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Smuggling: Malawi’s barrier to job creation

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By watipaso mzungu:

Sosten Gwengwe

The date June 10, 2020, will go into the annals of history as the day jobless Malawians removed the veil on the levels of unemployment among the youth in Malawi.

It is the day that laid bare the danger that lies ahead if the government does not address the menace as a matter of urgency.

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On this particular day, thousands of young people in desperate search of jobs rushed to Katoto Secondary School, Kamuzu College of Nursing in Lilongwe and College of Medicine in Blantyre and all the district councils for the walk-in interviews which, once again, exposed glaring unemployment levels in the country.

It was reported that 118 job seekers, who had flocked to Katoto Secondary School in Mzuzu to be interviewed for positions of Disease Control and Surveillance Assistants, hospital attendants, ward clerks and six other roles, were injured in a stampede that occurred at the venue.

They were rushed to Mzuzu Central Hospital for treatment to the multiple degrees of injuries they sustained in the stampede.

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High on the agenda of the Tonse Alliance government is to create one million jobs to accommodate the loafing youths within the first year of its administration.

Manufacturing is one of the key areas the government eyes to realise its job-creation dream.

But as the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Director of Business Environment and Advocacy, Madalitso Kazembe, observed recently, the government may be nurturing a far-fetched dream to realize unless it addresses the endemic problem of smuggling.

Kazembe said smuggling has proven to be among the biggest challenges in the manufacturing sector in Malawi as it affects production levels for most of the manufacturing companies in the country.

Experts define smuggling as an illegal transportation of goods across an international border.

Often, these goods are illegal or contraband and can include objects, information and even people. Even if the objects in question are not illegal, they will more than likely have tariff rates that are so high and the incentive to access them illegally is great.

It is indisputable that smuggling has somehow led to decline in production for local manufacturers as smuggled goods are offered at cheaper prices thereby naturally dominating the market, which results in lack of purchase of goods made in the home country.

Thus, established industries in the economy will suffer huge setbacks as they cannot compete with smuggled goods and hence production ceases and industries are shut down which leads to higher unemployment.

Kazembe emphasised that it is therefore high time the government and the private sector worked hand in hand in addressing the issue as the current mechanisms have failed to yield satisfactory results due to high corruption rates among the government officials.

Minister of Trade, Sosten Gwengwe, lamented that Malawi is losing billions of money through smuggling and illegal entry of foreign alcoholic and non-alcoholic beverages into the country.

“Each and every day, Malawi is losing billions of kwachas through unpatriotic people who are bringing into this country uncertified products. Currently, the fiscal police MRA [Malawi Revenue Authority], Malawi Bureau of Standards, my ministry and the private sector are engaged in joint operations to combat the menace,” he said.

“A lot more outlets will be closed down if they continue providing a market for smuggled and counterfeit products. We have intensified inspections and we are also currently in discussion to see if more help is needed from other security agencies over and above the Malawi Fiscal Police,” added Gwengwe.

Chancellor College-based economist, Professor Ben Kalua, said when smuggling overtakes a functioning economy, it creates instability and, in turn, this discourages business and investments from coming into the area.

And it would seem Malawians have already started paying the price! In May 2019, Castel Malawi Limited (CML) announced its intention to lay off about 300 workers due to the harsh economic climate in the country.

CML stated that it could no longer avoid the retrenchments because of the volatile economic climate.

“We continue posting the losses,” said the official. The brewer further announced that it had reduced to two bottles per person during happy hours and that visitors will no longer be allowed to patronise Friday Happy Hour.

Chibuku Products Limited (CPL) Business Development and Corporate Affairs Manager, Gloria Zimba, says the company is also grappling with the infiltration of illegal and uncertified Chibuku Super, Mahewu and Super Shake on the local market.

Zimba fears the illegal sale of foreign Chibuku products does confuse customers into thinking that they are buying products of the local company, leading to loss of sales volume and revenue.

“Smuggling infringes CPLs exclusive right to the use of the registered Trade Marks ‘Chibuku Super’ and ‘Chibuku Shakeshake’. Those trading in these products do not pay taxes and do not pay for trading licenses. As a result, they are able to sell these products at far much lower prices than those of CPL, which are subject to licensing and tax,” she said.

She said smuggling is anti-competitive, contravenes fair trading practices and has led to significant loss of business and brand reputational damage for CPL.

Besides encouraging the general public to report illegal importation of goods into the country, it is the expectation of every well-meaning citizen that MRA would cooperate with other government security agencies such as the Malawi Police Service (MPS) and the Department of Immigration in enforcing the Customs and Excise Act.

This Act, among others, spells out smuggling as a serious offence under it and that goods imported without license should be liable to forfeiture.

It says besides depriving the government of revenue for public expenditure, smuggling distorts market prices thereby depriving traders of fair competition, which might lead to the collapse of local industries.

However, it is baffling to note that foreign beers such as Chibuku Super have continued to illegally grace and flood local markets at Jenda Rural Growth Centre in Mzimba, Mchinji and Lilongwe under the watch of the Malawi Police Service, the Competition and Fair Trading Commission (CFTC), MBS, Department of Immigration Services and MRA.

In Chilinde, Chinsapo, Areas 25 and 36, traders of Burundi and Rwandan origins are importing and selling illegally imported beers and products right in front of police units.

But Mzuzu-based social commentator, Jackson Caesar Msiska, wonders whether this could be possible in the wake of immigration and police officers taking the lead in the importation and sale of illicit beers in border districts of Mchinji, Dedza, Mzimba and Mwanza.

“How will MRA intensify patrols and inspections when government security bodies are busy frustrating their efforts? In essence, we can comfortably conclude that the immigration and police officers are bent on killing the local industry thereby leading the economy to collapse,” Msiska says.

He stresses that by importing and selling foreign beers, local customers are promoting job creation initiatives across the borders.

“By buying and consuming foreign beers, we are exporting jobs to Zambia. We are empowering Zambia to create more jobs for its citizens while we are closing our companies. So, is this what our law enforcers in Mchinji are looking for? Where will their children get their jobs if we export all the jobs to Zambia?” he asks.

However, the MCCCI’s Kazembe alleged that high corruption levels at the ports and border points are factors promoting the malpractice as it lowers the cost of smuggling.

The said private sector involvement in the fight against smuggling can be effective as they are the ones that are being affected more.

“Smuggling can only end if its cost including the cost of being caught is higher than the revenue derived from the sale of the smuggled goods,” she said.

She proposed stiffer penalties to perpetrators of smuggling if the vice is to end in Malawi.

“Putting in place stiff penalties and addressing the issues of corruption at the border points will therefore assist in protecting the local industry from unfair competition they face due to the smuggled products,” she said.

On his part, Gwengwe assured that the government is working hard to flush out smugglers in an effort to resuscitate the economy and provide a favourable environment for job creation.

Studies by MCCCI have shown that the private sector is willing to financially support and involve itself in tip off anonymous system and other measures put in place to tackle the issue.

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