrix power plants

The government is encouraging the private sector to install hydro matrix power plants under bridges. A minimum of 50 MW is planned for installation.

Lunyina mini hydropower plant

Project description: The Lunyina river flows from the western side of Nyika plateau and is a tributary of South Rukuru. The flow is capable of producing 7-20MW, depending on the technology used. A phased development is favoured, starting with a mini plant of 7MW.

Cost of project: US$10.5-million.

For further information on these investment opportunities and the incentives available for investors in the energy sector contact the Malawi Investment promotion Agency (MIPA).

New Malawi Tax Measures Bound to Hurt InvestmentLILONGWE - Malawi's new tax measures announced this week are likely to impact foreign direct investment in the southern African nation, the Malawi Confederation of Chambers and Commerce (MCCCI) said on Saturday.

Finance Minister Ken Kandodo said in his 2011-12 budget speech on Friday previous tax breaks for industrial buildings, plants and machinery granted to companies under a free trade zone would be reduced to 40 per cent from 100 per cent. Companies will also be subject to the standard corporate tax of 30 per cent, he said.

"The new tax measures will in the long run worsen the investment climate which is already on a decline because of unreliable power outages, water shortages and the high cost of service," Chancellor Kaferapanjira, chief executive officer of the MCCCI, told Reuters.

MCCCI is an influential private sector grouping in Malawi.

Malawi's FDI inflows have been on the decline since 2008, when they peaked at US$144 million. The Malawi Investment Promotion Agency said investment into the country in 2010 fell by 46 per cent from the previous year to US$58,2 million.

"There are lot [more] minuses than pluses in the budget, for instance there is a lot of goods that have been applied VAT (value added tax) and for sure businesses may raise prices and in the long run investment may suffer," Kaferapanjira said.

The finance minister forecast that Malawi's economy will grow 6,9 per cent this year and 6,6 per cent in 2012, allowing the country to absorb a hefty decline in foreign aid.

Tobacco accounts for more than 60 per cent of Malawi's exports and 15 per cent of its gross domestic product. The tobacco industry employs an estimated two million people.

Malawi is also a uranium producer and touted to be home to one of the world's largest reserves of rare earth metals. - Nampa-Reuters

Malawi: Giving Up On Tobacco

Lilongwe — Malawi is reducing the production of tobacco following huge losses by smallholder tobacco farmers and commercial estates trading the crop on the country's only official tobacco markets, the auction floors.

Tobacco has been the country's sole main revenue earner accounting for up to 60 percent of the foreign exchange estimated at 950 million dollars. Malawi's tobacco accounts for five percent of the world's total exports, according to the country's ministry of agriculture.

Commercial production of Malawi's tobacco leaf dates back to 1889 when it was introduced by colonisers from Virginia in the U.S.

But since 2008, the auction floors have been seen prices plummeting from an average of 3 dollars per kilogramme to 50 cents this year. On average, a tobacco farmer spends up to one dollar to produce a kilo of tobacco, according to the ministry of agriculture.

The Farmers Union of Malawi (FUM), an umbrella body of farmers' organisations, attributes the low prices to the global anti-smoking lobby, which has led to demand for the crop reducing. The farmers' body also blames the drop in sales on the current economic crisis.

FUM has asked its members to reduce the production of tobacco and increase the production of coffee, cotton and sugar, which already contribute to the country's foreign exchange earnings. At the moment, the tobacco farmers in Malawi produce 220 million kilogrammes of tobacco against a current market demand of only 160 million kilos.

"Farmers are used to growing the crop as it has been known to bring a lot of forex to the country but now we need to change because the situation on the markets is not good," said Felix Jumbe, president of FUM.

He said FUM has been scouting the international market to assess which crops Malawian farmers could diversify into. He said groundnuts, legumes, soya, apples, paprika, wheat and sesame have been found to have a market potential for the local farmers.

"As a country, we have invested very little in the production of other crops. We have made enough losses from tobacco and it's high time we moved towards the production of other crops which are in demand on the international market," said Jumbe.

He said for a long time many Malawians have depended on tobacco farming for their livelihoods and have been living on profits from sales. "Many households are now struggling to survive and we have to start exploring alternatives if we have to keep on depending on agriculture," Jumbe told IPS.

Up to 85 percent of Malawi's 13.1 million citizens rely on agriculture for their livelihoods.

James Kupinda, 38, from Kaphuka in central Malawi has been growing tobacco since 1991. He dropped out of secondary school and joined his three older brothers in the family business of producing the cash crop.

Kupinda explained that his family has been growing tobacco on communal land and has been part of a cooperative, which they formed with seven other families in the village.

"We take the produce to the auction floors as a cooperative. We used to make good profits until three years ago when the prices started going down," Kupinda told IPS.

He said all the members of the cooperative could afford to send their children to school and buy food to last them the whole year when the prices were good on the auction floors.

"Things are not the same now. It is a struggle to pay school fees for our children and enjoy good lifestyles like we used to before," said Kupinda.

He said the members of the cooperative are planning to grow less tobacco this year. "We are thinking of growing soya and paprika," Kupinda said.

Malawi is reeling under an acute foreign exchange shortage, which has led to the rationing of forex for the private sector. The lack of foreign exchange has also been blamed for the country's fuel shortages.

It is not only farmers who are concerned over the loss of trade in tobacco. Government authorities are also disappointed with the loss in foreign exchange. As of the end of July, Malawi had only made 118 million dollars from tobacco sales as compared to 334 million dollars recorded at the same time last year, according to Reserve Bank of Malawi Governor Perks Ligoya.

Ligoya said at a press conference on Aug. 9 that this season's tobacco market was especially disappointing and alarming.

"We will not be able to make up for the losses made at the auction floors this year," said Ligoya.

He said the country needed to strategise on how to move forward in light of the low tobacco prices. Ligoya also recommended the urgent diversification of crops, which are marketable internationally.

Meanwhile a major tobacco-growing company, Press Agriculture Limited, which has been growing the crop for over 20 years, announced that it will stop cultivating the crop altogether due to the poor prices on the market. The development will mean up to 24,000 workers will lose their jobs.

President Dissolves Cabinet
After a series of anti-government protests in Malawi, President Bingu wa Mutharika has dissolved his cabinet, the maravipost has reported.

The State radio service Malawi Broadcasting Corporation said "all ministerial duties revert to the Office of the President and Cabinet", without giving reasons for the surprising move.

Analysts, quoted by the Maravipost, say Mutharika may be reacting to the 20-point demands presented to him after the July 20 violent demonstrations in which 19 people died.

One of the demands by the civil society leaders was that the president reduce his 40-plus cabinet to serve resources.

While it is not uncommon for the president to fire some ministers and keep others during a cabinet reshuffle, he only dissolves the entire cabinet when the country is heading to the polls. Analysts reportedly believe the president may be trying to re-align his cabinet ahead of the 2014 elections.

Organizers cancelled plans to resume anti-government demonstrations last week after businessmen close to the governing party obtained a court injunction but said they would continue protests in September unless the Government addresses economic problems and ends public threats against those with dissenting views.

Malawi's GDP growth slows, fuel prices hurt
Thu Feb 23, 2012

LILONGWE- Malawi's economic growth slowed more than expected to 6.0 percent last year, partly due to higher fuel prices and reduced income from lower tobacco prices, Finance Minister Ken Lipenga said on Thursday.

The rate of growth was lower than government's initial forecast of 6.9 percent after a 7.1 percent rise in 2010.

"In the face of escalating international fuel prices, reduced disposable income due to lower tobacco prices, scarcity of foreign exchange and intermittent power supply, the economy slowed down in 2011 from the initial growth projection of 6.9 percent to 6.0 percent," Lipenga told Reuters.

Malawi has in recent years seen GDP growth averaging 7.4 percent thanks to bumper maize harvests as a result of the implementation farm subsidies, which started in 2005.

The International Monetary Fund has previously said government's growth projections, including a 6.6 percent GDP forecast for 2012, were unrealistic due to industrial constraints a budget support freeze.

Malawi has been by hit a freeze in aid - which accounts for 40 percent of the budget - since last year as several Western donors have withheld funds due to concerns about creeping autocracy under President Bingu wa Mutharika.

The country is facing a $121 million budget shortfall in the current financial year due in part to a suspension of an International Monetary Fund loan programme.

Life has become increasingly difficult in the past year in the southern African country due shortages of fuel, medicine and foreign currency.

Last week, police arrested a leading lawyer and government critic for asking parliament to impeach the president for mismanaging the economy.

Civil society groups are demanding Mutharika to account for his wealth, mend relations with Britain - the country's former colonial master - and restore bilateral aid ties.

Last July 20 people were killed by Mutharika's forces to quell country-wide protests against his rule.


source: Reuters...

Malawi ends kwacha peg to dollar, seeks economic boost (http://www.reuters.com/article/2012/05/07/malawi-kwacha-idUSL5E8G71Q020120507?feedType=RSS&feedName=nonCyclicalConsumerGoodsSector)

Mon May 7, 2012 7:12am EDT

* Move expected to placate IMF, free up frozen aid

* Central bank scraps peg of 165 kwacha per dollar

* Commercial banks selling currency at 250

By Mabvuto Banda and Frank Phiri

LILONGWE, May 7 (Reuters) - Malawi scrapped its currency peg to the dollar on Monday, triggering a devaluation of around 50 percent in the kwacha as it sought to unblock frozen aid and halt a downward spiral in the economy of one of Africa's poorest states.

The central bank's move - welcomed by the market and one of the most dramatic since Joyce Banda took over as president last month - is also aimed at appeasing the International Monetary Fund, which suspended a $79 million aid programme due to a conflict with her predecessor Bingu wa Mutharika.

The IMF had called for a 50 percent devaluation of the kwacha, which commercial banks were selling on Monday at 250 to the dollar - well above the former peg at 165 and close to the black market rate of about 275.

The Reserve Bank of Malawi said it did not expect the currency reform to stoke inflation, because most commodities were already being traded at the unofficial exchange rate.

"At 250 per dollar the exchange rate is well adjusted," the Reserve Bank of Malawi said in a statement.

"It should also, together with the liberalisation of the foreign exchange market, contribute to government's efforts to reach early agreement with the IMF, which should lead to unlocking donor flows in the next few months."

Former colonial master Britain and major aid donor the United States froze aid packages worth nearly $1 billion to a country with an annual GDP of around $5.6 billion.

Dollars earned through tobacco sales, which usually account for 60 percent of Malawi's foreign currency revenue, can now go through commercial banks instead of through the central bank.

"All forex restrictions announced last year in August on forex bureau have been suspended since this is now a free floating foreign exchange regime," Charles Chuka, the central bank governor, told reporters.

He said the devaluation was met by higher sales for tobacco at auction.

The central bank also said it will allow international tourists to settle bills in any major currency.

HARD CASH CRUNCH

"It is very welcome and the playing fields have now been levelled," said Roy Daniels, head of trading for Africa at Rand Merchant Bank in Johannesburg.

"But like any field, it requires watering and to keep the importers from reverting back to buying dollars at the high rates of the offshore market, the central bank will have to allow export dollars to flow to the market along with supplying the market with dollars."

Mutharika, who died last month of a heart attack, had picked a damaging fight with donors, who suspended aid. He received international condemnation when his forces killed 20 civilians in anti-government protests in July, deepening Malawi's isolation.

Petrol, drugs and other items purchased abroad with hard cash grew scarce, with people lining up for days for a few litres of gasoline. Goods for the domestic market were sold over the border to earn foreign currency.

President Banda has wasted little time in trying to repair frayed ties with the international donor community.

Neighbouring Zambia donated 5 million litres of petrol to help her build support at home among Malawians who grew increasingly angry at having to queue for necessities under Mutharika.

"The economy will definitely experience some negative effects as a result of the (dollar) revaluation but overall its definitely positive," said Helen van der Horst, an economist at NKC in Cape Town.

"There's no way the country could have continued in the current state." (Additional reporting by Xola Potelwa in Johannesburg; Writing by Jon Herskovitz; Editing by John Stonestreet)

I have never known a country to succeed following IMF advise, hopefully she has a strategy behind these moves