Malawi relies on neighboring countries for port access and brings goods in in via road or rail.  Both road and rail present their own challenges; the country has approximately 2500 miles of paved roads and very limited railway infrastructure.  Formal and informal trade boundaries restrict movement of both imports and exports.  Malawi enjoys a strong commercial relationship with South Africa, which is Malawi’s primary importer.  Although U.S. products are well regarded, a lack of historical business ties between the United States and Malawi, together with comparatively high product and transport costs, disadvantages U.S. suppliers.  Malawi’s trade balance remains negative, and the country relies heavily on rain-fed agriculture for its export base.  As of 2022, fuel constituted more than 30 percent of the country’s total imported goods.  Tobacco, maize, and sugar account for more than 30 percent of the GDP, making the country susceptible to extreme weather, climate shocks, and unpredictable economic fluctuations.  Global demand for Malawi’s key cash crop, tobacco, is declining, further eroding the country’s ability to generate foreign currency.  Years of deficit financing have pushed Malawi’s total debt stock to 55 percent of GDP.  Annual debt service accounts for one-third of expenditures and in September 2021, the IMF deemed Malawi “at extreme risk of debt distress.”  

Extreme weather events damaged critical energy and transport infrastructure, but repair efforts are slow because of a lack of finances.  The country’s limited electric grid was damaged during tropical storms in January 2022 and the main hydroelectric dam was knocked off-line, further limiting access to electricity.  Prior to the storm, approximately 14 percent of the population had access to electricity; seven percent in rural areas and 54 percent in urban areas.  In 2018, Malawi completed a Millennium Challenge Corporation Compact focused on the power sector.  The compact expanded the country’s power infrastructure, but despite this investment, the grid’s reach is still limited, and the country suffers frequent power outages, load shedding, and blackouts.  A shortage of skilled and semi-skilled laborers is an impediment to business development.  Shortages are most acute in financial management, economics, engineering, law, IT, and medicine/health.  The Government of Malawi often makes capricious changes to key policies and regulations that hinder the operations and profitability of private enterprises.  Government leadership has committed to tackling corruption, but entrenched interests and a corrupt business environment disadvantage foreign companies bidding on government tenders.  In 2020, the government enacted the Micro Small and Medium Enterprises (MSMEs) Participation Order that requires government ministries, departments, and agencies (MDAs) to allocate procurements below certain thresholds to local MSMEs.