Malawi Autos Report Q4 2012

Malawi remains one of Sub-Saharan Africa''s least attractive auto markets at the present time, reflecting the still-difficult economic and political backdrop within the country. In our recently-updated Q412 Industry Risk/Reward Ratings for the autos sector in the Sub-Saharan African region, Malawi remains in 14th place (out of 17), with a score of 26.47 out of 100. A full ratings table and commentary can be found in this report.
Where Malawi fares particularly poorly in our ratings methodology is in its score for ''autos market'', which measures how we feel the new car sales market will develop over our forecast period to 2016.
Malawi scores just 10 out of 100 on this measure, the lowest in the entire Sub-Saharan African region. In addition, both car ownership rates and per capita incomes remain among the lowest in Africa. However, counting in the country''s favour is the fact that its infrastructure is better developed than some of its regional peers.
Our prognosis for new car sales is also downbeat, with our current forecasts calling for a total of just 2,064 vehicle sales in 2012. Annual sales growth will average just 3.2% between 2012 and 2016, when we estimate annual sales of 2,341 new vehicles.
Over the past quarter, the 50% devaluation of the kwacha against the US dollar at the start of May 2012 has done much to worsen the outlook for new car sales in Malawi, as the cost of new car imports has now risen substantially. Although new President Joyce Banda has now committed to a programme of economic reform, there will be considerable short-term pain for the Malawian economy. Indeed, the Finance Ministry recently revised down its 2011 GDP estimation to 4.3%. This compares to an average of 8.4% over the preceding four years. Moreover, the current account deficit stood at some 11% of GDP in 2011, underlining the severe fiscal challenges facing the Banda administration.
Malawi remains one of the least developed and most densely populated countries in the world with an economy based almost entirely on agriculture. In fact, agriculture is a source of income for more than 80% of the population, accounting for 30% of GDP and 90% of export revenues, according to the World Bank. The GDP per capita of Malawi is low, estimated at just US$407 in 2011, the lowest figure but one in the region, higher only than Mozambique. There is a natural correlation between per capita income and car ownership, with Malawi actually having the lowest regional vehicle ownership rate in 2010. As such, in the current economic climate, purchasing, owning or even operating a vehicle remains unaffordable for the majority of the population. Current vehicle demand prospects are therefore limited, with the used car market dominating the landscape.
In the long term, reform efforts may see a return of investment to the country. However, over the near term, BMI remains downbeat about the prospects for new car sales growth in the country and, by extension, the development of a thriving local autos sector