Agricultural Investment Opportunities in Malawi

The official language of Malawi is English, but Chichewa is also widely spoken. The country's economy has experienced consistent growth over the last several years, with agriculture being an important contributor, representing 30% of GDP in 2011. Agriculture is the single largest contributor to GDP, having grown at approximately 8.3% per annum from 2006 to 2011. Malawi possesses significant resources that support diverse crops, such as good water supplies, vast land resources, favorable agro-ecological conditions, and capable farmers. The country has abundant water supplies, with Lake Malawi and Lake Chilwa covering over 20% of Malawi's land area. There is significant potential for irrigation in the Shire River Valley for winter cropping, and if irrigation is fully implemented, Malawi has enough water to become completely food independent. Malawi has 3.6 million hectares of arable land, of which 2.1 million is already under cultivation, and 42% of potentially productive land is yet unused, presenting vast potential to increase agricultural output. The country's agro-ecological conditions are favorable, with five distinct agro-climatic zones: Highlands, Escarpment, Plateau, Upper Shire Valley, and Lower Shire Valley. These regions have different soil textures and rainfall patterns, and support a mix of crops including cereals, legumes, and an assortment of cash crops. Malawi's smallholder farmers (SHFs) are commercially inclined and respond to markets, growing crops they can sell. The majority of farmers possess at least basic skills in agriculture, and farmers require training in improved methods. The investment opportunity in Malawi's agriculture sector is significant, with a high-level investment opportunity in groundnut processing for local, regional, and international investors. The investment opportunity is an established groundnut processing facility that has managed to produce high-quality groundnut products, such as blanched peanuts and peanut paste, that meet stringent EU quality standards. The business model allows for premium prices and high margins due to the focus on value-added products, a Fairtrade certification, and access to international markets. Positive social impact is achieved by sourcing from smallholder farmers (SHFs) and by increasing the engagement of women. Malawi's high production potential (both in terms of quantity and quality) and increasingly enabling environment provide prerequisites for this attractive investment. Demand for groundnuts has grown for local (10%), regional (1%), and global (3%) markets, and Malawi's regionally competitive yields and high production volumes within the region make it an ideal country from which to serve this demand. The limited number of private sector actors involved in all stages of the groundnut value chain allows room for growth. The Government of Malawi is encouraging private sector-led growth through policy reforms, incentives to attract investment, and overarching sector-wide strategies that focus government intervention. Turnkey projects are underway to catalyze development and mitigate barriers in the operating environment in Malawi. The opportunity requires a USD 2.2 million investment, and investors can anticipate annual revenue growth of approximately 36%, 14,000 MT increased capacity by 2016, and profit margins of up to 15%. Investment challenges include aflatoxin control and aggregation of large (in-shell) groundnut volumes, all of which have mitigation strategies in place.