Page 12 - DMA Malawi Report 2013

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Investing In Malawi
world’s most
developed countries, the
Southeast African Republic of Malawi is
a predominately agrarian society, with
an estimated 82% of the population
living in rural areas. Agriculture accounts
for more than one-third of GDP and
approximately 90% percent of expor t
revenues. In recent years, tobacco
production has been central to economic
growth – accounting for more than half
of all expor t revenues. Annual production
levels of tobacco reached 175,000
tonnes in 2011 but stalled in 2012 due
in par t to both poor weather conditions.
Other impor tant expor t crops include
tea, coffee, macadamia nuts, groundnuts
(peanuts), sugar, cotton, soya and timber.
According to a 2009 study by the
United Nations Food and Agriculture
Organization (UNFAO), the top ten
agricultural products available for local
consumption are: maize, potatoes, cassava,
sugar, pulses, groundnuts, rice, plantains,
wheat and beans.
It is fair to say that 2012 presented
significant challenges for Malawi’s
agriculture sector. According to the
World Food Programme (WFP), erratic
rains and prolonged dry spells led to
poor harvests in many areas and, even
where food was available in local markets,
it was often too expensive for the
poorest households. Maize retail prices
rose nearly 100% from the previous
year. Almost two million people were
identified by the Malawi Vulnerability
Assessment Committee as food insecure
and significant international assistance was
required in order to aver t a humanitarian
crisis. Fur thermore, other factors such as
the political turmoil following the death
of President Mutharika, the impact of the
global economic crisis, climate change and
extreme pover ty have all hindered recent
growth in the agricultural sector. But with
a free market economy and a recently
reaffirmed commitment to democracy
and good governance, significant
international development funding has
begun flowing into the country, helping to
ease many of Malawi’s historic problems.
In terms of foreign direct investment
(FDI), Malawi is also a signatory to
international treaties for the protection
of foreign investment, and its legal system
(based on English common law) protects
investment regardless of ownership.
In spite of the poor growing conditions
experienced in 2012, there have
been some recent good news stories
for agriculture in Malawi, including a
resumption in the expor ting of peanuts
(or groundnuts, as the crop is known in
much of Africa). Expor ts of groundnuts
from Malawi dried up in the 1970s
because of high levels of aflatoxin
contamination. Since then, more stringent
European limits on aflatoxins in grains
and nuts have excluded many growers
across Africa, costing the continent an
estimated US$750mn per annum in
lost expor t revenues. Recently, however,
the National Smallholder Farmers’
Association of Malawi (NASFAM)
has been working in par tnership with
farmers, trade organisations and scientific
institutions such as the International Crop
by Brian Naughton