Industrial output has jumped by 8.8 percent, but some manufacturing firms have witnessed a decline in some segments, figures from the Ministry of Finance and Economic Affairs show.
The Malawi Government Annual Economic Report 2024 compiled by the Ministry of Finance and Economic Affairs shows that industrial output grew by 8.8 percent between 2021 and 2022 while output for the manufacturing sector rose by 5.9 percent.
However, there was a general decline in output in three out of five segments of the manufacturing sector, according to the report.
Reads the report in part: “A 72.9 percent increase was registered for the manufacture of tobacco products and the manufacturing of rubber and plastic products increased by 7.8 percent.
“The manufacturing of tobacco products alone contributed 65.3 percentage points to the annual growth rate and volume of production in Malawi.”
Meanwhile, output in the manufacture of food products dropped by 14 percent from the 2021 levels while the manufacture of beverages and chemicals and chemical products dropped by 35.6 percent and 29.3 percent, respectively.
The drop in output, attributed to the scarcity of foreign exchange and fuel, threatened to derail the country’s efforts to spur economic transformation through Industrialisation.
Reacting to the report, economist Bond Mtembezeka said the limited access to credit extended to the private sector, which has historically been skewed against the manufacturing sector, might have prevented the manufacturing sector from accessing credit during acute forex scarcity.
He said: “Manufacturers import raw materials and to do that they also rely on the lines of credit.
“If foreign exchange is scarce, they can’t import as much and by implication, cannot acquire as much credit.”
On the manufacturing sector’s capacity to boost economic growth, Mtembezeka said it is hard to achieve that goal when some of the segments in the manufacturing sector are in a state of decline.
On his part, economic analyst Dalitso Kubalasa urged local authorities to ensure that there is more financing going to the manufacturing and agricultural sectors to revitalize the ailing economy.
The Ministry of Finance and Economic Affairs is in the process of developing Special Economic Zones to attract investors to critical sectors of the economy having enacted Special Economic Zones Bill last year.
The manufacturing sector is grow in 2024 and 2025 at 4.4 percent and 4.6 percent, respectively.
Source: Malawi Nation online
A report by the Economic Commission for Africa (ECA) Africa's has stated that contribution to global trade remains at less than 3%.
The report on assessment of progress on regional integration in Africa shows Africa's regional integration agenda is progressing, but slowly.
It added that the programme for infrastructure development in Africa has seen mixed results in its efforts to enhance infrastructure.
While progress has been made in the areas of roads and ICT, advancements in rail transport and energy infrastructure have been minimal with financing posing a significant hurdle.
ECA Director, Regional Integration and Trade Division, Stephen Karingi, said unconstitutional changes in government across the continent, unemployment and poverty were top challenges facing the continent.
According to him, "The rising number of unconstitutional changes of Government highlights the ongoing challenges afflicting African countries, including weak governance, persistent poverty and limited employment opportunities.
The report further noted that although the agreement establishing the African Continental Free Trade Area (AfCFTA) officially started on January 1, 2021, the anticipated improvements in trade between African countries have not materialized.
The proportion of intra-African trade relative to worldwide trade decreased from 14.5% in 2021 to 13.7% in 2022.
During this time frame, the share of intra-African exports out of total exports dropped from 18.22% to 17.89%, and the share of intra-African imports out of total imports fell from 12.81% to 12.09%.

In tobacco production, curing the crop once it is harvested is an essential step towards making the harvested commodity ready for the market.

The most common methods for curing tobacco are by air, flue, sun and fire. In Malawi however, small-scale tobacco farmers commonly use fire, where open wood fires are kindled on the floor of a curing barn, and the curing process can either be continuous or intermittent, extending three to ten weeks before the leaf can be cured to the desired finish and be ready for the market.

But with wood fire curing of tobacco having the potential to increase deforestation levels and contribute to environmental degradation and consequently climate change, the tobacco company Philip Morris International (PMI) says it is working with small-scale tobacco farmers in Malawi, Argentina, China and Mozambique among other countries, in an integrated production system that ensures the wood used to cure the tobacco after harvesting is from sustainably managed forests.

For a long time, environmental organizations not only in Malawi but across the world have contended that the growing of tobacco has many serious environmental consequences which include loss of biodiversity, increase in atmospheric carbon dioxide and soil erosion among other effects, because cutting down trees for curing the crop after harvest directly causes deforestation.

PMI Sustainability, Activation and Support Director Miguel Coleta says forest sustainability is indeed paramount and the production of tobacco should not be allowed to cause degradation.

He says the company is working with local farmers in six countries including Malawi, where it offers both technical and financial support so that farmers use the forests where they get the wood to cure tobacco sustainably.

"As part of this relationship, we can have farm-by-farm monitoring of the tobacco production to ensure it is sustainably produced and the forests where wood to cure it comes from are sustainably managed. Today, we know where the wood is coming from on each farm, from among the farmers we are working with. We also do monitor to ensure that the investments we have made over the years, in this sustainability push is bearing the intended results," he said.

Mr. Coleta says in 2022 alone, PMI invested 6.6 million United States dollars in six countries including Malawi, on projects aimed at reforestation through awareness programs with farmers, which he says are key towards ensuring sustainability in environmental conservation. In the case of Malawi, Universal Leaf is the local partner in these activities.

"So we take a landscape approach. When we think about the environment, we think about the intersection between the impact of tobacco growing on the individual, the farmer, the community and the environment itself, and these impacts are addressed through this integrated production system," Mr. Coleta said.

Mr. Coleta explained that engaging directly with the farmer in this integrated production system is fundamental so that small-scale farmers can have predictability in terms of not only having a buyer for their produce or having a favorable price for their crop, but also having access to best practices that will improve their production capacity by taking care of the environment where they grow their crops.

"Sustainability is not just about managing the negatives but also looking for ways to create positives by using technology and innovation to drive value for society. In that sense, when it comes to tobacco growing, what is underpinning everything we are doing is the integrated production system," he explained.

In Malawi, Tobacco is considered green gold and the most profitable crop which can have over 20 times export value compared to tea, which is also an export from the country.

Mr. Coleta says through the integrated production system and to ensure sustainability in terms of the quality of tobacco, farmers have standard guidelines to follow which also include not using child labour, apart from using wood from sustainably managed forests in the curing of the harvested crop.

Meanwhile, the impacts of climate change on the farmer have also been an issue of concern, with tobacco production especially in Malawi being dependent on the rainy season, making access to water a subject that needs to be addressed so that farmers do not just rely on tobacco growing, but can grow other crops during the long dry season.

"Water is important for health, safety and hygiene, and having access to water without women having to walk for kilometers before getting the commodity is paramount. There is also a need for the farmer to have the ability to grow other things apart from tobacco since tobacco is one hundred percent rain-fed.

"So that's why in recent years, we have been working with communities and our business partners in local areas, digging hundreds of boreholes and hand pumps to provide access to water through what we call the wash program," Mr. Coleta explained.

Source: Nyasatimes
ARISE Integrated Industrial Platforms (ARISE IIP), owned by Africa Finance Corporation (AFC), Afreximbank and Africa Transformation and Industrialization Fund (ATIF), the developer and operator of world-class industrial ecosystems across Africa, is proud to announce the signing of a development agreement with the Government of Malawi for the construction of a Special Economic Zone (SEZ) and a dry port in the North of Lilongwe, Area 55 in Malawi. This agreement, in line with ARISE IIP’s ambition to unlock Africa’s industrial potential, will support the Government of Malawi in advancing the country’s long-term vision of becoming an inclusively wealthy and self-reliant industrialized upper-middle income country by 2063.
With an investment of approximately USD 150 million in infrastructure development and in partnership with Afreximbank, the Special Economic Zone (SEZ) and the dry port will be located north of Lilongwe, in the designated Area 55 in Malawi. The Special Economic Zone (SEZ) will aim to stimulate and attract multi-sector investments, both industrial and commercial, in the country and offers logistic services and inland container depot services to enterprises in Malawi. It will seek to promote the local processing of raw materials into high value-added finished products, with an emphasis on agricultural products and inputs. Arise IIP will oversee the majority of the project, holding a 65% stake, while the remaining 35% will be shared by the Malawian government and local investors.
Construction work is scheduled to begin in 2024 with the zone expected to become operational from 2026. The project is set to create approximately a minimum of 132,000 direct jobs and over 26,000 indirect jobs.
Gagan Gupta, Founder and CEO of ARISE IIP commented: “It is a great honour to partner with the Government of Malawi for the establishment of an Integrated Industrial Platform and a dry port in the country. Leveraging our experience as developers and operators of industrial ecosystems across the African continent, we are committed to supporting the Malawian Government’s initiatives for national development.”
Honourable Sosten Alfred Gwengwe, MP, Minister of Trade and Industry of Malawi said “This collaboration with Arise Integrated Industrial Platforms (Arise IIP) represents a significant opportunity to boost trade, investment, and job creation in the country. Given Arise IIP’s proven success in developing major projects across Africa, we look forward to seeing the positive impact of our joint efforts.”
For the past few years, ARISE IIP has experienced a remarkable expansion across Africa, with 12 integrated industrial zones accelerating the continent’s Industrialisation. For reference, in Benin, ARISE IIP manages the Glo-Djigbé Industrial Zone dedicated to the local processing of agricultural raw materials such as cotton, cashew nuts, pineapples, shea nuts, soya, etc. with the aim of creating flourishing value chains ranging from the supply of raw materials to the processing of resources and the export of finished products. The industrial zone is expected to create more than 300,000 direct jobs by 2030. Across the continent, ARISE IIP’s primary drive has always been the creation of industrial ecosystems committed to generating high local added value along with sustainable growth.
Source: Arise website

African governments are seeking an extension of the African Growth and Opportunity Act (Agoa) beyond 2025. The law was enacted in 2000 to "encourage increased trade and investment between the United States and sub-Saharan Africa". We asked David Luke, who specializes in African trade policy and trade negotiations, what benefits Agoa has brought for qualifying African countries and how it can be improved.


To what extent has the Agoa goal been achieved?

The duty- and quota-free access to the US market granted by Agoa has helped in boosting trade and investment between sub-Saharan Africa and the US. Many of the qualifying African countries have recorded specific successes in goods exported under Agoa to the US. These include textiles and apparel from Kenya, Ethiopia, Mauritius, Lesotho, Ghana and Madagascar. In Kenya, for instance, the apparel-dominated Agoa sales have grown from US$55 million in 2001 to US$603 million in 2022, accounting for 67.6% of the country's total exports to the US.

South Africa has sub-Saharan Africa's most diversified export list. The value of its automotive sales to the US has increased by 447.3% between 2001 and 2022 under Agoa. South Africa's vehicle exports to the US increased by 1,643.6% in the first year of Agoa, from 853 units in 2000 to 14,873 units in 2001.

Other country specific successes include Ghana where non-oil products like plant roots, textiles and travel goods are accessing the US market under Agoa. Ghana's exports to the US grew from US$206 million in 2000 to US$2.76 bilion in 2022, though only 26% of this trade was under Agoa.

The Agoa window has also lifted chocolate and basket-weaving materials from Mauritius; buckwheat, travel goods and musical instruments from Mali (suspended in 2022); Mozambique's sugar, nuts and tobacco; and Togo's wheat, legumes and fruit juices. Perhaps Ethiopia, which was suspended from Agoa in January 2022, best exemplifies the impact of the trade window on Africa's Industrialisation.

According to the World Bank, Ethiopia has attracted the world's attention with its ambitious Industrialisation plans, particularly through its industrial parks. The industrial parks, which mainly produce textiles and garments, have thrived on the duty-free and quota-free access to the US market.

In less than a decade, Ethiopia's industrial parks created 90,000 direct jobs, predominantly for women aged 18 to 25 years. Employment of this group is typically associated with a range of positive societal and economic spillovers.

Ethiopia's exports to the US increased from US$29 million to US$525 million in 2020, 45.3% of it under Agoa. Textile and garment exports that up to 2014 accounted for just 10% of the trade grew steadily to 69% over the period.

The industrial parks attracted 66 foreign firms investing about US$740 million since 2014/15, with Agoa as the major driver of the sector's investment and growth of its jobs and export earnings.

What's been the impact of Agoa on Africa's exports?

Between 2017 and 2020, the US became the third largest destination for Africa's industrial products after the European Union and intra-African trade. Agoa is part of the reason for this. That means Agoa has stimulated significant value addition in the region, traditionally known for exporting unprocessed items.

The positive impact on value chains explains why African countries such as Kenya, Lesotho and Mauritius have put so much diplomatic capital, and on occasion lobbying funding, into articulating a continuing case for Agoa's renewal.

The African countries have exploited the window to sell their manufactured goods to the US. This is the kind of trade that really matters for Africa's goal of economic transformation through "manufacturing, Industrialisation and value addition".

By comparison, during the 2017-2020 period, 87% of Africa's exports to China were fuels, ores and metals.

What kind of agreement are the US and Kenya negotiating?

The US and Kenya are not negotiating a bilateral free trade area agreement as is commonly misunderstood. What they are negotiating is a strategic trade and investment partnership which cannot be described as a free trade agreement as it does not include new market access arrangements.

The main goal of the partnership is to increase investment and to promote inclusive economic growth. It is meant to benefit workers, consumers and businesses (including small ones). Its other aim is to support African regional economic integration.

Given the prevailing global economic disparities, if African countries are to develop, they need trade concessions like Agoa, not bilateral reciprocal free trade agreements.


How can Agoa be made more beneficial to sub-Saharan Africa?

First, Agoa must be extended for at least 20 years. This will ensure predictability of the market access concession and boost confidence among investors of a sufficient time frame to recoup investments. Second, north African countries ought to be included in Agoa. This will extend Agoa to all African countries and support the trade integration of the continent through the Africa Continental Free Trade Agreement.

Thirdly, Agoa should stop punishing investors for mistakes of governments. It is unfortunate that countries that fail to meet the Agoa eligibility requirements, which include governance and human rights standards, are suspended from the scheme. This penalises private firms that invest and trade and the people who are dependent on these firms for jobs. But the US is not likely to change the eligibility requirements.