Key Business Points
- Low productivity is hindering the private sector’s growth, leading to low revenues, declining exports, and limited job creation, making it essential for businesses to invest in productivity-enhancing initiatives.
- The foreign exchange shortage is a major constraint for businesses, with 74.1% of firms citing it as a top challenge, highlighting the need for diversified trade relationships and foreign exchange management strategies.
- Improving productivity is crucial to increasing supply, easing inflationary pressures, and enhancing the business environment, as emphasized by Minister of Industrialisation, Business, Tourism and Trade George Partridge, who encourages businesses to adopt efficient production methods and innovative technologies.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has released its 2025 Economic and Business Review, painting a picture of a challenging business environment due to macroeconomic imbalances driven by low productivity. The report states that weak productivity has led to low revenues, declining exports, a negative balance of payments, and limited job creation, increasing pressure on social spending. This, in turn, has resulted in a cycle where increased social expenditures coincide with reduced government revenue, complicating the ability of both government and the private sector to perform their roles effectively.
According to the report, the economy is facing significant challenges, including a deficit of K2.037 trillion against a planned K1.534 trillion in the first half of the fiscal year. This deficit was largely driven by recurrent expenditure, which totalled K3.502 trillion, crowding out development spending. The MCCCI notes that the dominance of recurrent outlays, mainly wages, pensions, interest payments, and subsidies, continues to weaken the growth-enhancing role of fiscal policy.
The MCCCI Business Climate Survey reveals that most firms are operating below capacity, with 51.9% reporting utilisation below 50%. Foreign exchange shortages were cited as the biggest constraint, followed by inflation, rising input costs, policy uncertainty, and high interest rates. Minister of Industrialisation, Business, Tourism and Trade George Partridge is not surprised by the declining capacity utilisation, given the unsatisfactory business environment. He emphasized that improving productivity would increase supply and help ease inflationary pressures, using the Chichewa phrase "Kulima kwa mtengowanthu" (farming is done by people) to highlight the importance of human capital in driving productivity.
The survey also found that only 3.7% of respondents said they were not affected by forex shortages, while 63% said they were severely and frequently affected. This highlights the need for businesses to diversify their trade relationships and adopt foreign exchange management strategies to mitigate the risks associated with forex shortages. Furthermore, the MCCCI recommends that businesses adopt efficient production methods, such as "ukaputeni" (cost-saving measures), to reduce costs and improve productivity.
In terms of economic growth, real gross domestic product is projected to grow by 2.7% in 2025, slightly lower than the earlier forecast of 2.8%. This revision reflects weaker performance in manufacturing, wholesale and retail trade, mining and quarrying, and transport and storage. As the business community navigates these challenges, it is essential to focus on improving productivity and adopting innovative technologies to enhance the business environment and drive economic growth. By doing so, businesses can "pangana ndi nzeru" (work smart) and stay competitive in the market.
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