As the dust settles and investors pack their bags heading to the airport on their way back to Western capitals after the successful 2016 Malawi Investment Forum, expectations are high among Malawians that this time around, they will pump their money into Malawi.
High, because for a long time, Malawi has failed to attract meaningful Foreign Direct Investment (FDI) compared to neighbouring countries such as Mozambique, Tanzania, Zambia and Zimbabwe.
FDI is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.
FDIs are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.
This was the second time that Malawi hosted the Malawi Investment Forum after a similar event last year.
So as the representatives of various investment groups head back to Europe, Asia, US and many other destinations, should Malawians be overconfident that the dollars will flow into Malawi?
Considering that investors are rational beings and that investment is not charity, I would opt not to be over excited but rather play a wait and see game for fear of being disappointed some 12 months later to find that only a handful of investors have showed up.
What is not attracting the investors?
From the time of former president Bakili Muluzi to the time of Bingu wa Mutharika, Joyce Banda and now Peter Mutharika, Malawi has seen plane loads of investors coming to assess the situation but not coming back.
That is simply because government, in all the administrations, has failed to provide the conducive environment for investments to thrive.
What authorities have failed to accept is the fact that Malawi is a landlocked country which is a big minus for any investor willing to pump their dollars for manufacturing for exports as it would make their goods less competitive on the international market.
That is to say Malawi needs to have more attractive conditions than those of countries such as Tanzania and Mozambique which have access to the sea.
In such an environment, investors need to be treated with the utmost respect they deserve because they could choose to invest elsewhere.
That is say Malawi needs to have attractive taxation regimes as well as efficient organizations to help facilitate easy investment.
But looking at the situation at the moment, instead of praising them for opting to pump their hard earned dollars in Malawi and not Tanzania or Mozambique, we have tended to treat them as if we don’t care whether they leave or not.
In fact, Malawians have looked at investors as ‘plunderers’ who are just here to profiteer at the expense of ordinary people.
Malawi has plenty of examples of how investors such as Paladin have been treated.
So when such hostilities are reported in the Western media, they send some shockwaves among the potential investors.
Cost of borrowing, inflation
In addition to being landlocked, Malawi has had the highest costs of borrowing in the region.
Honestly speaking no sane investor could be attracted to pump money in an economy where interest rates hover above 40 percent.
Even the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) identified high cost of finance as the top impediment to doing business in its 2015 Malawi Business Climate Survey.
This coupled with absence of an institution to facilitate long term lending in a form of a development bank has made doing business almost impossible in Malawi.
In addition to high cost of borrowing, Malawi boasts of extremely high inflation recorded at 22.8 percent in August 2016.
The high inflation is slowly eroding the buying power of Malawians, thereby reducing their capacity to purchase more products and services.
Unpredictable environment
Investment is money, therefore the environment needs to be very predictable. When the environment becomes unpredictable, it makes planning extremely difficult.
Just like the rain, Malawi has become very unpredictable in recent years. Often times we have seen government officials coming up with policy decisions which have the potential to bankrupt an investor.
Policies such as haphazard export bans on agriculture products have made investment in agriculture a risky venture.
In addition, the exchange rate has been far from predictable, swinging like a pendulum at any time of the year.
Previously, Malawians could predict that the kwacha would easily predict that the kwacha would strengthen during the tobacco selling season and depreciate when the market is closed. Not anymore.
Today the kwacha falls and gains at any time, making business planning extremely difficult.
Unreliable power and water
Two things that are critical for any investment are power and water. Power will help an investor to make any product at any given time.
Similarly, water is a critical ingredient for the manufacturing of various products.
But looking at Malawi at the moment, power is almost nonexistent with electricity going on and off just like disco lights.
During the rainy season, the excuse there is too much debris affecting power generation and during the dry season, the excuse has been that the country has limited water to generate enough power. Same excuses for decades.
Again frequent water shortages have become an order of the day in recent years whether in the rainy season or dry season.
Glorifying corruption
Malawians need to be ashamed of too much corruption taking place in the country.
At the moment, officials in government need a kickback for some simple and straightforward documents to be processed.
This has often resulted in investing in Malawi an expensive venture.
Even President Mutharika has time and again expressed disgust over the high levels of corruption prevailing in both the public and private sector.
Despite having institutions such as the Anti Corruption Bureau Malawians are simply not ashamed to engage in corruption or to demand bribes.
Stories are told of civil servants, including road traffic police officers who have acquired enormous wealth in recent years that does not tally with their earnings.
Still plenty of opportunities
Despite the various challenges highlighted, Malawi still remains a land of opportunities.
Alltopstartups.com founder, Thomas Oppong, once said that as long as consumers have problems, they will always search for solutions.
He said people will always look for better, faster and smarter ways to accomplish everyday tasks.
And fortunately for entrepreneurs, there are still lots of rooms for improvements in existing products. That said, the biggest issue for most founders is finding these painful problems and matching them with the best solutions possible.
That is to say as long as Malawians continue to complain about unreliable power supply, it means that there are plenty of opportunities in the energy sector.
Similarly, where Malawians continue complaining of poor water supply, it means that there is plenty of room for investors to make it better.
Again Malawians have complained of high communication charges, poor internet connectivity and many other things. This clearly shows that Malawi is a land full of opportunities, especially to those who think outside the box.
Conclusion
Whether the 2016 Malawi Investment Forum will yield the intended results will depend on a number of factors.
Key among the factors is the stumping out of corruption among authorities so that investment is simplified.
Again ensuring that the economy becomes cheap and predictable would help.
Otherwise, we will keep singing the same old song.
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