Agricultural Investment Opportunities in Malawi: Sugarcane Business Case

The country's official language is English, but Chichewa is also widely spoken. With a population of 15.4 million people, Malawi has a land area of 118,500 square kilometers, comparable in size to the U.S. state of Pennsylvania. Malawi's economy has experienced consistent growth over the last several years, with agriculture being an important contributor, representing 30% of GDP in 2011. The sector is expected to continue to be a major part of Malawi's economy, having grown at approximately 8.3% per annum from 2006 to 2011. The country's economy has been growing steadily at a compound annual growth rate of 12.8%. 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 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. The majority of farmers possess at least basic skills in agriculture, and smallholder farmers are commercially inclined and respond to markets, growing crops they can sell. The investment opportunity in Malawi is a green field sugarcane production and processing venture. It is founded upon the Government of Malawi's Green Belt Initiative (GBI) and the development of 6,000 ha of irrigated land set aside for the production of sugarcane. In addition to developing the land for sugarcane production, a processing facility will be established. Malawi's potential to achieve high sugarcane yields of excellent quality provide the investment with strong profit-generating potential. Local demand growth for sugarcane is limited at approximately 0.2%, however, significant supply gaps exist in regional and global markets, indicated by increasing imports of 33% and 8%, respectively between 2006 and 2010. Sugarcane producers in Malawi can take advantage of this development, given favorable agro-climatic conditions and yields 62% above the weighted regional average, resulting in significant expected increases in production over the next years. The Government of Malawi is looking for a strategic partner to form a public-private partnership in the development of a 6,000 ha sugarcane estate with an attached processing facility. The immediate opportunity is a ~USD 70 million investment for the development of 4,000 ha of irrigated land, and the purchase of equipment and inputs. In the long term, the investor will operate the processing facility constructed as part of the initiative under the PPP arrangement.