When President Joyce Banda took office last year, she was left with a difficult situation. She started to work on the situation, and introduced some tough measures, such as the devaluation of the Kwacha. Do you think these policies are starting to reap the benefits?
I do personally think there are some signs that the policies are working. We are not yet there – I cannot say we have fully recovered yet, but we are in the process of recovering. You can see it; the evidence is there. If you go to the filling station to fill your car up, you do not have to stand in the queue. But the problem might be with the money, because it is a lot more expensive with the devaluation, but at least it is available. If you go to the bank now and look for forex, it is there, although it is expensive, because you have to pay a few more Malawi Kwachas to get dollars and the rand, but it is available. The Malawi Kwacha (MKW) has been appreciating recently against the US dollar and other major currencies. However the interest rates remain very high, although one of the banks, Standard Bank, recently indicated that it had reduced the base lending rate. Hopefully, this is the beginning of the fall in interest rates.
All this points to one thing – we are moving in the right direction. But the question is whether it is sustainable. I think that question is on the minds of most people – is the Kwacha appreciation going to last? When will inflation and interest rates start to go down? These questions are being asked because we are approaching the elections. The general elections are happening in May next year (2014), so the Government needs to stay the course of the ERP. The Reserve Bank has done extremely well with the monetary policies. On the other hand, the Government has to contend with the fiscal side of the ERP. Will the Government stay the course and will they control expenditure, especially when the elections are around the corner?
We are moving in the right direction, and I for one am convinced that we are on the right path, but it is a question of whether that can be sustained, and whether the Government can stay the course. That is the challenge and it is yet to be seen.President Banda also introduced the Economic Recovery Plan, which highlighted five key sectors to invest in. What potential do you see in each of these sectors and what role does Press Trust play within them?
One of our subsidiaries and the biggest investment we have is Press Corporation Limited (PCL). We have taken the Economic Recovery Plan as a challenge to define what we do as PCL. I chair the PCL board. We have come up with the energy sector so far. We think that is where we can move into very quickly, and make an impact. We are talking about solar energy. We have already started talking to potential strategic partners about moving into solar energy. We have also agreed amongst ourselves that we should not restrict ourselves to solar energy – we must also look at hydro, and any other form of power generation that is out there.
We are already in the telecommunications sector. We have got a mobile network, TNM, and we have the only fixed landline company in the country, MTL. These companies have not been performing well; they have been going through a very difficult period because of the economic situation. They have got huge foreign exchange loans. The challenge for us is to help them perform and get out of the situation they are in so that they can concentrate on expanding and move forward.
One other area we have not really focused on, which I think we need to do, is tourism. I am not just talking about Press Corporation, but for the entire investors out there, within and outside of Malawi. If Malawi has anything that needs to be exploited, which can bring in the forex we need quickly, then that is tourism. But there are quite a number of challenges along the way, such as the infrastructure issues that need to be looked at. The Government has got to come in; it is not only private investors that have to handle that. As an example, the road from Mangochi has to be upgraded to put up a hotel at Cape Maclear on Lake Malawi. As we speak, I do not think there is ESCOM power at Cape Maclear. You need various other infrastructure in place. But some of the best places in the world are in Malawi, and you just need to develop the roads and get the infrastructure done or rehabilitated and up to date. As I said, it is probably the quickest investment that can bring us forex into the country.
Regarding agriculture, we need to go commercial in the country. Press Trust
was the single largest investor in agriculture in the country through one of its subsidiaries, Press Agriculture.
In the years 2010/2011 you diversified away from the tobacco business in order to use the land and your people for other activities. That is also in line with the Economic Recovery Plan and the IPS. Could you tell us more about that?
We were not doing well in tobacco farming. The cost of production was much higher than what we were getting when we took the tobacco to the auction floors. Tobacco consistently posted losses over the years, and it became unsustainable. We could not go on. We tried various solutions. We even brought in a company to manage as well as finance tobacco production. They came in for five years and it was the same story. We parted company in 2008/09 and we said that we would go back and do it on our own. Three years down the line, we gave up. We could not go on. But we are still growing some crops, and we are subleasing some of our estates. One or two farmers are still in the tobacco production. They are doing well on their farms.
Malawi is an agricultural country, and I think we need to add value, by processing, so we can earn a little more. We should not just take unprocessed tobacco to the auction floors. If you sell a kilogram of tobacco on the auction floors here, you will get about $2.5/kg if you are lucky because it is basically raw. The tobacco merchant processes it and packages it, and sells it to the cigarette manufacturers overseas and he probably gets $10/kg. That is four times what they paid the farmer at the auction floors. The cigarette manufacturer produces cigarettes and makes a killing on just a 5-gram packet of cigarettes. If the farmer was paid say $5/kg, it would make a world of difference.
The route to take would be to establish a processing plant here. We need to do commercial farming. We have a lot of small-scale subsistence farmers, who are growing tobacco and other crops, like maize and soya on a very small scale. But we are not making any progress because it is dependent on rainfall. Everybody agrees that what we need to concentrate on is large-scale commercial farming using irrigation. This has been said so many times. What we need is action. We have got lots of water in Lake Malawi and the Shire River. If we harness the water and do irrigation, we will have more than one harvest a year, through the Green Belt Initiative. Those are the things we need to do. We need to move away from small-scale subsistence farming, to commercial agriculture.
We have got our own challenges as Press Agriculture Ltd. We are trying to sort out Press Agriculture’s crippling financial obligations to the banks. Once we get out of the tight corner we are in, we can start looking at the alternatives. We said goodbye to tobacco production; we have left it up to others. One of the problems for rural farmers is the lack of financing. What do you think about the microfinance initiative, and how is Press Trust collaborating in this regard?
Press Trust is not involved directly with financing small-scale subsistence farmers as such – it is the banks and other microfinance institutions in the country. We have a significant shareholding in Indebank, which in turn owns Indefund, which targets small and medium-scale businesses. The trust also has very minor shareholdings in Standard Bank, National Bank and CDH Bank.
For the smallholder farmer, the real challenge is that he cannot pledge the piece of land he is using as collateral because he has no title. For example, I have a title deed for the house I own, and I can go to the bank and get finance on it. But the land a farmer “owns” is what we call “customary land”. Unless that customary land is transformed into private land, and the farmer gets a title to the land, he will not be able to get a loan from the banks or any of the microfinance institutions. Until such a time that there is land reform and people can get some kind of title to customary land, it will be difficult for the small farmer to access finance from the formal banking sector. I think the land system needs to be reviewed, so that the smallholder farmer can be empowered to enable him to access finance.What does Press Trust mean for Malawi?
Press Trust was set up by the first Head of State of this country, Dr. Kamuzu Banda in the late ‘60s. Dr. Banda was a visionary. So, besides attaining political independence for Malawi in 1964, he also wanted indigenous Malawians to participate in the economic development of the country. He himself owned quite a number of companies which were grouped under a holding company called Press (Holdings) Limited (Press Group or PHL). At one point, the Press Group had grown so fast and so big that it became the singe largest contributor to Malawi’s GDP. However this was its own undoing, so much so that in the late ‘70s and early ‘80s, when the Press Group was performing so poorly and was on the brink of collapse, it was cause for concern to everybody within and outside Malawi. If it collapsed, the Malawi Economy would be damaged severely.
In a bid to rescue the situation, the World Bank and the IMF agreed to assist the Malawi Government to put things right by restructuring the Press Group. This resulted, inter alia, in the establishment of Press Trust and Press Corporation Limited. The latter took over the assets and liabilities of PHL and Dr. Kamuzu Banda transferred all his shares in PHL to Press Trust. Dr. Banda executed a trust deed in which he stated that “…in consideration of his love and affection for and dedication to the Malawi Nation and in furtherance of his desire to encourage, assist, promote and advance the welfare of the Malawi Nation…” he transferred all his shares in PHL to Press Trust for the benefit of the people of Malawi.
Press Trust was later in November 1995 re-constructed by an Act of Parliament called the Press Trust Re-construction Act which, inter alia, re-affirmed Dr. Banda’s wishes and went further to stipulate that at least 50% of the Trust’s income every year should go towards funding social programs which are in the interest and for the benefit of the people of Malawi.
Since then, that has been the mandate of the Trust. Therefore, Press Trust plays the dual role of an investor and a philanthropist. On the investment side, Press Corporation Limited is the Trust’s flagship investment and under it are all the operating companies such as National Bank, Carlsberg, Puma Energy, Ethanol, TNM and MTL. But, Press Trust also has direct investments in several other companies such as Indebank, CDH, Blantyre Hotels and Mwaiwathu Hospital.
But, from the way I look at it, all the above investments are a means to an end. The Trust is there to assist in funding social programs. Therefore, we build classrooms and furnish them; health clinics and furnish and equip them and we sink boreholes and build or rehabilitate water schemes to provide potable water to rural communities. We do all sorts of things to improve the lives of the local people. That is the mandate of Press Trust.
Although we have investments in a number of sectors of the economy, we still have to keep our eyes open and look for more investment opportunities to grow our portfolio. We also must make sure that whatever we have invested, everything is under control. So, my colleagues and I sit on the boards of the investments to provide oversight. Nevertheless, our primary mandate is to invest in social programs in the key focus sectors of health, education, social welfare and housing.I am sure that the Trust is very open to international partnerships. Please tell our readers about your international relations and partners.
Currently, we have got a very good partnership going on with UNDP. Three years ago, we set up a Revolving Fund in which each one of us put in MKW15mln (total: MKW30mln) and we hired a finance management company to run a fund. The purpose of the fund is to lend to small-scale businesses, especially to groups who are willing to get together. We do not seek security because we believe the peer pressure within the groups is enough for any member of the group to repay the loan. The results have been very encouraging indeed in that the loan repayment rate is over 90%. It has been a very good experience. We are still in discussions with one or two other international organizations to get involved in projects in water and sanitation and small-scale fruit and vegetable farming. One of the two is undertaking a pilot scheme in a few selected districts in the country.
At the end of the day, we are open to partnerships. We are prepared to partner with as many local and international organizations as possible. When we partner, we would like to ensure that our contribution is distinct and identifiable. If we are going to jointly build a big project such as a hospital, we should be able to point out then the specific item that we have spent our money on. We can then put a plaque stating that says for instance “…this maternity wing was built using funds donated by Press Trust…” If we can find partners who would accept that arrangement, then we will do business with them.How are you looking for international partners, and what can the U.S. start to do, in order to change the relation from aid to trade?
We are open to these partnerships. I have attended the investors’ conference that the President attended in March this year (2013). I am happy that I am on first-name terms with senior members of the diplomatic community and international organizations based here in Malawi. I am also on the Board of Malawi Investment Trade Center Limited. So, networking is taking place on both the formal and social fronts. The bottom line is that we are open to partnerships with as many companies and organizations as possible. Why Malawi? Why not other countries? What unique points would you highlight to our readers?
Press Trust’s logo is a heart within a heart. Because of its social programs, Press Trust has a heart for the Malawians, but Malawi is the warm heart of Africa. If we have any selling point, it is the people of Malawi themselves. They are kind hearted, warm, hard working and disciplined and wherever you find them – whether in South Africa, Zimbabwe or Zambia – they are renowned for that. Because they can be trusted, you will find them in the hospitality industry and doing domestic jobs.
We talked earlier about the natural resources we have, which have yet to be exploited. So, the opportunity is there for any investor out there to say yes, let me go to Malawi and see if we can get involved. There is mining – mining has not been developed. I sit on the Board of a mining company that is a subsidiary of a big mining company listed on the Australian Stock Exchange. Apart from Kayelekela Mining Company in Karonga, there is very little large-scale mining going on in Malawi. In fact, I did some research recently to ascertain whether a Chamber of Mines existed in Malawi and I discovered that a Chamber of Mines was formed some time ago but it is now dormant because there are very few members. The fact of the matter is that mining is one sector of the economy that is largely undeveloped.
In terms of opportunities, we also talked about tourism. As far as I am concerned, there is very little going on now regarding expansion of the tourism industry. Malawi has got some of the beautiful tourist attraction spots such as Cape Maclear on Lake Malawi. However, just like mining, tourism is there waiting for development.What has been your most rewarding experience so far?
Setting up the Secretariat of the Trust. I left College in 1976 when I graduated, and my first job was as a Management Trainee in Press Holdings Ltd. I worked there for seven and a half years. I then left and joined Indebank where I stayed for 13 years. When I joined Press Trust, there was literary nothing and I was asked to set up the Secretariat from scratch. I have seen the Trust grow in terms of number of staff, its investment portfolio (MKW16.1billion) as well as the social programs portfolio (MKW1.7billion). The net worth of the Trust has grown tremendously and currently stands at MKW16.1billion.
When I joined, Press Trust had only one investment in its portfolio – Press Corporation Limited. Today, it has got quite a diversified portfolio.
Personally, it has been a very rewarding experience indeed. When the time comes to leave the stage, I will do so without any regrets and I will look back with pride and satisfaction at what I have accomplished during my tenure at Press Trust.