Download Tourism Investment climate and potential

Economic Performance, Business Environment and
Tourism Potential to a Diversified Economy
Andrew Mwaba
AfDB Country Manager-Malawi
1st Malawi Tourism Conference
Sunbird Capital Hotel
Lilongwe, April 6th 2017
Key Questions
 What are Malawi’s economic conditions and outlook?
 What are the opportunities and impediments to
private sector investment?
 What is the Business and Investment Climate?
 What is the Investment climate for diversification and
investment in tourism?
 What are the Financing opportunities for tourism
investment offered by AfDB?
 What is the way forward for the warm heart of Africa?
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Economic setting
■ Malawi’s economy is highly vulnerable to external shocks
which are manifested in volatility in growth and other
macro-economic measures.
■ Lack of diversification and limited value addition have
exposed the economy to price shocks, rendering
management of the economy challenging.
■ These factors above have affected economic performance
over time.
■ Government is putting in place policies for promoting
investment in key sectors to create a stronger foundation
for sustainable growth and job creation.
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Developments in the economy and Prospects
■ Malawi’s was afflicted by adverse weather conditions for
two consecutive years 2015 and 2016.
■ GDP growth fell sharply from 5.7 % in 2014 to 2.9 % in 2015
■ Growth is expected to recover to a minimum of 4 % in 2017
and accelerate to 5 % in 2018
■ The recovery in agriculture output and incomes, and
consumption are expected to stimulate the economy
■ GDP growth will also benefit from improved
macroeconomic stability
■ Diversification is critical in enhancing resilience of the
economy and support higher and sustainable growth
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GDP Growth Trends/projections
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Inflation trends
 Malawi has one of the highest inflation rates in SADC
 Averaged 21.7 % in 2016 lower than 21.9 % in 2015
 Inflation in 2017 declined to 16 % from 23.4 % in 2016
 Imported lower inflation offset by Kwacha depreciation
 Monetary reforms continued to curb inflationary
pressures and stabilize the Kwacha in 2016.
 Policy rate was reduced from 24% to 22 % in March
buoyed by lower inflation
 Effects of lower inflation good for competitiveness
 Positive for tourism investments and visitors in the
regional context
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Inflation is falling
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Recent Reform Efforts
■ A number of economic, financial reforms and land related
laws have been enacted.
■ In 2016, the following were launched:
 The collateral registry system (Personal Property Security
Registry) to enable businesses and individuals access
loans using movable assets;
 The Malawi Business Registration System (MBRS) which
facilitates the online registration of businesses, and
automatically generate a Taxpayer Identification Number
for the business; and
 The trade portal which is one-stop window for
information relating to import into, export from and
transit through Malawi.
■ Ongoing reforms must be sustained to attract private sector
investment and FDI.
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Investment and Business Climate
■ Malawi’s progress in improving the investment climate and
competitiveness has been slow.
■ Reform efforts however beginning to show a turn around.
■ 2017 Ease of Doing Business (DB) ranked Malawi 133rd out
of 190 countries globally, improving from the 141st in 2016.
■ On DB Distance to Frontier (DTF), the country improved by
3.28 from 51.11 (2016) to 54.39 (2017)
■ This is above the 49.51 average for the Sub-Saharan Africa.
■ The 2015-16 Global Competiveness Index (GCI), ranked
Malawi 135 out of 140 countries with a score of 3.2 out of 7.
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Investment and Business Climate
■ Malawi’s economic freedom score was 54.8 out of 100,
making its economy the 126th freest in the 2015 Index.
■ Problematic areas included access to finance, bureaucratic
delays, and macro-economic instability.
■ Others were property rights, control of government
spending, monetary freedom, and trade freedom.
■ While foreign and domestic investment are generally
treated equally under the law, investors face bureaucratic
hurdles.
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Tourism Investment climate and potential
■ Tourism has potential to diversify the economy, drive growth
and generate foreign exchange and jobs.
■ Malawi total contribution of Travel & Tourism (T&T) to GDP
was 7.2% of GDP in 2015.
■ Forecast to rise by 4.2% per year to reach 6.9% of GDP in
2026.
■ T&T investment represented 3.0% of total investment in
2015.
■ There is potential to rise by 6.9% per year over the next 10
years to 3.2% of the total investment in 2026.
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Tourism Investment climate and potential
■ Malawi voted among the top ten must-see destination in
2014 by Lonely Planet.
■ The country has untapped opportunities as highlighted in
the Malawi Investment and Trade (MITC) Projects
Compendium.
■ Tourism faces a number of challenges including coherent
strategic focus, limited investment and undeveloped
tourism products.
■ Country also faces infrastructure constraints to facilities
and services.
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Tourist arrivals - Malawi vs. Top 5
Top Five African Countries for International Tourist Arrivals (millions)
COUNTRY
2010
2011
2012*
2013
2014
2015
Morocco
9.29
9.34
9.38
10.05
10.28
10.18
Egypt
14.05
9.50
11.20
9.17
9.63
9.14
S. Africa
8.07
8.34
9.19
9.54
9.55
8.9
Tunisia
7.83
4.79
5.95
6.27
7.16
5.36
Zimbabwe
2.24
2.42
1.79
1.83
1.88
2.06
Malawi
0.776
0.767
0.770
0.795
0.819
0.805
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AfDB Actions for Tourism Financing
■ AfDB through private sector lending window provides
support to the private companies through direct and
indirect financing.
■ AfDB also finances tourism and travel
infrastructure through the public sector window
related
■ Three priority sectors for lending are infrastructure,
financial intermediation, and industry and services.
■ Industries and services- the tourism sector has been
earmarked as a priority sector for AfDB direct and indirect
lending operations.
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AfDB Financial Instruments and Products
■ AfDB funds projects in the tourism sector through its private
sector loan products and equity financing.
■ Products include corporate loans, project finance and lines
of credit to commercial banks, and development finance
institutions (DFIs).
■ Direct equity in financial institutions and private equity
funds (PE Funds) that provide financing to investments in
the tourism sector.
■ AfDB has broadened its financial instruments and products
that are designed to catalyze additional private finance.
■ These include risk management products and guarantees.
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Examples of directly financed projects
■ AfDB funded business hotels with international chains such
as Hotel Intercontinental Lusaka, Sheraton Kampala and
Kempisiki Accra.
■ Provided corporate loans to Ethiopian Airlines and Air Cote
d’Ivoire for acquisition of state of the art airplanes.
■ In travel related infrastructure, funded the expansion of
Jomo Kenyatta International Airport in Nairobi.
■ The Bank Group funded the Kamuzu International Airport in
Lilongwe in 1977 among others through public sector.
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Indirectly financed investments
■ Through Lines of Credit to DFIs and Private Equity Funds.
■ Exampled of such projects include:
 Botswana - Travellers Rest House via AfDB line of credit to
National Development Bank of Botswana;
 Namibia – Shipreck Lodge, Marigold Investments Two
Hotel, Mango Guest House, African Pride Hospitality
Hotel, At the Waves Property Lodge and Windhoek Palm
Lodge via line of credit to Development Bank of Namibia;
 Tanzania – Lake Manyara Luxurious Tourist Lodge through
line of credit to Mauritius Commercial Bank; and
 Zambia - David Livingstone Safari Lodge and Spa via line
credit to Development Bank of Southern Africa (DBSA)
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Conclusions and Way forward
■ Malawi has undertaken significant economic and financial
reforms, and measures to enhance competitiveness.
■ Some gains have been recorded in stabilizing the economy
with lower inflation and interest rates.
■ Much unfinished business in unleash the potential of
Tourism for diversification and job creation.
■ Government to provide incentives to attract both foreign
and domestic investment through direct financing and PPPs.
■ Country should invest in infrastructure and focus on its
niche-water, mountains resorts and its people.
■ Identify and zone sites along the shores of Lake Malawi
offering potential for sustainable tourism investment.
■ AfDB has diverse instruments for financing the sector which
can be tapped by Malawi Investors.
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THANK YOU
Contacts: [email protected]
Web: www.afdb.org
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