Updated: Nov 10, 2020
There are currently more than 760,000 small businesses in Malawi that produce annual revenues of about U.S. $2 billion (Mawila.com). And although it’s not currently on the list of emerging markets, running a business in Malawipresents opportunity for future growth and provides quality service to a population in need. But managing a major business in Malawi is no walk in the park, especially when native culture and various regulations stand in the way. Here a few challenges executives running a business in Malawi may face.
Getting access to electricity is the most difficult challenge when Doing Business in Malawi. It can take up to half a year to acquire and cost over 1700% of the income per capita for the country. Establishing the infrastructure needed for operations and covering overhead costs once operations start can be challenging. And with a whole nation facing these issues, it is difficult to access modern technology and equipment. Discovering how to manage a business in a way that doesn’t require extensive electrical power may be a key factor for success.
On one trip to Malawi, BYU professor, Kristie Seawright, was detained—for no apparent reason—on her way to a meeting. The police wouldn’t say why she was stopped, so Seawright assumed they were simply looking for a tip. After several hours and no progress, Seawright knew she had to do something. She stood up to them and bluntly said, “We don’t pay that kind of money.” The police looked around, slightly surprised and slightly bashful, and finally let her go.
This simple example represents a larger problem when living and doing business in Malawi. With a young and slightly conflicted government system, corruption and bribery have found a natural place in society. Some of the areas to be particularly wary of include taxes, public procurement, land acquisition, and natural resources.
The solution Seawright used may not work in every situation. Some officers may not back down or may respond poorly to such a bold response. Establishing best practices for these situations will help prepare for those sticky situations in the future. Examples of best practices for corruption and bribery include the following: be proactive, train employees, have due diligence checklists, and be transparent in all business interactions.
With only 2 international airports, being land-locked severely inhibits the ability Malawi has to trade on a world-scale. But that isn’t the only thing that limits the import and export market in Malawi. Government regulations require several extensive forms be completed and filed for each cross-border transfer. And to make things worse, 82% of the country’s output comes from agriculture, making raw materials sourced in Malawi, other than food, hard to acquire. And during bad harvests, even food trade suffers. Keeping the business less reliant on suppliers and export sales may help overcome some of these issues.
Conflicts of Interest
In a recent government meeting, a local representative stood to give a speech in his tribal headdress. After several exclamations from the crowd, he was asked to remove the headdress, but he would not. Eventually, the sergeant in arms, carrying his ceremonial mace, walked over and escorted this man out. All for wearing a cultural headdress in parliament. The Malawi congressional system is “modeled after some of the British government institutions… It’s supposed to represent the country,” rather than the diverse, cultural, indigenous people. But Malawi tradition is to listen to their tribal leaders, to respect them. Kristie Seawright describes this as Malawi’s “two layers of government” in her Cultural Conversations Podcast.
This two-layer leadership is a result of British colonization in the 1890s. With a rich history of tribal leaders in Malawi, the British recognized that it would have been difficult and expensive for the people to adjust to a new system. It was much easier for them to establish indirect control. Thus, tribal chiefs maintained leadership with added credibility from the ruling British. After declaring independence in the 1960s, however, Malawi established their own system based on British standards. But with this system still being laced today with competing tribal and governmental boundaries, many find it difficult to navigate the conflicts of interest that arise. Business leaders in particular find themselves frequently weighing loyalties, taking up precious time and resources.
Malawi is one of the top 10 English speaking countries in Africa. The problem, however, is that the overall literacy rate in Malawi is low, at only 61% of adults, including both those who are literate in English and those who are literate in their tribal languages. Having English as the official language of the country certainly helps when dealing with international businesses. But a poor local literacy rate may cause problems communicating between customers and suppliers. To fully succeed in Malawi, it will be important to learn a second language, likely Chichewa.
Only 35% percent of children in Malawi complete primary school and only 8% complete secondary school. These education rates result and perpetuate from severe poverty, health issues, and young marriages. Even with consistent and increasing aid from the government, low education levels make it hard to find skilled and literate employees when growing a business in the area. Investing in quality education and training for employees will be a costly but necessary priority for local businesses.
Most African countries, Malawi included, view time as fluid and flexible. A meeting scheduled to begin at 5:00 pm likely won’t start until much later, even hours later. Keeping a schedule and arriving on-time doesn’t mean the same thing in Malawi as it does in the west. And business meetings won’t necessarily follow a defined agenda like they do in many Westernized countries.
In The Culture Map, Erin Meyer says that “the effective manager [must be] flexible and professional enough to capitalize on priorities and changing needs as they arise. Interruptions, agenda changes, and frequent shifts in directions [need to be] seen as natural and necessary.” Managers in Malawi will need to be clear in establishing performance and time expectations for employees in a respectful way in order to keep the business running well.
In 2018, the lending interest rate across Malawi averaged 32.29% and the three largest banks in Malawi provided 86.8% of banking services. With such a high interest rate and so few firms to get funds from, loans from banks may not be an easy source of capital. Executives in Malawi will likely need to look to foreign sources for their cash-flow and investment needs.
Culture, history, natural access to resources, and relations with other countries may all impact managerial practices. And although the list of challenges seems extensive, many tools and examples exist to help manage businesses in Malawi. One thing Kristie Seawright reminds us to remember is: “our brothers and sisters around the world are dealing with the same issues we are… Sometimes they have more challenges, or different challenges, but we’re all in this together.” For more insights into Malawi and working with the local people and culture, check out Seawright’s iHub Cultural Conversations podcast here.
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