Revitalizing Malawi’s Economy: Capital Markets Strategy Reboot for Business Growth
Key Business Points
- The Reserve Bank of Malawi’s five-year capital markets development plan has failed to meet key objectives, including increasing the number of listed companies and corporate bonds, and has been extended to next year.
- Challenging macroeconomic environment, including low GDP growth, high inflation, and interest rates, have hindered the plan’s progress, discouraging corporate bond issuance and company listings.
- Despite the setbacks, private placements have shown notable growth, and the bond market has seen the listing of government bonds, providing a secondary trading platform for bondholders.
The Reserve Bank of Malawi’s (RBM) five-year capital markets development plan, which was rolled out five years ago, has failed to meet its key objectives. The plan aimed to increase the number of listed companies to 24, increase the share of corporate bonds to GDP to 1.25 percent, and push the ratio of equity market capitalization to GDP to 55 percent. However, as the strategy comes to an end, it appears that the overall objective of channeling national savings towards long-term industrial financing has not been met.
According to RBM spokesperson Boston Maliketi Banda, the strategy has struggled to achieve some objectives due to implementation challenges, including the COVID-19 pandemic and a challenging macroeconomic environment. Banda explained that low GDP growth has limited the potential for company listings, while high inflation and interest rates have discouraged corporate bond issuance. Despite these hurdles, private placements, which are functionally similar to corporate bonds but privately subscribed, have shown notable growth.
The Malawi Stock Exchange (MSE) has also acknowledged the plan’s struggles, with Chief Operating Officer Kelline Kondowe citing the growth of the bond market as a success. The MSE has seen the listing of government bonds, which provides a secondary trading platform for bondholders. Kondowe also mentioned that the MSE will be graduating some SMEs that have been prepared to list on the local bourse, using the Chichewa term "zithunzi" to describe the process of listing companies.
Economist Lesley Mkandawire has urged for improved market regulation to make the market more attractive to investors. Mkandawire emphasized the importance of data availability to inform investors, saying that this will help to increase investor confidence in the market. As the plan is extended to next year, it is essential for the RBM and MSE to re-evaluate their strategies and work towards creating a more conducive environment for businesses to thrive.
The RBM believes that it has laid a strong foundation to build on, despite the plan’s shortcomings. With the extended deadline, the central bank has an opportunity to refine its approach and work towards achieving its objectives. As wafukula (business owners) and entrepreneurs in Malawi, it is crucial to stay informed about the developments in the capital markets and to explore opportunities for growth and investment. By doing so, they can contribute to the country’s economic growth and development, and help to achieve the goals of the mwano (plan).
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