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An economic analysis report by the Malawi Stock Exchange (MSE) has said industry, which is battling to remain firm in a raging economic storm, is facing fresh threats from cheap imports and falling consumer power.
With depressed industrial output and an increase in bad debtors, the report said most companies are up to the neck in problems and that there are no signs for immediate relief at the moment.
The brief analysis, contained in a stock market report for the third quarter of this year, said many companies are struggling to keep afloat.
Plagued by high interest rates of above 45 percent—which have highly increased the cost of borrowing investment finance from commercial banks—the MSE said the industry is not likely to get breathing space in the near future.
“Prospects for improvement in various macroeconomic fundamentals remain bleak in the short term,” said MSE. “Business confidence remains low.”
MSE said improvement in agricultural output for last season could help reduce the food import bill and also act as a stabiliser of crop prices, especially the staple grain maize.
The decay has not spared other sectors of the economy, with financial and stock markets taking a blow as well as most investors opted to put their money in high-yielding Treasury Bills (TBs).
Economic analysts blame the high TB yields on government, which increased its public borrowing when donors closed their taps almost three years ago. The move pushed domestic debt up above K45 billion.
The recession continues to take a heavy toll on industry, with major companies either falling under receivership or facing liquidation as creditors, tired of waiting for payments on ends, start calling for their money..
Others, facing dry markets as consumers’ pockets dwindle, are opting for voluntary winding up of business.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says industrial output has fallen by more than 13 percent in the last two years.
President of the Insurance Institute of Malawi (IIM) Osman Karim said in Blantyre recently that the insurance industry was having a tough time because the “insured” were closing up their businesses.
He said the industry was losing on premiums because clients are failing to expand businesses. In the end insurance firms are likely to fail to pay out claims, said Karim.
The MSE said prospects for portfolio reallocation into bank deposits and equities remain overshadowed by the high yields in TBs.
Said MSE: “The yield differentials still vastly favour Treasury and Reserve Bank of Malawi bills.”
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