Is Malawi doing enough on exports?
The question ‘mention seven commodities that Malawi exports?’ may look unimportant to many Malawians.
But the sincerity of the question is seen when one starts listing down the commodities. An average Malawian stops at four or five.
Most likely you thought of the traditional tobacco, tea, sugar, soya and what else; maybe pigeon peas.
But if we are to reverse the same question to say, what Malawi imports, the list is endless.
We have commodities such as fuel, cars, fertiliser, equipment, medical drugs, clothes, foot ware, cement, iron sheets, furniture, electronic gadgets even toilet tissues and toothpicks, we are importing.
A critical look at the two lists tells us one thing: the bulk of the things we are exporting are low value raw agriculture commodities while at the same time, we are importing high value finished products.
No wonder the country has an annual trade deficit of $2 billion with imports seen at $3 billion and exports at a mere $1 billion.
But why such a yawning gap?
Betchani Tchereni is an Associate Professor of Economics at the Malawi University of Business and Applied Studies.
Before he went into teaching, he worked as a Desk Officer for the African Growth and Opportunity Act (Agoa) in the Ministry of Trade.
Under Agoa, Malawi was looking at exporting textiles to the United States of America.
Years later, according to Tchereni, looking at the Agoa documents, he sees some products that Malawi was expected to export to the US but it didn’t.
According to Tchereni, the market demand was never met due to capacity challenges.
“We didn’t take advantage of Agoa. We thought cotton, shirts, Agoa, we are rich. We never became rich. Even in the clothing quota, we never satisfied even 15 percent. We didn’t do that.
“What is wrong with us? Number one is capacity. But that is not about pHD in production, a Master’s Degree in Engineering, no!!! I think there is one particular training that all we must do. Train us all in doing,” Tchereni said.
Former Cannabis Regulatory Authority chairperson Boniface Kadzamira believes Malawi has failed to grow her exports because of the failure to take advantage of the huge market for other crops such as chamba on the international market.
“But what do we do in Malawi? We keep on burning the crop and arresting those people who are growing it. That’s literally burning forex. We are arresting people who could generate forex for Malawi.
“We has an investor who offered to buy the biomass, Malawi Gold Biomass at a minimum price of $350 per kg. That is locally grown, organic. What did we do, we arrested people,” Kadzamira said.
Sungold Food Processing Limited Managing Director Mahesh Ghedia believes Malawi needs to encourage the export of processed and value added commodities.
According to Ghedia, unlike raw commodities which are just seasonal, the processed ones can be done to throughout the year and create jobs in factories.
Grain Traders Association Chairperson Grace Mijiga Mhango laments the absence of structured market infrastructure and policy inconsistencies.
She said, under market infrastructure, they are looking at the soft infrastructure which is the market information system and hard infrastructure which is the storage issues.
“Malawi is a place where we don’t have reliable information which can help us to make decisions. Am looking at information relating to stocks that we have available that we can export, where the real markets are and information on what exactly do those markets require.
“Market research is something that we need to invest heavily on so that we get real time information on what exactly is being required by specific markets and may help us to penetrate in some of these markets,” Mijiga Mhango said.
She also lamented the huge gap that is there between the official foreign exchange rate and the parallel market which she says encourages more informal trading than formal business.
Mijiga Mhango said government policy also affects the export business sighting export bans as an example of a policy which makes planning extremely difficult.
What the authorities have done this far
On December 16, 2021, Malawi launched the second National Export Strategy (Nes II) which seeks to boost the contribution of exports to the Gross Domestic Product (GDP) from the current 14.6 percent to 20 percent by 2026.
The strategy has four goals first of which is to make Malawi a producer of competitive products that are in demand in the region and beyond. The second goal is to make Malawi compliant with regional and international standards of production.
The third goal is to make Malawi a diversified economy as we transition out of our reliance on tobacco as a major export earner; and the final goal is to make Malawi a sustainable sourcing destination, with more and more people buying from Malawi.
Launching the Nes II, President Lazarus Chakwera said Malawi needs to identify products that can adequately complement tobacco exports, as well as remove the bottlenecks bedeviling our private sectors capacity to diversify her exports.
“I am therefore confident that once we do this, the trade balance will tilt in our favour, leading to the creation of jobs and wealth; the enhancement of our revenue collection; the unlocking of foreign currency inflows; and above all, lifting millions of our rural people out of abject poverty,” Chakwera said.
On his part, Minister of Trade Simplex Chithyola Banda believes time has come for the business community in the country to take advantage of various trade pacts that Malawi has signed to grow the country’s exports.
Chithyola Banda believes Malawi is deeply integrated into the world market through its comprehensive network of bilateral, regional and multilateral trade agreements.
Among others, Chithyola Banda said goods made in Malawi enjoy preferential market access, predominantly duty free and quota free into the European Union under the Everything but Arms (EBA) initiative; and the United States of America (USA) under the Africa Growth and Opportunity Act (Agoa).
He added that the goods have access to the African sub-continent through its membership to the Southern Africa Development Community and Common Market for Eastern Africa.
“Malawi also benefits from preferential market access under Generalised Scheme of Preferences (GSP) and as an LDC members.
“In this regard, exporters should be focusing on diversifying their exports into nontraditional African markets. These markets are Arab Magherb Union, Economic Community of Central African States, Economic Community of West African States (Ecowas) and Community of Sahel- Saharan States amongst others,” Chithyola Banda said.
Over the years, stories of Malawi failing to meet export demands have been a common phenomenon.
As Malawi struggles to produce enough for the market, on one hand, the problem of shortage of forex continues to deepen on the other hand.
But President Chakwera believes the solution to Malawi’s economic challenges lies in increasing production and nothing else.
“It is that simple. Now to increase the quantity, the variety, and the quality of what we produce as a country, we have to do the work.
“No one is going to do that work for us. And as I have stated previously, the primary and priority sectors in which we must work harder, smarter, and together to increase productivity are agriculture, tourism, and mining,” Chakwera said.
At the end of the day, Malawi needs more hands in the export business to find lasting solutions to forex challenges which continue to riddle the economy.
