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Malawi’s National Budget 2018/2019: A Post Budget Statement Review

 

On the 18th May 2018, the Government presented the 2018/19 Budget Statement to Parliament. According to the budget statement, the key focus of the budget is robust economic growth as the main goal of economic management alongside maintenance of macroeconomic stability for robust, inclusive and sustainable growth.

The national budget remains the most important document through which policies and programmes are executed by governments. These policies and programmes have implications, either positive or negative, on private sector performance. An analysis of the budget statement is therefore very important because the statement reveals government’s position, commitments and advances it has put in place to stimulate private sector activity.

First of all, MCCCI would like to applaud Government through Ministry of Industry, Trade and Tourism on the efforts that have been made on ensuring that the reviewed Control of Goods Act is passed in parliament. The act now empowers the Minister to engage stakeholders before banning or restricting imports and exports of commodities. The previous Act empowered the Minister of Industry Trade and Tourism to institute bans without consultation with relevant stakeholders.

MCCCI would also like to commend Government on the job well done in its mission towards macroeconomic stability. Indeed, inflation which is at 9.7 percent as of April 2018 has continued its downward spiral as food prices, maize prices especially, continue to drop. Lending rates though still high at an average of 26.9 percent have fallen and the policy rate is at 16 percent compared to the average lending rate and policy rate of 31.6 percent and 22 percent respectively during the same period in 2017. In addition to this, exchange rate has stabilized and foreign reserves are adequate enough to cover at least 3 months’ worth of imports. The International Monetary Fund has approved a new Extended Credit Facility program with an amount of US$112.3 million and the World Bank is expected to extend a MK60 Billion concessional loan as part of budgetary support. The Extended Credit facility is subject to performance that has been agreed to ensure that key issues are dealt with if the economy can be on the right growth trajectory.

Despite these achievements, it is very surprising to note that the 2018/2019 budget has totally ignored the private sector, a sector which has the highest potential to catapult the country to economic freedom. Complementary enablers for inclusive growth and industrialization, such as immediate remedial solutions to the energy crisis that the economy is facing and incentives have not been considered in this budget.

Budget Statement Analysis

The budget, as presented by Minister of Finance, Economic Planning and Development, is built on assumptions that are not strong to drive economic growth of Malawi.

The following macroeconomic targets were outlined in the 2018/19 budget statement:

  • A real GDP growth rate of 4.1 percent in 2018 and 6.0 percent in 2019.
  • An average inflation of around 7 percent.

The modest GDP growth forecast of 4.1 percent and 6.0 percent in 2018 and 2019 respectively is not enough to fix the economy, because our export base is narrow, commodity based and prone to climatic conditions. Furthermore, the average GDP growth rate of 2.4 percent for SADC as stipulated in the budget statement cannot be used as a yardstick for Malawi since countries within SADC have GDP bases which are much higher than Malawi. For instance, Zambia’s GDP for 2017 is estimated at 19.55 billion United States Dollar which is five times more than Malawi. Malawi needs at least 7 percent growth rate sustained over a period of not less than 6 years to meaningful bring a change in the economic development of the country. The quality of growth and the sectors in which the growth is generated matters. It is a very well known fact that sustainable growth cannot, and will not, happen without private sector prosperity. This sector has the potential to have a transformative impact on a struggling economy like Malawi and shift the economy from an agriculture based economy to an industrial based one. More and more countries in Sub-Saharan Africa are shifting towards value addition through industrialization. Industrialization, driven by private sector growth, has all the pre-requisites of mopping out unemployment which is one of the major challenges that Malawi is grappling with today.

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HIGHLIGHTS FROM THE STATE OF NATION ADDRESS, MAY 2018

HIGHLIGHTS FROM THE STATE OF NATION ADDRESS, MAY 2018

Procurement flaws costing businesses

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says businesses are still hopeful of improved public procurement management systems despite many of them losing business opportunities to lack of transparency in the procurement process. MCCCI director of membership development and service delivery Stella Ng’oma said this during a business outreach workshop organised by the World Bank in Blantyre. She observed that public procurement is one of the most serious and common grounds for corruption and fraud in the country. Ng’oma said the promotion of exchange gratification to secure procurement contract is the main cause of fiscal drain which undermines implementation of key activities that can help resolve business challenges and build a better private sector to drive the economy in the country. She said: “Some of the businesses have even failed to raise issues simply because of being afraid of the reprisals or being blacklisted and, therefore, suffering in silence. Even those that have ever appealed against the procurement decision, procurement process would proceed and awards made. This does not help those who appeal because they shall have lost the business and companies see no incentive to make future appeals.” The concerns follow an assessment of public procurement system in Malawi carried out from February 24 2018 to seek feedback from the private sector by the Public Procurement and Disposal of Assets Authority (PPDA) with support from the World Bank. According to the assessment findings, which had 150 respondents from the business community, 82 percent of the respondents consider that there are inadequate opportunities for qualified companies to compete fairly for contracts with 73 percent of the respondents feeling that the complaints review system is not trustworthy and consistent with findings of the case. A 2014 research by the Centre for Social Research also found that 20 percent of all procurement contracts with government involve gratification where 11 percent of the cost of the contract is paid to secure it while at the same time demanding businesses to forfeit 10 percent of the value of invoices to be paid. In Malawi, public procurement is regulated by an Act of Parliament, Public Procurement Act 2003, which has now been replaced by the Public Procurement and Disposal Act 2017.

Applications for Trade Fair participation closes today

Today the 11th May is the last day to receive applications for businesses wishing to participate in this year's Malawi International Trade Fair.

Applications for Trade Fair participation closes today

Today the 11th May is the last day to receive applications for businesses wishing to participate in this year's Malawi International Trade Fair.

Malawi International Trade Fair 24th May - 3 rd June, 2018.

Trade Fair offers your business a convenient and conducive space to market your products and services and enhance brand and product visibility that will generate leads to drive incremental sales. It offers answers about the win-win networking opportunities for your business from prospective business partners both on the local and international front. If you are introducing a new product, the Trade fair is an amazing opportunity to introduce new products and services and immediately initiate contacts with new local and International customers Gates Open from 8:00am – 05:00 pm each day. Key Dates: 24th May - Official opening day 25th - 26th May - Public days 29th - 31st May - Business seminars 1 st - 3 rd June - Public days.

Malawi International Trade Fair 24 May -3rd June “ Industrialisation: Basis for Trade Competitiveness”

The theme has been considered to reflect the need for the Malawi economy to produce and trade in goods with value addition, a scenario that is possible through Industrialisation. This year’s theme thus focuses on the need to adopt a more export –oriented industrialization as basis for achieving trade competitiveness. It calls for trade and economic policies that speed up the industrialization process to propel exportation of high value processed goods. Industrialisation is therefore fundamental to attain trade competitiveness for the Malawi economy.

Trade Fair: An opportunity to market products

The 30th Malawi International Trade Fair that will be held from May 24 to June 3 will bring together exhibitors from the continents of Africa, Asia, America and Europe. Hence giving exhibitors an opportunity to market their products and services and enhance brand and product visibility to generate leads for increased sales. Deadline for registration is 11 May. Call 01871988/813 01 759 912

AFCFTA new dawn to African economies

The Minister of Trade, Industry and Tourism Honorable Henry Mussa said the creation of the African Union Continental Free Trade Area (AFCFTA) would increase intra-African trade resulting in an increase of African manufacturing exports within Africa and beyond. During a sensitization seminar with the private sector, the Minister said the AFCTA is expected to bring together 55 African countries with a combined population of more than 1.2 billion people. AFCFTA is a free trade arrangement established among African countries to conduct trade among themselves without charging each other customs duties. He said there will be better harmonization and coordination of trade liberalization, facilitation and instruments across regional economic communities and Africa. He said: “A fully implemented AFCTA will create opportunity to establish regional and global value chains and promote industrial development. The AFCTA market will make it easier and cost effective to trade inter-continentally and attract FDI for natural and regional infrastructure projects,” He added that the private sector in Malawi stands to benefit from financial support to be provided by Afrexim Bank through the existing local banks to leverage their potential. He called on the private sector to take the agreement positively by being proactive in seizing opportunities that it will avail. The ministry will intensify sensitization and consultations meetings in building a national position on the issue.undefined

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