Q&A with Mark Mikwamba, MD, OMIG Malawi
Q&A with Mark Mikwamba, MD, OMIG Malawi
"Even after the currency devaluation, the equity market was up by about 9% in US dollar terms" - Mark Mikwamba
Mark Mikwamba is Managing Director at Old Mutual Investment Group (OMIG) Malawi, a subsidiary of South Africa’s Old Mutual Limited, a pan-African investment, savings, insurance, and banking group. Mark joined the firm in 2011. He previously served as CEO of Stockbrokers Malawi Limited. He’s a CFA charterholder.
Chipo Muwowo: Can you give us a sense of what’s recently been happening in the Malawian economy, from a macro perspective?
Mark Mikwamba: The country’s economic performance was negatively impacted last year due to Cyclone Freddy. Real growth was modest at about 1.4%. The infrastructure damage and humanitarian assistance needed following the cyclone put significant pressure on the fiscus. Today, the Malawian government faces a tricky situation where economic growth isn’t very strong, but there’s still need to fix damaged infrastructure and deal with the impact of climate change. This has created a huge deficit from a fiscal budget perspective. In addition, weak export growth resulted in a significant misalignment of the currency. So in November 2023, the government made the bold decision to adjust the currency down by 44%. The country currently has an IMF Extended Credit Facility (ECF) to help shore up government finances and support economic recovery plans.
Chipo Muwowo: What about the Malawi Stock Exchange (MSE). What has its general performance been like?
Mark Mikwamba: The equity market did very well in 2023. Even after the currency devaluation, the MSE was up by about 9% in US dollar terms. In my view, that was a good performance given where most frontier markets ended 2023. Over the past three years, returns have been positive in US dollar terms despite pressure on the local currency. Our market is relatively small and is dominated by banks. The banks did very well from a profitability perspective. Profits were up on average by over 50% on the prior year.
Chipo Muwowo: What’s driving your own asset allocation strategy as Old Mutual Investment Group Malawi?
Mark Mikwamba: One of the key drivers of our strategy is diversification that our clients need. We aim to diversify across asset classes and reduce our risk as much as possible. Basically, we look at sustainable business models that are trying to address the key long-term challenges faced by the Malawian economy. There are areas in our economy that the government is unable to invest in, and that creates a lot of space for the private sector to come in.
Chipo Muwowo: Can you give us a few examples of such areas?
Mark Mikwamba: The agricultural sector is a significant contributor to national GDP and employment therefore it’s one of the areas we are focused on. Within this sector, we see many opportunities in export-oriented markets because the government is not in the best position to run an export operation that competes at international level. And then there’s infrastructure. The capex requirements in that sector are significant especially in energy, transport, and logistics. We also have some exposure to real estate. In fact, we own one of the real estate businesses in Malawi, MPICO, which is a very big landlord. It also offers office space to the government so yes, we're seeing a lot of opportunities across the spectrum.
Chipo Muwowo: How would you describe the current pricing of companies on the Malawi Stock Exchange? Do current numbers represent good value?
Mark Mikwamba: In my view, going into 2023, we were looking at quite a few companies that were undervalued. Now in 2024, we seem to have gone to the other side of the coin. That does not mean to say there aren’t any opportunities. I just think that once companies start releasing their half-year results in the next few months, that will probably start to justify the pricing positions within the market and create further opportunities for a market rally. Of course interest rates are also something to keep a close eye on.
Chipo Muwowo: Urbanisation and digitisation are impacting African countries in various ways. How are these two trends affecting Malawi?
Mark Mikwamba: Yes, urbanisation is a key issue for Malawi as well. We’re seeing deliberate efforts to create secondary cities so that the distribution of wealth spreads across the country. From a digital perspective, various multinational companies are coming into the country. We've seen changes in the telcos space to improve connectivity and uptime. The World Bank is also supporting the government in terms of digitisation. There’s a programme that seeks to provide free internet access to local universities.
Chipo Muwowo: Finally, what would you say is the value proposition for investing in Malawi from a foreign investor perspective?
Mark Mikwamba: I think one important aspect of Malawi is that it’s generally a stable country. We have gone through various changes over the years in a stable manner. That's what every investor wants to see. There are clear opportunities in terms of economic growth especially with the realisation that the economy needs diversification. We have a young population which will be a source of future market demand. When that comes to fruition, it will provide huge upside for both domestic and foreign investors. It’ll therefore be very hard to ignore Malawi.
© Capital Markets Africa, 2024
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