By Taonga Sabola:
At the time industry players are struggling to cope with frequent power blackouts which have resulted in ballooned production costs, manufacturing firms are facing another ghost in smuggling which threatens to hit the final nail on their coffins sooner rather than later.
According to the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), sectors badly hit by smuggling include cooking oil, dairy products, textiles, cement and steel.
MCCCI says in a statement the capacity utilisation rate which measures the extent or level to which the productive capacity of a plant, firm, or country is being used in the generation of goods and services shows the capacity utilisation rate for the manufacturing industry has been on a declining trend since January 2017 to June 2018.
The Chamber has cited high levels of corruption and punitive taxes as some of the factors fueling smuggling.
Among others the Chamber said there is an influx of cooking oil from neighbouring countries such as Zambia, Mozambique and Zimbabwe through illegal means, adding that these products are being sold at much lower prices since they avoid border taxes.
“Consequently, this cooking oil has overtaken the locally produced cooking oil thereby destroying the local industry. Likewise, some distributers of cooking oil and dairy products are also facing challenges.
“They have lost distribution rights for locally produced cooking oil due to the presence of imported cooking oil and dairy products on the market through illegal means, but not limited to smuggling and corruption,” reads a statement from MCCCI.
The private sector mouthpiece said collusive forms of evasion of tariffs and taxes and coercive bribery at the borders is also affecting the textile industry in Malawi.
It says textile imports, mainly from China have flooded the local market with cheap products since most of these products are entering the country without adhering to import procedures, thereby propagating goods to enter the country without declaration and illegal smuggling of products into the country.
“This has resulted in some of the companies reducing the quality of their textile materials in order to compete with these cheap Chinese products. Apart from being affected locally, there is also unfair competition on the international market from the same Chinese products which are flooding the entire African continent.
“The consequent shift in demand from locally produced textile products to imported products from China has resulted in a decline of production and revenue,” the statement says.
It adds that most cement and steel entering the country is also passing through illegal means, a development which is not only posing huge competition to the local industries but also putting the lives of people at risk.
“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. High corruption levels at the ports and border points are making the cost lower and therefore easier for products to be smuggled thereby encouraging the act.
“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,” MCCCI says.
It adds that high import tariffs on some products hinder individuals from importing products into the country legally as they want to reduce costs.
“High tariffs are imposed on some products in order to protect the local industry by reducing the volumes of foreign competing products.
“However, this also encourages some sectors of the economy to import the goods illegally in order to evade these high duties,” the Chamber says.
According to MCCCI, dealing with unemployment can also play an important role in protecting the local industry from smuggling.
It says unemployment can only be addressed if there are necessary conditions for the growth of the private sector which is the largest employer.
Ministry of Industry and Trade Spokesperson, Wiskes Mkombezi, Sunday said issues of smuggling are tackled under the Customs and Exercise Act, adding that the Malawi Revenue Authority (MRA) is better positioned to comment on that.
MRA Spokesperson, Steven Kapoloma, could not be reached for comment.