Maravi

(NYASATIMES) Malawi forex crunch affect companies

Malawi forex crunch affect companies
By Nyasa Times
Published: September 22, 2010

The foreign exchange shortages have adversely affected the manufacturing sector as companies such as Bata Shoe say they cannot secure necessary raw materials. Malawi is currently experiencing severe shortage of fuel and foreign currency.

Managing Director of Bata Shoe Company, the producer and seller of shoes, George Mlenga told Zodiak radio that the forex crunch is affecting the company from purchasing raw materials from abroad as well as exporting the finished products.

“The forex issue has hit us badly. You know we are doing production and at times when we need to get raw materials it is becoming a challenge,” said the Bata boss.

Entrepreneurs say foreign currency is scarce in financial institutions, a similar problem the country faced around December last year. Reserve Bank of Malawi (RBM) resumed rationing of foreign currency from September 1 2010.

And published reports say financial services group, Nico Holdings Limited, has said it fears that the uncertainty surrounding the shortage of foreign currency will be a major challenge to their businesses in Malawi.

Finance Minister Ken Kandodo told parliament earlier this year when he was presenting the national budget that the forex shortage situation will improve “as the year progresses”

“I am very much aware of the challenges facing our business community. It is my hope and belief that as the year progresses, the foreign exchange situation will improve. In this regard, the Reserve Bank of Malawi has instituted measures -that will enable the country to rebuild the foreign exchange reserves position,” said the Finance Minister.

There is also diesel shortage in almost all service stations in the capital city Lilongwe, bringing business to a standstill.

Nyasa Times also interviewed some residents in the capital who said there pumps were dry and that motorists were reportedly continuing to abandon their motor vehicles at service stations hoping they would refuel once gasoline is delivered at the stations.

“I have searched for fuels today from one service station to another but pumps are all dry. At least some stations, there is short supply of petrol but diesel is unobtainable,” Sosten Mtunduwatha said.

The problems that Malawi is facing ranging from fuel shortages, the forex crunch, power blackouts and water scarcity are attributable to the Mutharika administration which has snobbish tastes for extravagant use of forex.

Nyasa Times earlier reported that Malawi’s forex problems occurred because the Government of Malawi, in June 2007 through the Reserve Bank of Malawi, lent the Zimbabwe Government about USD100 million.

The money was meant for the Zimbabwe Government to buy maize in Malawi, according to information on page 62 of the account for Reserve Bank of Malawi for the year ending 31 December, 2008.

The loan, guaranteed by the Malawi government on the basis of a personal understanding between President Bingu wa Mutharika and his close political pal President Robert Mugabe of Zimbabwe, was supposed to be repaid by December 31, 2009.

There has been no report that the money was repaid.

In addition, the Mutharika Government bought a presidential jet for about US$15.9million.

However, the government was not fully forthcoming on the transaction involving the jet, bought from Aero Toy Store in the United States of America. Specifically, the government has been very secretive regarding the vote used to purchase the plane.

The government also depleted forex following the blowing of £3 million on a fleet of 22 Mercedes Benz motor vehicles from Britain for the cabinet. According to The Sun newspaper of Britain, London-based Crown Agents Bank Ltd. is said to have brokered the deal.

Moreover, Mutharika has been the subject of criticism on extravagant expenditure, drawing the ire of the opposition when his government purchases a fleet of top-of-the-range Hummer vehicles for his motorcade. In the same splurge, he also bought buses to run his campaign, using one during the campaign in which he was the only passenger.

Labels: FOREX, GEORGE MLENGA, ZAMBIA BATA SHOE COMPANY PLC

posted by MrK @ 6:08 PM