Seeking new pathways to green growth in Malawi

With the recent declaration of a drought in 23 of its 28 districts, Malawi once again stands on the brink of crisis, one that would compound its macroeconomic woes and shortage of foreign exchange. While a swift response, leveraging two World Bank disaster mechanisms—the Contingency Emergency Response Component (CERC) and Catastrophe Deferred Drawdown Option (CAT-DDO)— will help, there is a need to consider how to avert the next crises.

This combination of disasters, with climate vulnerabilities and critical foreign exchange shortages driving its balance of payments crisis, reveal structural challenges to the country’s economic growth. A forward-looking approach to green economic growth is essential for Malawi, medium- to long-term. The government has identified agriculture, tourism, and mining as key growth sectors. Within these, export-oriented strategies, for goods and services, are needed to sustainably address Malawi’s balance of payments challenges.

The 2023 Malawi Country Economic Memorandum identifies several agricultural value chains, including soybeans, macadamia nuts, and groundnuts, for which Malawi has developed industrial-scale production facilities. Key avenues of further growth in these value chains will come from investments in climate-smart agriculture, low carbon processing, and traceable value chains, designed to maintain and increase the production levels of certified, export-quality consumer products, even as the frequency of climate disasters increases.

More processing needed for smallholders

More community-based processing facilities are needed to add more smallholders to the chains and to broaden value addition by, for example, developing soybean products such as tofu and seitan (both plant-based meat substitutes) for export. Similarly, investing in traceability and digitalization across the value chains could enhance market access for Malawian exporters. This is especially relevant as consumers worldwide seek organic, certified products, while global sustainability regulations—such as the US Forest Act, EU Deforestation Regulation, and the Corporate Sustainability Due Diligence Directive—seek greener imports for large markets like the EU and the US.

A dedicated focus on increasing domestic value addition, greening value chains, and increased export market access is needed to realize the full potential of each. There is a concurrent need for investments in digitalization and improvements in border management systems, as well as for improving hard infrastructure, like roads and electricity, streamlining business permits and licensing systems, and scaling up access to investment and operations financing for firms.

Lake Malawi - a tourist attraction

Malawi remains an under-the-radar destination in the Southern Africa region, but tourism offers wide-ranging backward and forward linkages across the economy, creating jobs for skilled and unskilled labor. According to the World Travel and Tourism Council (WTTC), tourism directly contributed less than 2% to Malawi’s GDP in 2022, with its share expected to rise to a mere 3.3% by 2033. Some estimates place the total (direct and indirect) contribution of tourism at 5% of GDP, with visitor exports at $26 million. These are all positive signs of future potential in the sector.  

Positioning Malawi’s lake tourism as a must-see destination in Southern Africa, with the UNESCO World Heritage Site of Lake Malawi as its centerpiece, offers a viable opportunity. The country’s land and air links to nearby popular destinations in South Africa and Zambia is an opportunity for Malawi to position itself as an indelible part of the regional package. Opportunities for greening tourism in Malawi abound, from developing off-grid electricity generation to eco-tourism activities.

Even as Malawi navigates the current storm of its polycrises, it is important to consider how to escape the cycle and strengthen Malawi’s economic resilience through growth investments. Scaling-up agribusiness exports and tourism would generate much-needed foreign exchange, raise domestic revenues, and create jobs, while solidifying Malawi’s pivot towards greener pathways of growth.