Some local manufacturers have bemoaned trade barriers existing within the Common Market for Eastern and Southern Africa (Comesa) and Southern Africa Development Community.
It has emerged that some local manufacturers, especially in refined cooking oil and laundry soap sectors, are failing to fully utilise the duty free status accorded to goods traded within Comesa and Sadc regions.
Comesa and Sadc provide an environment for duty free trade among member states based on the Rules of Origin criteria.
According to members of the two sectors, similar goods from Comesa and Sadc enter Malawi market duty free, while the same goods attract different taxes locally and also surcharges when exported to the two blocks.
In separate interviews, a representative of Sunseed Oils, producers of Mulawe cooking oil and laundry soap said the development is sad for Malawi as the economic effects are many.
Sunseed Oils Limited Managing Director, Wassim Kassam, said there are surcharges on refined cooking oil when exported to countries such as Zambia, Zimbabwe and Tanzania.
“For instance, in Zambia they ask for a five percent surcharge, Zimbabwe it’s 25 percent while Tanzania we have to pay up to 40 percent. This is done in order to protect the local industry in their respective countries, which is not the case here,” Kassam said.
He said, with the surcharges, producers in the sector are failing to export their goods, thereby limiting their growth.
“The economic effects are many. As an industry, we are failing to create employment, because we cannot compete with goods that are coming into the country duty-free; at the same time we cannot export,” he said.
Another cooking oil producer who asked for anonymity said their company has already raised the issue with authorities such as Ministry of Industry and Trade, Ministry of Finance and the Malawi Revenue Authority.
Laundry Soap Producers representative, Fredrick Changaya, said more products are landing in the country duty-free but more importantly without Value Added Tax (VAT).
“As a soap industry, we have information that some powder detergent soaps from Tanzania get into Malawi VAT free, since the Malawi tariff regime is silent about VAT on powder soap which is more up market and expensive than our bar soaps and yet bar soaps have positive Vat rate.
“It is quite sad. Why should soap for rich people go VAT free while soap for the majority of our people is taxed? This is regressive and should be revised with a sense of urgency,” Changaya said.
Responding to a questionnaire on the barriers of trade in terms of the surcharges, Comesa Director of Trade, Customs and Monetary Affairs, Francis Mangeni, said the Secretariat has received similar complaints involving other countries under different circumstances.
“For instance, Egypt has in the past complained about the non-issuance by Zimbabwe of licences for the importation of bottled soya oil, Kenya has complained about the query raised by Zambia on the originating status of pure palm-based cooking oil and Mauritius has complained about the originating status of cooking oil from Egypt,” he said.
Mangeni said Comesa’s main objective is to promote trade among its member states in the context of an liberalised environment.
He said if, as a result of implementing trade liberalisation measures, a country experiences economic difficulty. However, the Comesa Treaty has provisions for dealing with that situation.
“In terms of protection of local industry, the Comesa Treaty has adequate provisions that can be invoked to address injury or threats of injury to domestic industries. The protection of domestic industry can be done within the context of infant industry under Article 49(2) of the Treaty.
“Another form of protection of domestic industry can be done within the context of a surge in imports that will pose injury or a threat of injury to similar domestic industry. Article 61 of the Treaty provides for imposition of quantitative restrictions in such circumstances,” Mangeni said.
He further said other forms of protection can be done within the context of anti-dumping duties and countervailing duties to address the issues of dumping and subsidies.
“Anti-dumping duties can be levied to address the issue of products that are being dumped in a country while countervailing duties can be levied on subsidised products that are being exported to a country,” he said.
However, Ministry of Industry and Trade publicist, Wiskes Mkombezi, said there are no goods, especially cooking oil, that enter into the country duty free.
He said manufacturers should understand the implications involved when countries within the two blocs restrict entry of each other’s goods.
“Being under Comesa or Sadc, there are treaties that were signed and need to be followed in terms of trade. What most of these manufacturers would like to see is the banning of foreign products. But this has its negative effects. Banning foreign goods may result in retaliation by other countries, who may ban Malawian products in their markets,” Mkombezi said.
He further said local producers need to up their game in terms of value addition and improved packaging that can compete well in all markets.
Mkombezi also said another challenge experienced locally is that Malawians prefer foreign goods; hence, the government introduced the Buy Malawi Strategy to promote local consumption.