Foreign Direct Investment in Blantyre, Malawi - Millennium Cities ...

macadamia-planting machines, which cost approximately US$1.5 million. 160
Furthermore, development
of commercial estates could also generate employment opportunities for small farmers by hiring them on
an on-going basis.
Constraints
Supply Shortage
Inadequate supply is the biggest constraint in the macadamia nut industry. While smallholders are
incapable of meeting grades and standards that are required for exports, there are few estates that have
large enough land to benefit from economies of scale. 161
Sable Farming’s factories have more production
capacity than current levels. However, due to the lack of raw materials, the company is unable to produce
more.
Long-term Investment
Since it takes eight years for a macadamia nut tree to grow and high levels of fixed investment and inputs
are required, there is a large lag-time between investment and production. Furthermore, young trees are
more vulnerable to diseases and pests than older, more established trees.
Costs Associated with Value-addition
The lack of domestically produced packaging materials and high transportation costs make value-addition
within Malawi more costly. Since value-addition has high costs associated with transport and handling, it
is more profitable to export semi-processed raw nuts and leave further processing for the destination
markets.
Impact and Feasibility Assessment
Impact
Employment
There are limited employment opportunities, as there are only five companies engaged in macadamia nut
production. While it depends on the size of an expansion, the potential for employment generation is not
very large, given the limited land availability.
Skill Set
Most labor does not require a high-level skill set. For example, Sable Farming employs mostly unskilled
farmers from villages, some semi-skilled labor and few skilled laborers who are engaged in research and
mechanical operations. If the production or processing of macadamia nuts is expanded, it is most likely
that companies will increase the number of unskilled workers. Therefore, the impact that an investment
can bring to the workers is limited.
Feasibility
Demand Factors
While there was growing demand from the 1980s until the mid-1990s, keeping prices stable, world prices
fell in the late 1990s, as supply stocks overtook demand. 162
Supply Factors
The crop is mainly produced by estate holdings, as production of macadamia nuts is difficult for
smallholders in terms of grades and standards. Thus, the supply shortage is a problem.
160
Lalit Khatri. Sable Faming Co. Ltd.,. Personal interview, January 17, 2008.
161
Toomey, David C., Patricia Aust Sterns, and Charles Jumbe (2001). The Impact of Improved Grades and Standards on the
Export Potential of Targeted Commodities in Malawi PFID-F&V Report, (East Lansing, MI: Michigan State University and
United States Agency for International Development).
162
US International Trade Commission (September 1998). Macadamia Nuts: Economic and Competitive Conditions Affecting the
U.S. Industry.
FDI in Blantyre Page 44