By Takeshi Tomiya from Malawi
I have been staying in the Republic of Malawi in southern Africa since December 2012.
Currently, I am involved in ODA (Official Development Assistance) , but thanks to ARUN, I have gotten an important opportunity to see the developing country as a potential investment, not only as a target for assistance. In the world of developmental assistance, Malawi is viewed as “the poorest, landlocked African country that depends on agriculture”, but staying here for a year, I can see both Malawi’s advantages and problems (which are specific to Malawi, not the points common in many developing countries) from the point of view of social investment.
1. Malawi’s population density is higher than surrounding countries. From the point of BOP, customers are geographically concentrating and advantageous for market creation.
(Population density of Malawi is 121 persons/km² in 2011 and much higher than neighboring Zambia [17.4 persons/km², 2010] , Mozambique [29.6 persons/km², 2012], and Tanzania 51 persons/km², 2012.] Source: Wikipedia)
2. In order to reduce dependency on donation support, which is 40% of government revenue, expectations for private investments are increasing within the government.
(Malawi is rewriting various legislations to entice private investments. In 2012,they established an investment trade center, holding investment seminars frequently both domestically and internationally.)
3. Multiple international transportation routes (roads and rail) go through Malawi, and has potential as a hub of goods in Southeast Africa.
4. Since the independence, no military conflicts or coup d’état have happened. (Rare case in Africa)
5. Official language is English, and there is little problem communicating with government and private companies in English.
Challenges of Malawi
1. Malawi lacks capable Malawian leaders in the private sector. (Young and capable people hope to become government employees, donor/NGO staff, or build their career overseas (doctors, lawyers, etc.), and few wish to become entrepreneurs. Currently, many private companies in Malawi are managed by Indian and Chinese managers.)
2. Malawi has higher inflation rates than the surrounding countries. (Malawi 21.4%, Zambia 6.5%, Tanzania 15.3%, Mozambique 3.5% Source: Wikipedia, 2012 predicted rate)
3. Excessive imports and lack of foreign currency have been perpetual problems and overseas remittance takes a long time.
4. Because it is a landlocked country, transportation costs for import and export are high.
5. Electrical infrastructure is worse than surrounding countries, preventing manufacturing businesses to come (private generator use with diesel fuel is very expensive).
6. Rural population is conservative against changes. Trying to start a new business in the village, one can face envy of other villagers and be harassed, making it difficult to start a business in the local setting. (We hear such stories often from volunteer workers in Malawi.)
Above is my summary of Malawi’s attractions and challenges, and I think in order to consider countries like Malawi as a potential place to make social investment, the key factor lies on the existence of a capable leader (social entrepreneurs).
With my work, I sometimes have opportunities to meet Malawi’s entrepreneurs. Among them, two people particularly come to my mind.
Recently I visited an entrepreneur (male) who is aiming for stable production of processed goods using local agricultural products produced by local farmers.
He negotiated directly with a food company in Malawi, obtained a contract to provide intermediate goods (soy product) for the company’s vegetarian food and secured a stable income source, purchased machineries with the loan from a commercial bank, and was producing cooking oil with the nuts and soy bought from local farmers. Currently Malawi’s cooking oil is largely imported, but the expansion of domestic production of cooking oil will promote use of domestic agricultural products and contribute to the increased income and the diversified source of income of the farmers.
Another entrepreneur (female) formed a team with a local ex-banker in order to solve increasing problems of forest reduction and poverty.
They manufacture artificial logs made from old newspapers and cardboard and sell them to the villages that suffer forest reduction problems. They also support rural women for producing fruits that are promising as sash crop, and creating and selling souvenirs for foreign visitors. They also support negotiations with a local insurance company so that rural women who never had insurance can obtain insurance to reduce future risks.
Neither of these two entrepreneurs seemed to be acting according to solid business plans, but their leadership and dynamic energy were superb, and enthusiastically explained their visions and the meaning of social value of their current activities to me.
In the future, if I meet an entrepreneur who is promising, I would like to consider investment through ARUN (my personal hope)! I encourage ARUN partners to visit and see Malawi firsthand. I am looking forward to continue working with you for the new year!