Economy
Despite project loans (10% of GDP in 2022-2023), international aid (1.4% of GDP in 2022-2023) and the absence of conflict since independence in 1964, Malawi is the third-poorest country in the world. In 2023, its GDP was 482 dollars per capita. Despite having applied the economic policies (structural adjustment programs, poverty reduction strategies) advocated by the international financial institutions from 1980-1990 onwards, mainly focused on stimulating the private sector, liberalizing trade, privatizing public enterprises and rationalizing the tax system, Malawi still sees two-thirds of its population living below the poverty line. By way of example, only 15% of its inhabitants have access to electricity. This chaotic situation sometimes gives rise to demonstrations, as in 2011 when shortages (electricity, petrol...) and the austerity economic policy (among other grievances) set the country alight (18 people lost their lives at the height of the riots).
Successive global crises (Covid-19, the war in Ukraine, Cyclone Ada in February 2022 and Cyclone Freddy 2023) worsened the state of public finances and led to a staggering increase in debt, itself fuelled by a high deficit. Economic growth remained decent between 2015 and 2019 (around 3.5%). In 2020, growth was 0.9%, compared with forecasts of 7% before the start of the health crisis. In 2021, thanks to good figures from the agricultural sector, recovery saw a tepid rebound (2%) before slowing again to 0.8% in 2022 and then rising again to 2% in 2023. In 2024, growth forecasts show a slight acceleration (between 3.2% and 3.5%). This growth rate remains insufficient, given the rapid expansion of the population (+3% per annum).
Malawi remains classified as a LDC (Least Developed Country) and benefits from the HIPC (Heavily Indebted Poor Countries) initiative, launched and supported by the World Bank and the International Monetary Fund (IMF) to make the debt of the countries concerned more sustainable. The country suffers from structural problems (poor or non-existent infrastructure, unfavorable business climate, low-skilled labor force, corruption, etc.), environmental problems (deforestation, erosion, soil depletion and impoverishment, etc.) and geographical problems (landlockedness, resulting in high transport costs, etc.) that hamper its economic development. Despite some timid initiatives, such as the increase in the budget allocated to research and development, the country remains extremely dependent on external aid (IMF, World Bank, bilateral aid, NGOs, etc.) in many areas. After the 2013 cashgate financial scandal involving misappropriation of public funds, World Bank activity gradually returned to normal from 2016 onwards, and currently includes some thirty projects worth over $2.1 billion. At regional level, Malawi, which has a trade deficit, has signed economic cooperation agreements with South Africa and Zimbabwe. These two countries are among the main importers of Malawian products (mainly agricultural), along with Mozambique, the United States and a number of European Union countries (Belgium, Netherlands, Germany, etc.). Malawi imports food products, medicines, consumer goods and cereals from South Africa, China, India, the United Arab Emirates, the Netherlands and above all Russia, which is the country's second-largest supplier of cereals (20% of cereal imports in 2019). Soaring prices for grain and agricultural inputs since the start of the war in Ukraine have threatened the country's food security. Short of foreign currency, Malawi is experiencing major difficulties in financing its strategic imports, including fuel. Discussions are currently underway with the IMF to set up a new financing program to avoid widespread shortages.
Agriculture, a pillar of the economy
A few figures illustrate the importance of agriculture in Malawi: 90% of the Malawian population living in rural areas (more than 75% of the total population) make their living, more or less directly, from food crops (cassava, beans, rice, groundnuts, etc.). The agricultural sector accounts for a third of GDP and 80% of export earnings, but is sorely lacking in resources, starting with irrigation systems. Poorly mechanized and therefore not very productive, it is mainly family and rain-fed agriculture, strongly influenced by the seasons and dependent on the vagaries of the weather. Gold, tobacco, tea and sugar cane are the country's main exports. Cotton, coffee, corn, potatoes and sorghum are also exported, but in much smaller quantities. In addition, processing plants (tobacco, sugarcane, tea) generate employment and substantial income for their owners. Tea is grown mainly on plantations in the south of the country, in Thyolo and Mulanje; annual production is around 50,000 tonnes, making Malawi the second largest producer in Africa. Sugar cane is grown on large estates in central (Dwangwa) and southern (Nchalo) Malawi. The state-owned Sugar Corporation of Malawi (SUCOMA) and Dwangwa Sugar Corporation (DWASCO), created in the 1960-1970s, were privatized in the latter years of the last century and are now owned by the South African Illovo Sugar Group. Encouraged by the government and a number of donors (African Development Bank, European Union, etc.), Illovo has been encouraged to increase cane sugar production, notably by increasing the size of its cane plantations, in order to reduce the country's dependence on tobacco exports (60% of total exports), which are highly exposed to market fluctuations. However, the expansion of these large estates onto the land of neighbouring smallholders is not without its tensions. In the primary sector, we should also mention fishing: fish from the country's lakes, first and foremost Lake Malawi, are both a source of protein and income for the local population; the chambo, threatened by over-fishing, is the best illustration of this. Dried fish is also exported to neighboring countries. Forestry and silviculture are important activities, particularly in terms of employment, but the sector faces recurring socio-economic and environmental problems (illegal logging and charcoal production by local people, damage to biodiversity, etc.). Extractive industries include a uranium mine operated by an Australian-South African consortium near Karonga and coal mines in the Mzimba region.
The secondary sector
Accounting for just over 18.5% of GDP, the secondary sector covers a wide range of industries (cement, fertilizers, construction, etc.), especially around Blantyre, where numerous factories are located, particularly in the food sector (cookie factories, dairies, etc.). In addition to factories processing, packaging and refining agricultural products, the French Castel group (main manufacturer and distributor of alcoholic beverages - Malawi gin, Carlsberg... - and non-alcoholic beverages - Coca-Cola, Fanta... - in the country), local pharmaceutical firms (producing on a small scale medicines adapted to the Malawian market) and the national electricity company (ESCOM), which operates the Shire dams and hydroelectric power stations that supply almost all the electricity produced in Malawi.
The tertiary sector
Services now account for just over 52% of Malawi's GDP. Strongly growing but underperforming and lacking in infrastructure, tourism (8% of GNP by 2023 and providing around 4% of the country's jobs) is one of the government's priorities for economic development. Since February 2024, to increase the number of visitors and encourage future investors, Malawi has undertaken a series of measures to facilitate the entry of foreigners, including the abolition of visas for 79 countries, including France, and the signing of agreements for direct flights to its territory. Traditionally targeting Anglo-Saxon and South African tourists, Malawi is seeking to diversify its clientele. Its goal is to increase the number of tourists to 1.5 million a year by 2030. Currently, the country welcomes around 600,000 tourists a year, generating $65 million in revenue.
Other notable services in the tertiary sector include retail, education, transport (such as the national airline Malawi Airlines), health services, telecommunications (such as the telephone companies Airtel, Access Communications Limited and TNM) and banking. Last but not least, the country's most powerful state-owned company, Press Corporation PLC, is a holding company listed on the London Stock Exchange and owns shares in a wide range of companies: Castel Malawi, Puma Malawi Limited (an oil company with service stations throughout the country), TNM, National Bank of Malawi, Maldeco Fisheries (an industrial fishing company based in Mangochi), etc.
