The country’s manufacturing sector almost grinded to a halt last year due to persistent power outages, with figures from the Ministry of Finance indicating that the industry only managed to record a growth of 1.8 percent.
In its 2018 Annual Economic Report, the Treasury says frequent power outages heavily impacted manufacturing performance as factories could not operate full time.
Treasury says, as a result, firms resorted to using diesel generators to supplement the power supplied by the Electricity Supply Corporation of Malawi (Escom) which was very costly.
“In addition, the sector experienced low credit levels in 2017 compared to previous years. Due to the difficult environment in 2017, growth in this sector is estimated at 1.8 percent,” reads the annual report in part.
The Treasury has forecast manufacturing to swell by 3.6 percent this year, buoyed by low inflation and availability of foreign exchange.
The Ministry of Finance was, however, quick to note that the industry will continue to be affected by intermittent electricity supply and the persistence of cheap smuggled products which create unfair competition with locally produced products.
“Furthermore, the decline in agricultural production may have an adverse effect on demand for manufactured goods,” reads the statement.
In 2019, the economic activity is projected to grow by 5.1 percent.
According to the report, the projected growth is on account of anticipated improvement in power supply due to the increase in water levels in the Shire River and the Malawi-Mozambique power interconnection.
In its post-budget review, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) predicted that manufacturing would continue to shrink as Capital Hill has not provided clear strategies to deal with blackouts.
“The budget and the State of the Nation Address do not outline short term solutions for energy supply. In fact, there are no clear energy supply opportunities in sight that would be sufficient for boosting the productive capacity.
“The indicated solutions in the budget are all medium to long term solutions but [there are] no clear interim measures to mitigate the energy crisis that Malawi is currently facing considering that the generator sets that were procured have proved to be expensive to run and unable to cater to the electricity demands,” MCCCI said.
MCCCI also said the private sector would continue shrinking if electricity woes continue.
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