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Smuggling threatens manufacturing sector

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Some manufacturing companies in the country have said the influx of smuggled products into the country is threatening the sector.

Smuggling of goods into the country such as sugar, cigarettes, cooking oil, batteries and textile is on the rise, according to the Malawi Revenue Authority (MRA).

Interviews with some of the affected companies indicated that if the trend continues, most companies will likely close down.

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Mapeto DWS general manager Martin Mpata said there are a lot of goods that are going under the normal routes.

He said because of this, the owners run away from laid down costs, resulting in their products being cheaper than the manufacturing companies.

“As Mapeto, we have lost millions of kwacha due to the smuggling of goods into the country. This problem has a lot of consequences. The smugglers are running away from paying duty, which obviously makes the market uncompetitive,” said Mpata.

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He said if the problem continues in the next one to two years the consequences will be unbearable.

“The likelihood of shrinking is going to happen, thus, we either down size or close. Why should a big company like us remain in business when somebody brings the same thing we are manufacturing by smuggling and under cuts us?

“60-70 percent of our market share is gone, because somebody is bringing in cheaper materials through unchartered routes. These products are not in real sense cheap, but they are made cheap because somebody has run away from obvious cost. It is both us and the government that are losing out,” he said.

SunSeed Oil Limited general manager Wasim Kassam said the issue of smuggling has a negative impact on the country’s economy.

He said smuggled products are cheaper because the smugglers avoid paying taxes.

“As SunSeed, we are largely affected by these smugglers. Our production at the moment has gone down by almost 60 percent as we cannot compete with the smugglers on the market,” he said.

Kassam said as manufacturers they pay excise duty and Value Added Tax which increases the cost of production, while the smugglers pay nothing to the government.

He said for local manufacturers to compete with the smugglers, it means the government has to come in and remove some of the taxes.

“The smugglers do not create jobs; do not pay taxes all they do is make huge profits for themselves. As a company, our monthly taxes to MRA have actually gone down because our sales are affected. If this continues, we have no choice but to close down, because at the moment we have already scaled down,” said Kassim.

Sole Cigarette manufacturer, Nyasa Manufacturing also confirmed that the company is having tough times with smuggled cigarettes on the local market.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Newton Kambala said the development is bad as it brings unfair competition.

“This is bad, as it brings unfair competition on the market. As we have always said in relation to tax on finished products enjoying low taxation or smuggled into Malawi versus raw materials which are heavily taxed,” said Kambala.

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