Context

Malawi is has a population of around 18 million and is ranked at 170 out of 187 countries in the United Nations Human Development Report (2016). This is one of the lowest scores in the low human development group and below the average for countries in Sub-Saharan Africa.

Encouraging gains have been made in human development which has seen improvements for example, in access to education for girls and poverty has declined from 25 percent to 17 percent in urban areas. Notwithstanding these gains, the World Bank reports that poverty is increasing in rural areas where more than 85 percent of the population live. This negative trend is a concern for policymakers and development partners as the majority of Malawians are rural small-holder farmers.

As one of the poorest countries in the world, the challenges of creating and sustaining an enabling business environment in Malawi are made more difficult by the country’s vulnerability to climate change and its landlocked geography, which increases the cost and distance to markets.

The World Bank reports that Malawi’s economic prospects remain at risk in part due to weather shocks which have a damaging effect on agriculture, in particular the volume in the production of maize which is needed for export markets and to meet local demand. Given these developments as well as low agricultural productivity, the World Bank suggests that it is likely that around 6.5 million Malawians will struggle to meet their food requirements in this fiscal year.

The African Development Bank report that flooding in 2014/15 and drought in 2015/16 hurt agriculture, the economy’s dominant sector. Erratic rains affected the country’s hydro-dependent electricity generation, leading to widespread blackouts and water shortages. The power shortages severely affected smalland medium-size enterprises dependent on distributed power. Larger businesses generally have power backup systems to maintain production, but using these adds to the cost of doing business. In 2016/17, adequate rainfall improved agricultural production, increasing the maize, groundnuts, and beans harvests. The economy is expected to double its 2016 GDP growth rate of 2.3% to 4.5% in 2017. The medium-term outlook (5%–5.5% in 2018–19) is more positive as the economy stabilizes, but the country remains vulnerable to external shocks and fiscal slippages.

DFID Malawi Strategy

Building resilience to crises: By 2020, The UK will support Malawi to break the yearly cycle of hunger and humanitarian crises that threatens the lives and livelihoods of over 6 million people. The UK works to ensure the government of Malawi reforms to improve food security, including reforming its maize markets. The UK leverages greater results through the United Nations (UN) and International Financial Institutions.

Women and girls: The UK is prioritising the poorest and most vulnerable, including girls and women and those living with disabilities. By 2020 the UK’s work to tackle violence against women and girls will have led to fewer women and girls suffering from violence and improved support services for victims. The UK works to protect those at particular risk of abuse.

Building institutions and economic development: UK aid investments, UK partnerships and UK political influence combine to support greater transparency and accountability, tackle corruption head on, and focus on stronger growth and trade, jobs and incomes especially through agribusiness.

World Bank Doing Business

Latest data from the Doing Business Report (2018) indicate that Malawi made progress in efforts to reform the business and regulatory environment. These reforms have allowed the country to improve its Doing Business ranking by 23 places from 133 in 2017 to 110 in 2018.Malawi’s attempts to reform is reinforced in its Distance to Frontier score which increased from 58.94 in 2018 from 52.61 in 2017.  Malawi continues to rank above the Sub-Saharan regional Distance to Frontier score of 50.43.

The key reforms in 2018 were as follows:

  1. Dealing with Construction Permits: Malawi made dealing with construction permits cheaper by halving the fees charged by the city council to process building plan approvals.
  2. Getting Credit: Malawi strengthened access to credit by adopting a new law that establishes clear priority rules inside and outside bankruptcy procedures. Malawi improved access to credit information by establishing a new credit bureau.
  3. Trading across Borders: Malawi made exporting and importing easier by upgrading to a web-based customs data management platform, ASYCUDA World.
  4. Resolving Insolvency: Malawi made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the debtor’s business during insolvency proceedings and introducing regulations for insolvency practitioners.

However  Malawi made starting a business more expensive by increasing the cost of registering a business with the Registrar General.