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The Thumb: Malawi must protect it’s cement industry

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There are varied arguments on the issue of cement importation into the country. While one group believes this threatens the local cement industry, others feel it is necessary to keep prices of the product low for the benefit of the consumer.

The argument of whether imports are the main reason for stable cement prices in the country is, however, debatable. Malawi has been importing cement for many years and there was a time when the market was awash with Chilanga cement from Zambia and other brands from Zimbabwe.

At that time, there was only Portland Cement Company in Malawi and despite the large quantities of imported cement, prices kept going up and these were widely reported in the local media.

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It was until Shayona Cement Company and Cement Products Limited came on the market when cement prices slowed down to the point where they are maintained even when the kwacha is devalued or fuel prices go up.

The main reason for the fairly competitive cement prices in Malawi may therefore not be imports but increases in the number of local producers.

It is therefore important for the Malawi government to protect these local companies as careless issuance of import licences can kill them and bring us to the time when cement prices were driven by depreciation and fuel prices.

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Besides, the Malawi government has recently launched the Buy Malawi Strategy which requires consumers to buy locally made products rather than foreign products.

This is not unique to Malawi as there is even a ‘Be American, buy American’ campaign in the United States which appeals to Americans to prioritise locally made goods instead of imported foreign products.

Malawi also needs to protect local industries to maintain and increase domestic employment as importation reduces jobs through scaling down or even closures of local companies.

Malawi’s local industry is generally at an infant stage and needs to be provided protection from the competition of lowly-priced imports from mature and well-established foreign industries.

Shortly after the American Revolution, Alexander Hamilton – the US’s first secretary to the treasury, argued that American industries required temporary protection for some time so that they should grow and achieve production efficiency and economies of scale before they could successfully compete with low-cost British goods.

He argued that temporary protection of infant American industries was necessary for industrial development of America.

Similarly, the infant industry argument has been advanced for protecting infant industries of the developing countries from competition of the low-cost firms from the industrialised developed countries. Given some time, these infant industries will grow and will be able to benefit from the economies of scale and learn the techniques necessary to lower their cost of production.

As a result, over a period of time their cost per unit will go down and will therefore be in a position to compete with foreign imports. Therefore, Malawi’s cement industry should be protected for sometime; otherwise it would be wiped out by foreign competition.

The other problem with imported goods is that of dumping. Dumping is a form of price discrimination where producers of one country sell goods in another country at lower prices than those charged at home.

While consumers in a country in which foreign goods are dumped are beneficiaries, the industries and the economy is general suffer as they are unable to compete with the ‘dumped goods’.

There is also a more harmful ‘predatory pricing’ practice where foreign companies sell goods in other countries even at below cost to establish an international monopoly by driving competitors out of the market. Once the local industries are competed out, they raise prices to obtain monopoly profits.

Malawi does not have laws against dumping and predatory pricing. The Malawi market is therefore vulnerable to such deceitful imports that could lead to extinction of the local industry. Until Malawi will be able to prohibit dumping by making it illegal, the only way our local industry can be protected is through import bans or high tariffs against strategic national commodities such as cement and sugar.

Malawi also needs to protect its foreign exchange reserves by restricting imports of goods which it is able to produce on her own. The country already suffers chronic foreign exchange shortages and it does not make sense to be importing goods like cement and sugar which we already have adequate capacity to produce.

Malawians have a duty to contribute to the economy by consuming locally-produced goods and services in order to reduce Malawi’s import bill and build local businesses. And the government has a moral obligation to live by its own Buy Malawi Strategy by restricting unnecessary imports such as cement from Zambia and Tanzania.

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