Sunday, October 14, 2012

Taught by hard times: How small-scale businesses outsmarted Malawi’s economic crisis

By Richard Chirombo
Challenges that beset Malawi’s economy during the past two years were not pulley enough to bring informal sector enterprises down, as entrepreneurs shifted from capital intensive ventures to small business ventures with high returns, says the Malawi Union for the Informal Sector (Mufis).
Mufis general secretary, Mwanda Chiwambala, said in an exclusive interview that the organisation has no reports of small business enterprises closing shop. If anything, he said, the 3.5 million people Mufis counts among its membership national wide simply moved from one type of business to another in a bid to reduce on operational costs and maximize profits. 
This is in sharp contrast to the knee-jerk reaction adopted by medium and large-scale enterprises at the height of the crisis, resulting into staff down-sizing exercises and reduced operational capacity as the country grappled under an unprecedented fuel and forex shortage squeeze.
At a time European investors were eyeing Africa as a viable investment alternative owing to the establishment of pro-business policies and inherent regional advantages in low labor costs and abundant resources, Malawi’s policies under the Bingu wa Mutharika’s administration stifled the operations of local investors while scaring away potential Foreign Direct Investors.
“We did not register any cases of business enterprises closing down due to the economic situation of the past two years. When things get tough in the economy, the tendency by informal sector traders is to shift from one business venture to another, rather than closing down on operations. This is because, in most cases, the business ventures act as their only viable means of survival,” Chiwambala said.
“If a small-scale business enterprise was affected by fuel, forex, price adjustment shocks, punitive taxes, and declining consumer demand, operators were simply refocusing on ventures that could yield immediate financial results without exposing them to business losses, “Chiwambala said.
Chiwambala said, however, that even without any economic challenges, informal sector players face a number of challenges, including failure to access soft loans through Authorised Dealer Banks (ADBs), unsanitary business premises, and lack of consultation on policy issues.
“For example, when City, town and district councils are adjusting market rates, vendors are not consulted, which creates animosity between them and the responsible officials,” Chiwambala said.
He proposed that policy makers should establish an ADB to cater for the specific needs of informal sector players, consult informal sector players on policy issues, and introduce insurance cover to shield vendors from market fires.
This is in reference to market fires that often plague local markets. Some of the gutted places razed down by infernos include Blantyre Flea Market, Ndirande in Blantyre, Balaka market, and Mtandire in Lilongwe.
A snap survey conducted among small-scale traders in Blantyre and Zomba also revealed that most traders survived the economic storm by investing in quick-returns’ ventures.
A good case in point is that of Merina White, a maize trader at Manase market in Blantyre.
“Of course, we had the issue of shortage of disposable income among our clients but I did not stop selling food commodities. At one time, I took a break from selling maize and opted for ground nuts, before reverting to maize again.
“This business keeps me going, and I could not abandon it due to the economic problems. I depend on this business to meet family needs,” White said.
White said the secret to surviving market uncertainties lies in the ability to alternate between one food commodity and another.
“We are fortunate in that we have so many seasonal crops that bring us cash in Malawi. People like me do not depend on economic indicators but (we) depend on the season of the year. When it is the season for mangoes, we sell mangoes. When tangerines are in season, we sell for tangerines. That way, we survive,” White said.
White said informal traders could have survived the economic crisis because it was just one of the many challenges facing them, the other challenge being that of neglect.
“Most of the times, we depend on ourselves. For your own information, Blantyre City Assembly workers do not visit Manase (market) to collect garbage and market fees- which shows that every day is survival day for us,” she said.
Ronnie Kazembe, a small-scale business woman from Domasi in Zomba, said she continued selling farm produce and baking flitters because it is her only source of income.
“During the tough economic years, I have been shifting the focus from selling flitters, Zigumu (home-made cakes), sweet beer, cassava tubers, sweet potatoes, tomatoes. The determining factors are the season of the year, and commodities available. I take care of my children and orphaned children, who all count on me to provide clothes, school uniforms, shoes, food, and shelter.
“So, despite the shortage of money in our pockets and escalating cost of commodities, I did not opt out. My business ventures do not depend much on fuel except, perhaps, when transporting maize from Mulanje, Chikhwawa, Zomba to my business-place,” Kazembe said.
Kazembe said the main challenge facing local businesspeople has nothing to do with surviving the economic meltdown, saying the challenge is on “growing our businesses, and graduating from small-scale business enterprises to large-scale enterprises”.
“We need business loans but (commercial) banks remain hostile and demand a lot of paperwork,” Kazembe said.