The remittance collapse: How Malawi’s migration crisis is fuelling trafficking and deepening economic decay

In one year, money sent home by Malawian workers plummeted 62%, and the country’s response is making it worse.

By Collins Mtika

When 25-year-old Asiyatu Jafali left Mwanyama village to search for her husband in South Africa, she carried little more than hope and K50,000. Three months later, after being detained in a Zimbabwean police cell, she returned with nothing.

Her story is now emblematic of a spiralling crisis reshaping Malawi’s economy, accelerating human trafficking and deepening rural poverty.

In the space of three years, formal remittances into Malawi have plunged from US$300 million in 2021 to just US$112.5 million in 2024, a 62% collapse that has left households devastated and policymakers scrambling.

For the first time, the country recorded negative net remittances, meaning money officially leaving the country exceeded what was coming in.

At a moment when over half of Malawi’s youth are unemployed and more than half are actively considering emigration, the collapse of formal channels has pushed desperate workers into the arms of smugglers and trafficking syndicates.

Malawi’s labour migration system was never built for this level of pressure.

The country recently introduced its first comprehensive labour migration policy framework and signed bilateral agreements with South Africa and Zimbabwe, aiming to promote regulated migration and protect workers abroad.

Yet these policy advances were overrun by economic reality.  A crippling currency crisis made formal remittance channels economically irrational.

With the kwacha officially trading at 1,751 to the US dollar but fetching over 3,100 on the parallel market, migrants sending money home through official banks lose nearly half their value before paying fees as high as 36% on some corridors.

Against such distortions, bypassing the formal system is rational. A Malawian worker in the UK can exchange £200 at the official rate of 2,224 kwacha to the pound, or nearly double that through informal dealers.

As one UK sender explained simply, “We just have to find people who can give me kwacha back home.”

Trade-based money laundering networks now facilitate diaspora purchases of goods abroad, with payment quietly settled in kwacha at home.

The Reserve Bank concedes these informal flows have overtaken formal remittances by a wide margin.

Government responses have only tightened the vise. New foreign exchange control regulations introduced in December 2024 require the conversion of all foreign currency receipts, pushing migrants further underground.

The IMF has warned that these measures, intended to shore up reserves, may instead accelerate capital flight and dry up liquidity in the formal market.

Rather than formalising remittances, the government has criminalised them and, in the process, strengthened the business model of human traffickers.

As formal labour migration pathways collapsed, trafficking networks filled the vacuum. Between March and July 2021, during the pandemic’s travel disruptions, the International Organization for Migration assisted nearly 400 stranded Malawians attempting irregular journeys.

By 2024, that number had ballooned into the thousands. Dzaleka Refugee Camp, built for 12,000 people but now sheltering more than 56,000, has morphed into a trafficking hub.

Well-organised smuggling networks charge around US$4,800 per migrant to route Malawians through Mozambique and Zimbabwe into South Africa. Top smugglers move about 200 migrants each month, earning over US$2,300 per person.

In 2022, UNODC investigators discovered a “Sunday market” inside Dzaleka where children were bought and sold for forced labour and prostitution. Ninety victims were rescued, though investigators warned the operation represented only a fraction of the trafficking underway.

A government raid in 2024 detained more than 250 people, but rights groups later reported widespread human rights violations during the sweep.

The exploitation stretches far beyond refugee camps. In September 2024, a South African court convicted seven Chinese nationals for trafficking 91 Malawians, including 37 children, into a Johannesburg factory producing cotton blankets for export.

Workers smuggled in shipping containers were locked inside the premises, forced to work eleven-hour days, seven days a week, and paid US$1.64 per hour, well below South Africa’s legal minimum.

One victim testified that workers were not permitted to leave the factory even to buy food.

Women and girls face the greatest dangers. Although men historically dominated labour migration, women now account for more than a third of Malawian remitters in South Africa.

Yet they encounter distinct barriers: migration driven by marriage more than employment, domestic burdens that limit mobility, and heightened vulnerability to exploitation.

Traffickers increasingly target border districts like Mulanje, Phalombe and Thyolo, where women and girls are coerced into domestic servitude or sex work. Local networks report between 15 and 20 such cases every day.

The state’s capacity to respond is threadbare. The Trafficking in Persons Fund, established under the 2015 anti-trafficking law, is virtually empty.

Caleb Thole of the Malawi Network Against Trafficking says even basic rescue operations are starved of resources. “We need food, transport, shelters, but there are literally no funds. The government cannot show you any,” he said.

The consequences of the remittance collapse extend beyond migration and trafficking into the heart of Malawi’s economic structure. History shows that remittance inflows can transform rural labour markets.

After South Africa cancelled its labour treaty in 1974, 120,000 returning Malawian workers brought back an estimated US$10 million, catalysing decades of structural change.

Employment gradually shifted from agriculture to services, women’s agricultural participation fell by nearly a quarter, and investments in children’s education accelerated.

The reverse is now unfolding. As remittances shrink and formal labour migration pathways evaporate, rural households lose the capital that once financed business startups, school fees or even basic consumption.

The labour force remains trapped in agriculture, even as the sector remains incomplete, unproductive and exploitative. Malawi’s workforce is still 76.9% agricultural, and 80% of its exports rely on agriculture.

Still tea and tobacco estates suffer regular labour shortages while wage rates remain stagnant.

On tobacco estates, tenant farmers remain locked in sharecropping contracts that keep families perpetually indebted, conditions ripe for forced labour and child exploitation.

The US Department of Labor identifies tobacco, tea and sugar as the sectors with Malawi’s highest concentrations of child and forced labour.

The government continues to prioritise management of external labour migration while neglecting worker protections at home.

The draft National Labour Migration Policy has languished for years, with officials insisting in late 2024 that the document is “in its final stages.”

Economists warn the reforms will remain meaningless unless Malawi addresses the currency crisis and the exchange-rate distortions pushing workers into informal channels.

The private sector has called for a more holistic strategy, while analysts like Velli Nyirongo argue for lowering transaction costs, reforming exchange regulations, offering competitive rates and expanding mobile-money platforms.

However, all these require macroeconomic stability, a precondition Malawi has not met.

What began as rational household decisions to send money home through better-paying informal channels has now metastasised into a national trafficking emergency.

Malawi is no longer simply exporting labour; it is exporting people, increasingly controlled by smuggling syndicates and exploited across borders.

Dzaleka Refugee Camp, built as a sanctuary for those fleeing conflict, has become a processing centre for human beings on the move. Policy remains disconnected from the economic forces pushing 51% of Malawian youth toward emigration and thousands into the grip of traffickers.

The remittance collapse has produced a cruel paradox. It has stripped rural households of the capital that once offered a pathway to education, investment and mobility.

Yet for those who manage to leave, it has freed them from the financial pressure to support families back home. This divide, between those who escape and those who remain, is widening into a new social fracture.

Unless Malawi confronts the currency crisis at the heart of the remittance collapse, rationalises exchange rates and builds competitive formal remittance channels, workers will continue to abandon legal pathways.

And traffickers, as always, will thrive in the spaces where formal systems fail.