Challenges and solutions to improve exports in Malawi

BY CRISPIN KASIYA - In April 2023, the Malawi Investment Trade Centre (MITC) conducted a discussion workshop at Bingu International Convention Centre (BICC) in Lilongwe themed “Rewarding Excellence, Unlocking Global Export” that provided space for stakeholders to discuss challenges and solutions to improve exports in Malawi.

Among key participants to the event whose headline sponsor was Eco Bank were representatives from farmers under the Grain Traders Association, agro-processors and financial institutions that mobilize resources for financing export-oriented activities.

Before unpacking key issues that were discussed at the conference, it is important to note that currently, Malawi has in place a five-year National Export Strategy II running for the period 2021-2026 which is aimed at promoting export-led economic growth through well-structured fiscal and non-fiscal incentives to registered exporters.

The Export Strategy observes that Malawi is a relatively small trading nation with trading in goods and services representing about 58 percent of GDP in 2019. In the same period, exports of goods and services were at 14.2 percent while imports were at 42.7 percent.

This is a clear indication that Malawi is a net importer and suffers from chronic trade imbalance to the scale of an import to export ratio of 3:1 percent in 2019.

The export basket only concentrates on a few products mostly agricultural and agro-processed such as tobacco, tea, coffee, sugar, cotton, edible nuts, oilseeds and residue, with tobacco alone accounting 55 percent of total exports.

Getting back to what was discussed at the conference, ECOBANK Executive Director, Weruzani Chingota highlights lack of information on markets, inadequate financial support from financial institutions, increased transportation costs and unreliable water and power supply as some of the major challenges exporters face as they trade.

“Suppliers of raw materials fail to get financial support from money lending institutions because they have limited capacity to manage medium or high scale export business particularly when they are to procure machinery, buy raw materials, and manage storage facilities among others," Chingota explains.

SunGold Food Processing Limited is one of the major agro-processing companies in the country that is involved in processing and value addition of Soy bean to produce cooking oil and Soy pieces among others.

Managing Director of the company, Magesha Gedia says there is a ready market for Soy pieces in Zambia, Mozambique, South Africa, Tanzania and the United Kingdom.

“However, the company faces setbacks at national level which makes them fail to meet the demand, such as shortage of forex and export licence and other certifications bureaucratic process,” he says.

Grace Mijiga, Chairperson of Grain Traders Association notes that lack of information on international markets and inadequate storage facilities for small and medium enterprises are some of the key factors affecting prices.

At the moment forex scarcity is a song of the day in Malawi and that is why the country is promoting export trade as a sure way of generating more forex to stabilize its economy.

Dr. Kisu Simwaka, Director of Foreign Inflows at the Reserve Bank of Malawi reveals that 80 percent of the national budget is for consumption while only 20 percent is for production; 70 percent of the country's products are produced for domestic consumption while 30 percent is for exports.

Based on these figures, Dr. Simwaka concludes that Malawi is choosing to keep on spending more on consumption and at the same time, grow the debt.

"If we produce more for export we could be able to reduce on borrowing," he advises.

Despite challenges being encountered, stakeholders in the export industry are optimistic that there is still light at the end of the tunnel and that solutions are within arm's reach for the country to have a vibrant export industry.

Dr. Simwaka suggests that enhancing legume production, particularly Soya beans and Ground nuts can help the country generate more forex than tobacco as these commodities have a huge demand on the international market such as in India, South Africa, United Kingdom and Canada among others.

Cannabis can be another alternative source for forex and the establishment of the Cannabis Regulatory Authority (CRA) through the Act of Parliament was quite a positive step in the right direction all it needs is to motivate farmers into embracing the trade.

Export Development Fund, a leading development financing institution that supports government efforts of broadening Malawi's export base made a proposal for the country to put in place a National Export Credit Agency which will be providing reference of exporters to banks when they apply for financing policies.

"Exporters lack backup when they want to access loans from banks. We believe that the National Credit Agency will help to provide referrals to ease the process of accessing loans" explains Fred Chanza, acting Managing Director of Export Development Fund.

Atupele Madumuse, Head of Treasury at ECOBANK said the institution has always been there and ready to finance export projects.

"We encourage Small and Medium Enterprises to form cooperatives and approach us for financing. We also support the establishment of mega farms as they have the capacity to produce higher value crops in large volumes to meet the demand on international market," Madumuse says.

ECOBANK has also introduced the 'Single Market Hub' where exporters can register and access new trading partners and do business with no custom tariffs applied on most goods and services as well as take advantage of other trading opportunities offered by the African Continental Free Trade Area (AfCFTA).

On his take, Chief Executive Officer of Project Innovative Centre, Boyd Luwe says Malawi’s economy relies on agriculture no wonder the introduction of the Affordable Input Program (AIP) to help farmers increase yield.

"However, despite government investing heavily in AIP, its implementation leaves a lot to be desired, and there is low output since the program targets smallholder farmers," Luwe laments.

Luwe also pleaded with the Malawi Revenue Authority (MRA) to reduce export taxes as they demotivate companies to engage in export activities.

Malawi through the Ministry of Trade and Industry continue to put effort in promoting exports as demonstrated through Malawi Investment and Trade Centre (MITC) whose current Chief Executive Officer is Paul Kwengwere.

Minister of Trade and Industry, Simplex Chithyola Banda emphasizes that made-in-Malawi goods are sort after on the international market and it is incumbent upon manufacturers in the country to make these products more competitive.

“Malawi signed a number of regional and international trade agreements that provide enormous opportunities to new and existing investors and exporters," he explains.

The major trade agreements that Malawi is party to include World Trade Organisation (WTO), European Union (EU) under Everything but Arms (EBA), COMESA and SAD.

Malawi is also a beneficiary of the African Growth and Opportunity Act (AGOA) under which exports to the United States of America enjoy duty and quota free status.

Other functional trade agreements exist with countries such as China, Zimbabwe, Japan, South Africa and Malaysia.


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