The year 2025 will forever be etched in the memories of Malawi’s private sector as a true test of endurance. From bustling urban enterprises to vital rural businesses, companies across the nation found themselves battling a fragile and often unforgiving economic environment. It was a year where simply staying afloat became the primary objective for many, a year of relentless struggle against an economic perfect storm.
The Perfect Storm: What Made 2025 So Tough?
While some official indicators hinted at a slight easing compared to 2024, the reality on the ground was far grimmer. Businesses, both large and small, grappled with a myriad of challenges that collectively shackled growth and innovation. Imagine trying to run a business when:
- Forex Shortages Persisted: This was arguably the biggest villain of 2025. A staggering 74 percent of firms surveyed by the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) reported limited access to foreign exchange. This meant crucial raw materials, spare parts, and machinery were delayed, crippling production across manufacturing, construction, and agro-processing sectors. Many operated at below 50 percent capacity.
- Inflation Bit Hard: High inflation continued to erode household purchasing power, leading to weak consumer demand. People simply had less money to spend, directly impacting sales and profitability.
- Costs Skyrocketed: Rising operational costs, fueled by fuel scarcity, intermittent electricity supply, and expensive short-term credit facilities, squeezed margins to breaking point.
SMEs on the Frontlines: Bearing the Brunt, Showing the Way
Small and Medium Enterprises (SMEs) truly bore the brunt of these challenges. Already operating with thinner margins and less financial buffer, they faced immense pressure. The struggle for forex meant imported goods were scarce, and high interest rates made borrowing a desperate, expensive gamble. This frustration boiled over in Lilongwe, where vendors protested outside Parliament, demanding solutions to the forex crisis that was crippling their ability to procure merchandise.
Yet, amidst the adversity, Malawi’s SMEs showcased remarkable resilience and an impressive capacity for innovation:
- Local Sourcing & Value Addition: Many turned inwards, exploring local sourcing and import substitution. Agro-processing and light manufacturing firms focused on adding value to locally available materials.
- Digital as a Lifeline: Digital platforms became vital tools for online marketing and sales, expanding reach in a constrained physical market.
- Strength in Numbers: Associations and cooperatives proved crucial, enabling collective procurement and better market access for their members.
A significant ray of hope emerged with the enactment of the MSME Bill in 2025. This landmark legislation provides a much-needed framework for advocacy, collaboration, and structured dialogue between SMEs, government, and other stakeholders, promising a more systematic approach to supporting this vital sector.
Big Players, Big Headaches: No One Was Spared
Even larger companies, with their stronger financial buffers, were not immune. Rising input costs, delayed procurement due to forex woes, and policy uncertainty created significant operational challenges. The election year further complicated matters, with donor support and foreign investment slowing down, leading to reduced liquidity and limited expansion opportunities. For many, the focus shifted from ambitious growth plans to the grim reality of survival and meticulous working capital management.
A Glimmer of Hope? Looking Ahead to 2026
As Malawi steps into 2026, there’s a sense of cautious optimism. Projected GDP growth of 3.8 percent, driven by structural reforms and improved sectoral productivity, offers a more hopeful outlook. Businesses anticipate better harvests, which could improve food security and alleviate inflationary pressures. Forex availability is expected to gradually improve, though the scars of 2025 will likely linger.
The year ahead also promises expanded access to finance, with a push for more affordable credit tailored to SME needs. Collaboration with universities and higher education institutions could foster local machinery fabrication and further boost import substitution efforts. Furthermore, the Small and Medium Enterprises Development Corporation is poised to elevate sector standards through the accreditation of business development service providers.
Paving the Way Forward: Key Recommendations for a Resilient Future
The lessons of 2025 are stark, yet clear. To build a stronger, more inclusive business environment in Malawi, several key areas demand urgent attention:
- Prioritize SMEs: Ensure equitable allocation of scarce forex to these vital engines of the economy.
- Expand Affordable Finance: Create accessible and affordable credit facilities.
- Stabilize the Macroeconomy: Implement policies that control inflation and ensure exchange rate stability.
- Strengthen Public-Private Dialogue: Foster continuous and effective communication between businesses and policymakers.
- Support Local Production: Invest in local manufacturing, skills development, and digitalisation to reduce import reliance.
Collaboration is also key – between SMEs and larger firms, especially in supply chains, to leverage synergies and build collective strength.
The Fight Continues, But Hope Endures
The year 2025 was a brutal reminder that economic instability, forex shortages, and rampant inflation can bring even the most determined businesses to their knees. Yet, it also showcased the incredible spirit of Malawian entrepreneurship. SMEs, in particular, demonstrated remarkable adaptability and innovation in the face of immense pressure. As Malawi navigates 2026 and beyond, the determination and lessons learned from the “year of fighting to stay afloat” will undoubtedly serve as a crucial foundation for building a more resilient, dynamic, and prosperous private sector. The road ahead may still be challenging, but the collective will to overcome provides a solid basis for cautious optimism.
Source: Original Article
