The agriculture sector has seen hard times in the recent past due to drought and political instability. Government’s reaffirmed commitment to democracy and good governance and significant flow of international development funding are helping to resolve historic problems.
There are a few good news stories for agriculture coming out of Malawi, including the resumption of peanuts exports after a long lull, and high level political support for agricultural development initiatives.
Investment opportunities
Cotton production
Malawi has been a cotton growing country since the colonial era. The cotton sector was vibrant for many years but started to slump in the early 1990’s due to the decline in global prices for cotton and the increasing cost of cultivation, which eroded the profitability of the crop for many smallholder farmers.
More recently, things have been looking up. Agricultural research institutions in the country have developed cotton varieties suitable for local climatic conditions and yields are improving. It is hoped that, with the introduction of foreign investment and expertise, yield levels can be increased from a current estimated 800 kg/ha to as much as 3,000 kg/ha in coming years.
Investment opportunities exist in the commercial cultivation of cotton through contract farming, village adoption, cooperatives and associations. These help to improve the production and quality of cotton with the objective of providing raw materials to the textile industry for its preferential markets under the African Growth Opportunity Act (AGOA), and the EU.
There are also larger-scale opportunities, such as the call for an investor to establish a second spinning, weaving and knitting plant in the country – to meet the demand of garment manufacturing companies operating under Export Processing Zone (EPZ) status. The investor will address the issue of inadequate raw materials, particularly of knitted fabric.
Increasing capacity and moving up the value chain are two major issues for the cotton sector in Malawi. With existing ginneries using only 25% of their ginning capacity, there are opportunities for investors to help increase productivity and add value to the cotton crop by converting it from raw cotton into other cotton products.
Tea production and processing
Tea is the second most important export crop for Malawi and it contributes around 8% of total export earnings. Tea is exported to European, Asian and American markets. Since tea is a major foreign exchange earner, additional investments are necessary through joint ventures with Malawian companies in the processing of tea and other byproducts and also in the actual farming of the crop. New opportunities also exist in the processing of green tea for East Asian markets. The Tea Association of Malawi coordinates information on the production and processing of tea in Malawi
Macadamia nuts processing
Macadamia is among the most important cash crops in Malawi. The nuts have a variety of uses, ranging from usage in confectionery products, eaten raw or roasted as dessert nuts. They are also used for household oil extraction and cosmetic manufacturing. Macadamia products are exported to both Asian and European markets. The current total area under macadamia cultivation is 2,200 hectares. Production of macadamia nuts is by both smallholder farming and large-scale estates. The cost per hectare in Malawi is very low. So far, macadamia bodies have been established and two processing plants are already operating. However, due to increasing demand for the product, more foreign investment is being sought to boost the production and processing of the nuts into various
Arabica coffee production and processing
Arabica coffee is the fourth most important export crop in Malawi. Exports are made to European markets, Asia markets and American markets. Coffee offers more profits than most other crops. In order to boost production, the government has privatised the Smallholder Coffee Trust, which empowers smallholder farmers to control coffee production. Opportunities for investment exist in form of joint ventures in production and processing of coffee into marketable products.
Soya bean processing
Malawi produces more than 35,000 metric tons of soya beans per year. Most of the soya bean is exported raw and little is processed for food domestically. Malawi’s soil is very conducive to soya bean cultivation and farm gate prices are internationally competitive. There is a growing demand, both locally and internationally. The government is encouraging increased growth, production and utilisation of soya beans. As such, investment opportunities exist in the processing of soya beans into soya milk, soya oil and other secondary products.
Cut flower production
Investment opportunity exists in the production of cut flowers exclusively for the export market in Europe. There are already some firms that are successfully exporting to Europe and additional investment in this sector will create economies of scale and hence make Malawi’s cut flower industry more competitive on the international market. Malawi has a favourable climate and weather for the production of cut flowers. Since flowers do not do well in cold seasons in Europe, Malawi has an advantage over producers in Europe during the festive cold seasons of November-February in Europe. Investments are likely to yield high returns and an initial investment capital might be no more than US$2m. Sufficient labour is readily available for such a project within the city of Lilongwe and surrounding districts where cut flowers can be directly exported by air to Europe.
Fruit processing and canning plant
Malawi currently has no processing plant using local fresh fruit. The country has a favourable climate for the production of a wide range of fruits that include pineapples, tangerines and mangoes. The local market for these products is good and there are export opportunities to South Africa and other regional markets. An investment opportunity exists to set up a fruit juice processing plant in the southern region of Malawi. The estimated project cost is US$5mn and the expected return on investment is 33%.
Sesame processing
Sesame is used in Malawi both for consumption purposes and as a cash medium in some rural areas. It is used in confectionery products, for seasoning side dishes, and in soap making and cooking (including sesame oil). The crop grows along the lakeshore, in the Shire valley and on the warm plateau areas of Lilongwe, Mzimba, Rumphi and Chitipa. Estimated annual production has averaged 205 tons over the past 10 years. Opportunities exist in production and processing of sesame oil into marketable products.
Source: Developing Markets Associates
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