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Mission Malawi: The History of Malawi

At Pangea Resourcing, we’re dedicated to our corporate social responsibility. In the first of a series of articles looking at our Mission Malawi initiative, we take a look at the history of the African nation, investigating the turmoil the country has faced, its current economic make up, and the scope for development within the Malawi economy.

June 2019

Mission Malawi: The History of Malawi

To say that Malawi’s recent history has been eventful would be something of an understatement. Originally the domain of the Bantu, a nomadic people who occupied a large area of Africa, this small country in the east of the continent has witnessed much in the past 150 years.

It’s one of Africa’s poorest nations, yet one with great potential – not only for its residents, but also for external businesses and overseas investors. After all, the nation is rich in opportunities - be they in the agriculture, energy, mining, or manufacturing industries - making this a region that looks set to flourish in the coming years.

However, to fully understand the scope of potential for the nation, it pays to first analyse both the history and current standing of the region. In this first of three posts, we provide a brief introduction to Malawi, taking a look at its history, population and economic development opportunities.

Malawi to date

In 1891, Malawi fell under British rule. For its people, this was a time of hardship, with many natives forced to work plantations in poor conditions. In the ensuing decades, the country faced political unrest as its people rebelled against the iron will of the British. Finally, in 1964 independence was declared and Dr Hastings Kamuzu Banda took the office of President, which he held for three decades.

Although Malawi remained an impoverished nation, its situation was helped by a pledge from the World Bank to cancel 50% of its foreign debt in 2000. Since then, socio-economic developments have included a promise to provide anti-viral drugs to AIDS sufferers and, most recently, a raise in the legal age of marriage to 18 years old.

Sadly the impact of Cyclone Idai in March of this year wrought devastation upon the population, with floods wiping out roads, bridges and homes. Damage to two hydroelectric power plants on the Shire River resulted in an 84% loss in the country’s total 320MW hydroelectric power capacity.

 

Socio-economic profile

Malawi socio-economic profile

Population

Over 19 million

Population growth

Total number of households increased by 38.9% from 2008-2018, though average household size decreased from 4.6 to 4.4. Southern Malawi has the highest population density as at 2018

Life expectancy

64.2 years according to WHO

Age structure

8.7 million adults of 18+

Almost 50% of population is under 15

Birth rate

Estimated 41 births per 1,000 population in 2017

Death rate

Estimated 7.9 deaths per 1,000 population in 2017

Under 5 mortality in 2015 was 63 per deaths per 1,000 live births; in 2010 it was 112 deaths per 1,000 live births.

Overall infant mortality rate (deaths under 1 year old) has declined dramatically since 2000.

Migration rate

Net migration rate was -0.37 in 2015

Employment makeup

Largely agricultural country. Agriculture main activity of GDP (crops, animals, forestry and logging), followed by wholesale and retail trade, then manufacturing. Main imports are diesel, petrol and paraffin; main exports are tobacco and tea.

 

An economy exploited

An ActionAid report in 2015 detailed how the Australian mining company, Paladin, found ways to cut their tax contribution in Malawi, leading to the country missing out on a staggering US$43 million. Such a loss resulted in far-reaching consequences for Malawians: the report suggested that this capital could have funded over 400,000 annual HIV/AIDS treatments, and the wages of over 60,000 doctors, nurses and teachers.

Malawi’s domestic policies partly allowed for this exploitation of its tax laws, meaning that Paladin was able to reduce the normal 5% tax rate on sales to just 1.5% - resulting in over US$15 million being lost. Not only that, but due to the nation operating a tax treaty with the Netherlands eliminating the 15% withholding tax, Paladin was able to route its loans via the Netherlands and reduce Malawi withholding taxes by more than US$27.5 million over six years.

 

Contrasting Malawi with others

This oversight brings Malawi into stark contrast with the continent’s more prosperous and successful nations and their economic policies. In fact, the IOA’s 2017 Africa Country Benchmark Report (ACBR) looked at 54 African nations to determine the efficacy of their economic setup. The report found that arguably the largest factor influencing the success of performance is the nation’s political performance.

In essence, the private sector does not have the power or autonomy to steer the economy, with government leadership instead dictating those sectors that will grow and prosper. This same report also determined that single-commodity economies are also in a position of constant risk. Malawi depends heavily on its agricultural activity, with tobacco and tea dominating its exports. The volatility of external influences - such as climatic and health-related factors - thus impacts the overall economic success of the nation.

 

Unlocking Malawian potential

With the right improvements in infrastructure, management, and technology, the scope for developing Malawi for external investors could be huge and unlock the full potential of the nation. In the next part of our Mission Malawi series, we’ll take a closer look at the challenges faced by the country and areas of untapped potential throughout the nation.

 

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