I am very pleased to publish this post today upon the request of one of our Africa Business Jumpstarters who asked me on Facebook to share some more insights about starting a business in Malawi. He is currently still based in the Diaspora, but would like to return to the continent soon. Well, Africa Business Jumpstarters is all about providing information that enable smart and informed decision making and as such I will try to give a representative overview with some top tips.
Malawi has certainly promising economic prospects and major opportunities to offer, in particular in the areas of telecommunications, agriculture and food processing, transport, tourism, and energy.
But both starting a business and doing business in Malawi is not easy. You see, here are some interesting developments in this regard that I would like to share with you. In 2013, the Government of Malawi made an announcement that by 2014 it seeks to be among the top 100 countries in the world in the World Bank’s index of ‘Ease of Doing Business’. The announcement came when it dropped from position 151 in 2012 to position 157 (out of 181 countries worldwide at the time).
So, do you think Malawi managed to get into the top 100?
Well, it is true that Malawi has made some minor improvements both in regards to starting a business and accessing electricity, but unfortunately in the latest World Bank index of 2015 it has dropped to a new low at 164th position (out of 189 countries).
This means that it is one of the most difficult countries to do business in on the continent. And although it is followed by Nigeria, Angola and the DRC, it simply does not provide the same level of high opportunity that these three mega markets at least bring with them after you have gone through the initial pain building a start-up in a challenging business environment.
So frankly, from a comparative analysis point of view, Malawi is probably not your best choice when looking for the best or most convenient markets to do business in Africa. Having said that, you may have other reasons for wanting to do business there – maybe it’s simply home, and if you belong to the people with enough perseverance then you can tap into some huge opportunities and make it work.
Here are 4 mega gaps you can step into!
#1) Fill Africa’s biggest gap in the dairy industry !
Here is a fact that can be of great significance to you as a business start-up: Malawi’s milk consumption is the lowest in Africa! It only consumes about 5 liters per capita per year as compared with Africa’s average of 80 liters and the World Health Organization’s (WHO) recommended intake of 200 liters per year. And not even that is produced locally. Malawi imports 50% of its dairy products. Wow, what an opportunity for any start-up or an investor!
According to the US state Department key areas for investment at the primary production level include: · Cattle breeding; · Feed growing and feed production; · Hay production through growing of Rhodes grass and stocking it for sale to farmers; · Manufacture cooling tanks and collection equipment (e.g. milk churns); · Service provision (e.g. artificial insemination, operation of dipping tanks, administration of drugs, and transportation of raw milk to processing plants).
#2) Build US-Malawi trade & investment platforms, services, and links
Malawi is one of the US AGOA partners, but this has so far been underutilized and this is where you could come in, especially if you have an understanding of or links in the US. There is of course the possibility of shipping goods yourself: U.S. products are in significant demand and include computers, used clothing, telecommunications equipment, used trucks, and agricultural machinery/equipment. But frankly trading across borders in Malawi is one of the worst in the world (World Bank index 170 out of 189 countries) – although Malawi has taken out import taxes for computers.
I would therefore focus on trade platforms, services, and links which you could design and mainly manage online or through your own branded networking or trade events.
There are around 25 U.S.-affiliated companies doing business in Malawi. Of these U.S.-affiliated companies, approximately one dozen either have financing from American businesses or fulfill distribution roles for them. Malawi does not have an American Chamber of Commerce (AMCHAM) at this moment, and I think you could fill a great gap in this regard that can actually be lead from the ground in Malawi or in the US.
The good news is that the Government of Malawi is “officially supportive of foreign businesses interested in establishing agency, franchise, joint venture, or licensing relationships.” So there is some space for you to manoeuvre in the field of US-Malawi trade and investment (get to know the space if you don’t!) by offering networking opportunities, business services, brokering, and related events organization.
#3) Import used trucks
Used heavy goods trucks are in high demand. There is good potential to market U.S. vehicles through agents and/or dealerships in Malawi. Office space acquisition is easy in both Blantyre and Lilongwe. Opportunities Return to top The only other source for used trucks is the U.K. Japanese vehicle exports are largely confined to used passenger vehicles. Used farm tractors are also in demand, and are sometimes sourced directly from the U.S.
#4) Process Soybeans for various industries
Soybean production in Malawi is growing very rapidly and there are significant quantities of soybeans on the market. This is due to a high demand for related cereal for infants, poultry and other animal feed, additives for meat, bakery, soy milk, and for the manufacture of soap. Although there is large production of soybeans, processing is currently only taking place at a small scale and there is great potential for additional investment to supply both the local and regional markets and the growing demand of consuming industries. This means that your product can really be sold on to a wide range of industries, and such potential for diversification is always good news as it makes your undertaking less prone to risk.
#5) Start an ‘eco-tourism’ or ‘connected traveller’ tour agency
Malawi is endowed with a beautiful scenery, especially around Lake Malawi, but it has also a rich fauna and no less than 9 National Parks or Wildlife Reserves. The problem is that Malawi had so far a real problem to attract enough tourists into the country and the government plans to improve tourism marketing – here you go, there is an opportunity right there to fill a gap.
You may want to read my recent article ‘Get Started With These 4 Hidden Trends in Africa’s Tourism Industry (#3 Is The Most Surprising)’ where I discuss the latest African tourist trends that are widely overlooked. Malawi seems be a perfect destination for the growing number of ‘connected travellers’ in Europe and the US who want to connect to local communities, learn something, or make an impact. There is also a very dynamic and fast growing momentum among Americans of African descent who want to repatriate to Africa or who seek to connect to the continent in a more genuine and authentic way. They too, could be a great target market for you.
For intercontinental flights from Europe, Kenya Airways (also with KLM), South African Airways and Ethiopian Airlines offer good options to Malawi, with routes involving an aircraft change at their respective national hubs (Nairobi, Johannesburg and Addis Ababa), but it means that it can be easily reached and tourists enjoy overall better security in Malawi, which is certainly a great plus these days.
Cycling also grows fast in popularity, and some young African entrepreneurs have started great cycling tourist businesses in this regard. Malawi being a relatively small country with amazing natural scenery would provide some very easy business options for you by organizing and leading cycling trips. Charge $50 for half day cycling trip visiting some beautiful spots and local communities (connect with a small local village that can go in business with you by preparing a traditional lunch!). If your group is made up of 8-10 cyclists a day, you could easily earn $500 a day. In fact, if you are short of tourists during a particular season, you could offer the same to Malawians of the upper middle class or upper classes, as an activity to maintain fitness and health.
With the right business start-up and investment choices you can make almost every market in Africa work for you. Now, it’s your turn – we would love hearing from you in the comment section below! What are your thoughts regarding doing business in Malawi?
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Thank you very much for the beautiful piece, it was insightful and it really got me thinking