Sosten Gwengwe, Minister of Industry and Trade of Malawi, discusses with United World how his country aims to correct the trade deficit and make doing business easier, as well as the investment opportunities available to foreign entrepreneurs
Malawi relies heavily on agricultural goods, and tobacco accounts for no less than 50% of exports. Please highlight Malawi’s exports and how you want to lower the dependence on agricultural goods in order to export other products.
First of all we have a structural trade deficit, which has been like that for a long time. Our inputs are outstripping our exports. It is true that agriculture is our main source of export, especially tobacco, tea and a little bit of sugar. Last December we launched the National Export Strategy, which is playing a key role to diversify and move away from an over-reliance of exporting raw agricultural products, like what we did with tobacco. The essence of the export strategy is to look at what other clusters can bring into our export picture, so it is not just tobacco.
We have developed three main clusters, the first one being the oil seed cluster. Here, we are developing some cash crops, like soya beans and sugar beans. We are now looking at how we can move away from just tobacco, and rely on sugar beans, soya beans and others. That has really taken off. We also have another cluster for manufacturing. We are promoting value addition, and we are supporting SMEs and the manufacturing sector so it can grow. We do not want to just export raw products. We should also diversify away from an over-reliance of tobacco. When you look at the world market, we know that the future may not be as bright, so maybe now is the time to look at alternatives to tobacco in agriculture.
The government has said that private investment is key to lowering the trade deficit. How are you encouraging the private sector to be more included in the economy?
Politicians often talk about the private sector being the engine of growth. The President has a strong business background, so she understands private sector issues better. She has been a champion for private sector reforms, to make doing business in Malawi easier, and make Malawi a favorable destination for foreign direct investment.
We have been looking at constructing a dialogue and institutionalizing. Every quarter of the year we have a public-private partnership (PPP) dialogue forum, where you have key players from the public sector and the private sector. It is an institutionalized interface or forum, where there is a chairman from the private sector plus the Ministry of Industry
. It is jointly co-chaired, so that we can sit down and look at our constraints and challenges and be able to discuss actions to move forward. That kind of dialogue has been adopted by the private sector, and we are able to engage better that way.
In terms of making the business environment more conducive, the Government has embarked on law reforms in terms of institutions that support business, as well as administrative reforms. There are many Institutional, legal and administrative reforms, in order to increase business, make it easier and cheaper. When we say that we are a destination for investment, we should be able to say that the process for you to come in and register your company is simple. So many laws have been passed in parliament. Four economic bills are already on the agenda for parliament, and they are awaiting approval. Hopefully these will be passed, and this will help streamline business processes and operations. There is a specific inclination towards foreign direct investment, but local and foreign investors are given equal treatment in terms of protection, being able to invest in any sector. We are a friendly destination for foreign direct investment.
The World Bank’s Ease of Doing Business ranking includes ‘trading across borders’. The problem we have had is that there have been delays around the border and duplication of information. Money is prone to fraud and errors. So the cabinet recently approved the establishment of the national single window, and right now, we are looking for a partner to work on a PPP basis for us. We already have an Act for this in place, and we are hoping that the PPP Commission will be able to procure a private sector for government, so it can be implemented in earnest. It does not need parliament approval, so once cabinet approves that, it will be ready to go.
What investment opportunities can Malawi offer interested entities?
There are so many misalignments in the economy. The first thing that the President embarked upon when she assumed government was to put the economy back on the same footing. She introduced the ‘Economic Recovery Plan’, which is a mechanism to grow the economy using five sectors that are likely to boost economic growth in Malawi. We have tried to put incentives into place and direct investors towards these five specific areas. These include agriculture – we want to commercialize the sector, by using the Green Belt Initiative. We have a big lake, but we have not really tapped that resource. It is the most biodiverse lake in the world, with over 1,000 species. There are so many other rivers that cross the country as well, and we want to use our abundant land and water resources by developing the Green Belt Initiative where over 1 million hectares of land will be available for investment. Companies like Malawi Mangoes are already on the ground and taking advantage of that initiative.
You are probably also aware of the G8 New Alliance on Food Security and Nutrition, which America is also part of. Malawi will be joining in June . I think we will become the seventh African country to join this alliance. There are lots of opportunities for the private sector to get involved in agriculture as a business. There are so many companies here in Malawi and a few from outside that have already put their letters of intent indicating that they will be G8 partners and will increase their commercial agricultural activities. We have seen that agriculture is a potential area where investors can come and do farming and value addition. For example with Malawi Mangoes, they will be squeezing the mango puree for exports.
Another strategic sector apart from agriculture is tourism, targeting the lake and other game reserves in the country. We are also looking at energy. In Malawi, our energy is 99.9% hydro. We want our partners to get involved in renewable energies, and the challenge we have now is that the demand for electricity is exceeding supply. So we are only producing about 260 MW and the country needs more than 300 MW. That does not include the mining sector. Once you start putting the mining companies into the picture, we will need maybe close to 1,000 MW. So there is still a deficit even as we talk now, excluding the mining companies. This tells you that there are huge investment opportunities in energy, be it renewable or hydro. Renewable energy solutions would be most suitable, so that is another area of investment.
We are also looking at mining. There are so many minerals that Malawi is endowed with. In the meantime, it is just uranium where we have a functioning mine. There are huge deposits. We will be the second highest producer of rare earth elements in the world and a UK company is working in the southern region of Malawi. So the potential is there. There is potential for oil and gas as well. That provides scope for mining in Malawi, not just for minerals, but also for oil and gas.
You have got agriculture, mining, energy, tourism, infrastructure and ICT. Those are the sectors where we would like investors to look towards. There is a team for each of these areas that will ensure an enabling environment, so we can track investment in those specific sectors.
What efforts are you making to promote the Malawi brand abroad?
That is a very good question. Our efforts have really been constrained to the international investment forum and maybe using our embassies and high commissions abroad. Launching into the international media is something I think we need to aggressively pursue, so that the Malawi brand will become known and it will go on the map, so that people will know what is available in Malawi, and what the opportunities are. We currently have a page for tourism, industry and trade, but this is not very good I would say. But going forward, we have set up a one-stop shop for investors, called the Malawi Investment and Trade Centre (MITC). Essentially, they are a promotional agency that promotes Malawi. They are working with DfID to polish up their website, so that it meets international standards, as another vehicle that they can use for the Malawi brand.
You are one of the youngest Ministers in the cabinet, being a good example of Malawi’s new generation of well-prepared youth. What would you say about the human capital, the skills of young Malawians, for investors who want to come here?
Malawi is an English-speaking country. English is the only language that is spoken across the country really. That makes it easier for investors, because communication will not be as difficult as one would expect. Like any other country, the population in Malawi is very young, so the workforce is still very young and dynamic, and pretty well-exposed to the world. There are a significant number of younger ministers in cabinet, as well as in other positions in the private sector, and the public sector. There are young directors in many companies. The workforce is fairly young in both the public and private sectors, and that is a good thing because younger people are dynamic, they are not afraid to take risks, and they are innovative. It is therefore easier to work outside of the box when you have a group of younger people working.
Malawi’s strengths include land, water and a young, vibrant workforce, which I think would attract investors.
What are your views on the future relations between Malawi and the U.S.?
The visit we had in America was intensive. We met almost everybody I would say as far as business is concerned. This can only indicate the intent of the Malawian government to be able to partner with America in the longer term.
One thing that was highlighted is that Malawi is not a recipient of aid, but rather a trade partner, so that we move from aid to trade. If there is aid, it should be aid that assists us to trade more. We are really looking towards this as a nation. We want to trade more as an expense of aid. I can see that relationship going stronger, especially with the involvement of the Millennium Challenge Corporation, MCC, which is a unique funding mechanism for the energy sector (US$350 million). I think America is really at the center of trade and our bilateral relationship. USAID has the Feed the Future program, and Malawi is one of the countries that are really benefiting from this. Most of the programs we are running are attached to the U.S. and that only tells you that going forward with our efforts to boost exports and trade volumes, America is really at the center of this.
To finish our interview, we would like to give it a personal touch. What legacy would you like to leave once you have finished your term as minister?
The trade deficit has been an issue, where our imports have been stripping our exports for a long time. We hope to see a reversal in that, and if this happens, I will feel that I have really done something for my country. That will be a legacy.