Mining & Trade News

Salima Sugar Company says it is fast-tracking preparations to resume sugar production from Saturday, May 7, 2022 due to current shortages of the commodity on the Malawi market.

The Company has been in off-season from March this year in order to plan, strategise, and review as well as carry out a maintenance programme on its plant, and was expected to commence production on May 14, 2022.

But theCompany Secretary Dr. Charles Thupi acknowledged to have received reports from their distributors of low stocks of sugar in many depots across Malawi which has prompted the company to fast-track preparations to resume production.

Thupi said; “As of now we have received reports of low volumes of our sugar in most of our distributors’ depots, and as a measure to address this inadequacy we have resolved to fast-track our preparations to resume production so initially we intended to commence production in two weeks’ time, but with the current development, we will start this weekend.”

In terms of distribution chain, Thupi highlighted that their sugar is mainly distributed by retail chain stores such as SANA, Chipiku and Kulima Gold since they are not mandated to facilitate their own distribution process under fair trade policy.

“As a Company we do not have a distribution license because we cannot be manufactures and retailers at the same time, hence we rely on these distributors to ensure that our product is widely accessed across the country. But having seen the gap we will open up to more distributors so that our product is evenly distributed.” he said

He also hinted that the company is looking into prospects of increasing its production capacity in order to meet the increased demand of the product against the current capacity.

Thupi said; “The current challenge we have is a high demand of the product and looking at our machinery, production capacity is still on the lower side, therefore we are liaising with our colleagues in government to expand our plant.”

Meanwhile, Salima Sugar Company crushes about 250 thousand metric tonnes of cane yearly which produces a range of 25 thousand to 30 thousand metric tonnes of sugar.

The company has 4,000 hectares of land and currently, 1,000 hectares of land is under cultivation. The farm and factory are located in the shores of Lake Malawi and flood and pivot irrigation is used for sugarcane crop.

The Malawi Government through its investment and trade promotion and facilitation agency, Malawi Investment and Trade Centre (MITC) will on February 12, 2022 host an investment and trade forum at the ongoing World Expo in Dubai.

The forum aims at showcasing trade and investment opportunities and the attractiveness of the Malawi’s business climate to the United Arab Emirates (UAE) business community and other potential investors from other countries patronising the international trade fair in Dubai, MITC Director, Cindy Kibombwe, says in a press statement.

Kibombwe says the forum is part of the Government’s economic recovery plans to mitigate against the negative effects of the global novel coronavirus pandemic on the local economy.  

She explains that the forum will bring together policymakers, private business and financial sector players and other relevant stakeholders to discuss Malawi’s business and legal environment and ways of channelling investments into key sectors like agriculture, energy,infrastructure, ICT, agro-processing, tourism andmanufacturing among others.

“This Forum will provide a platform for us as a country to interact and collaborate with potential investors that share our vision in improving investment flows into Malawi as well as positioning our export products in international markets,” she points out.

The director challenges investors to come and explore the opportunities that the Malawi possesses.

The discussions at the forum is will largely focus on Malawi’s business environment; key investment and trade opportunities; exploring funding and financial potentials for potential projects; and networking opportunities.

About 30 Malawian firms expressed interest to participate at the expo which started in October, 2021 and expected to end in March, 2022.

MITC identifies develops and packages investment opportunities in Malawi as well as markets the country as a viable investment destination.

MITC is also a One-Stop Service Centre for business trade and investment start-ups in the country.

The Ministry of Finance has described an increase in imports of items for the novel coronavirus (Covid-19) management as well as strategic commodities under the Affordable Inputs Program (AIP) as the main catalysts for worsening of the country’s trade balance.

In the 2020-21 Mid-Year Budget Review in Parliament last Friday, Minister of Finance Felix Mlusu said the country has registered heavy imports of the products following the rise of covid-19 cases and increase in demand for AIP products as Malawi clocked the agricultural growing season, a situation which has widened trade deficit.

“Madam Speaker, the country’s trade balance continues to worsen.”

“As at end December 2020, trade deficit widened to US$566.7 million from US$352.8 million recorded during the same period in 2019,” Mlusu said.

Mlusu also said at the end December 2020, Gross Official Reserves stood at US$574.3 million, representing 2.8 months of imports, down from US$846.6 million, 4.1 months of imports recorded in December 2019.

He said the situation has forced the Malawi Kwacha exchange rate against major trading currencies during the year 2020 to face some depreciation pressure.

Mlusu said from June 2020 to December 2020, the Malawi Kwacha depreciated by about 5% against the United States dollar.

He also said the Malawi economy in the year 2020 grew marginally by 0.9%, a downward revision from the estimated growth rate of 1.9% detailed during the 2020/21 budget formulation.

Mlusu said: “This economy, Madam Speaker, continues to suffer from the adverse effects of the coronavirus pandemic which compelled Government to impose containment measures, including partial lockdown and restrictions on mobility.”

“Internationally, Malawi’s economic activities have been hampered by border closures in neighboring countries as well as containment measures in major trading partners such as South Africa, Europe and China.”

The Minister also cited that the Finance Ministry has forecasted preliminary Gross Domestic Product (GDP) growth rate for the year 2021 at 3.5%.

Mlusu said the estimate follows normal to above normal rains that the country has received so far, although localized dry spells are being experienced in some districts mostly in the southern and eastern regions of Malawi.

According to Mlusu, growth in 2021 will also be significantly bolstered by the expected increase in agriculture output due to the impact of AIP.

He said: “Madam Speaker, enhanced growth prospects in 2021 are also buttressed by the on-going Government infrastructure development projects in the road, energy and agriculture sectors, most of which are growth enablers.”

“Furthermore, Madam Speaker, just as in many other countries, the Covid-19 vaccine is also expected to spur business and economic confidence.”

“It is however, important to remember that economic growth in 2021 and beyond is dependent on how fast the second wave of the pandemic dissipates.”

Meanwhile, State President Lazarus Chakwera has assured local Small and Medium Enterprises (SMEs) that his government will operationalize a new Public Procurement and Disposal of Assets  Act that will prioritize local SMEs in awarding of government contracts.

Chakwera said his administration is enforcing the new Act to confine the procurement of several goods and services to local SMEs.

He said: “This effectively brings to an end the procurement policy of past administrations that allowed the concentration of public contracts in the hands of large and foreign businesses for the supply of goods and services that can ably be supplied by local SMEs.”

“Additionally, these policies will inject the much-needed liquidity into the economy by putting money in the pockets of Malawians, enabling them to care for their families, which will in turn stimulate economic activity.”

“To prepare for potential liquidity shortages during the coming weeks of the state of national disaster, my administration has activated the Emergency Liquidity Assistance (ELA) framework to support banks in the event of worsening liquidity conditions.”

Chakwera also said under his leadership, the Government has extended the Reserve Bank’s moratorium arrangement on loan facilities for another six months to June 2021.

He said the moratorium has been designed to give businesses that are operating on funds borrowed from banks some breathing space to stop bleeding from the blows of the pandemic.

The mid-year budget review revised the earlier budget projection from MK2.19 trillion to MK2.33 trillion.

Small and Medium Enterprise Development Institute (SMEDI) has advised young entrepreneurs to venture into business partnerships as one way of dealing with challenges facing their businesses.

Speaking during 265 Pitch event in Lilongwe, CEO for SMEDI Rodrick Chattaika said young entrepreneurs in the country are facing challenges including lack of financial support and technical skills, which can be addressed through partnerships.

Chattaika said: “We want to encourage the entrepreneurs to rely on partnerships because one might have feasible ideas and another one resources. If these two merge, they can improve their image amongst themselves and therefore excel in their businesses.”

He said on its part, from the year 2018 to 2020 SMEDI has been working in partnerships with other stakeholders including National Bank, NBS Bank, Malawi Enterprise Development Fund, Synergy and other development banks.

Chattaika said through the partnerships, SMEDI is able to access services that entrepreneurs are lacking as well as giving the banks an opportunity of meeting upcoming business gurus.

SMEDI supported 265 Pitch event as one of its programs that gives courage to young entrepreneurs to showcase their ideas, and gain support from financial institutions.

Chattaika said the event also helps instill entrepreneurship spirit in people who get motivated by fellow entrepreneurs.

“As you know many youths in the country, even if they have the potential to innovate, are the ones who are highly affected in terms unemployment. So if we can harness their skills we can create more entrepreneurs in the country who will substantially contribute to country’s economy,” he said.

In her remarks, Deputy Minister of Labour Vera Kantukule concurred with SMEDI on the issue saying for someone to succeed in business, a partner is required.

Kantukule said: “We have people who are good at marketing while others at production. They have to come together to create a successful business entity.”

“If you look at western culture, a lot of enterprises are working as partnerships and are exceling on the market.”

She, however, said she is impressed with the growing number of young entrepreneurs in the country saying the development will help to reduce the unemployment rate which is growing at an alarming rate.

In the October 2020 265 Pitch, Mtengo Wakumunda company specialized in production of porridge flour emerged as the winner, seconded by Adamant Furniture with Adas Season Farms coming on the third position.

SMEDI is a parastatal under the Ministry of Trade, and was established in 2013 with three departments of business information and training; planning and research; and finance and administration.

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says its random survey has unveiled that many local consumers consider imported goods as being of higher quality, a tendency which is hindering the “Buy Malawi Strategy” from meeting its goal.

MCCCI’s Head of Membership Development and Communications Tione Kafumbu said the Malawi Government needs to scale up sensitization campaigns on the strategy to support growth of local industry.

Kafumbu said: “The awareness campaign should focus on convincing local consumers on the importance of buying locally produced products. Additionally, government has to be exemplary in its procurement processes through giving local preference to locals, and the general public will adopt the same trend.”

But the Ministry of Trade has differed with MCCCI in a separate interview saying Malawians have responded positively to the strategy such that local producers are easily finding a market for their products.

Spokesperson in the Ministry Mayeso Msokera said the exercise has also encouraged local producers to start producing goods of high quality to substitute foreign products.

He also said the strategy has assisted local manufactures to find markets for their products in other countries across Africa, Europe and Asia.

Msokera said the strategy is benefiting locals at producer, consumer and government levels.

He said: “Our producers are able to earn a living since they are able to sell their products, and consumers are now being supplied with goods of high quality hence government is able to collect more revenue in form of taxes.”

“The Ministry assesses each and every product to ensure that it meets our standards.”

The Ministry of Trade has since called on companies and industries to register with the Buy Malawi Strategy for them to start making progress in their operations.

Small and Medium Enterprises Development Institute (SMEDI) has welcomed government’s move to ratify the African Continental Free Trade Area (AFCFTA) saying it has major benefits for Malawian Small and Medium Enterprises (SMEs).

Minister of Trade Sosten Gwengwe announced recently that government is in the process of ratifying AFCFTA which is aimed at boosting trade among African countries.

SMEDI Spokesperson Alinafe Mpoka said SMEs welcome the Trade Area considering vast benefits that will come along with it in terms of easing import and export business between African countries.

“There are major benefits expected to emerge from the CFTA, including boosting trade and welfare gains and fostering a vibrant and resilient African (including Malawian) economic space. These, in turn, will serve as a springboard for more beneficial integration by Africa into the global economy,” Mpoka said.

He explained that  SMEDI’s positive reaction to government’s process of ratifying the Trade Area is based on its mandates which include;establishing a single continental market for goods and services with free movement of business professionals and investments, accelerating the establishment of the Continental Customs Union and the African Customs Union,enhancing competitiveness at the industry and enterprise level by exploiting opportunities for scale production, continental market access and better reallocation of resources.

He said AFCFTA offers many opportunities for developing and promoting SMEs and economic growth in Malawi and Africa as a whole.

Mpoka said: “SMEDI is optimistic that Malawian Small and Medium Enterprises (SMEs) and others from the African continent, will largely benefit from AfCFTA because it will entail lower or no tariffs and free access to market and market information which is vital for startups and established SMEs.”

“We have all the hope that the instrument will indeed lead to removal of tariff restrictions and other barriers on intra-African trade which has been a barrier to many SMEs in Import and Export Business.”

He said with the Trade Area functional, it will also be easier for local SMEs to establish businesses in different African countries.

Mpoka cited Intra-African Trade in agriculture which, he said, is expected to increase, resulting in increase in wages and employment.

The arrangement will also allow businesses to access cheaper raw materials and intermediate goods, and will also improve the conditions of regional value chains and access to global value chains.

Mpoka explained: “SMEDI believes that the AfCFTA agreement will give Malawian SMEs an advantage to grow beyond domestic market into regional one. Other African markets would be much easier for them to enter as opposed to the difficulties they encounter trying to enter the global market.”

“This is of a huge importance bearing in mind that SMEs account for 80 percent of businesses in Malawi and Africa. AfCFTA will also allow SMEs to supply larger regional companies, a feat that is almost impossible without AfCFTA.”

He said Malawi’s AfCFTA ratification and implementation strategy should not only focus on promoting high and sustainable long-term growth but also ensure that the benefits of such growth are widely shared in order to reduce poverty and improve the standard of living for all in Malawi.

If well implemented, the AfCFTA will provide the opportunity for African economies to create the world’s largest free trade area, with the potential to unite 1.3 billion people, in a $2.5 trillion economic bloc and usher in a new era of development.

Meanwhile, SMEDI has also welcomed government’s move to operationalise the Control of Good Act (COGA) saying it will help to control illicit trade.

“This will enable Malawi as a country to find ways to enhance and improve local production, identify high value products and value chains that can be manufactured or grown successfully locally, look at various options, ideas and strategies on how to increase local Product Manufacturing and local Agriculture Production in Malawi so that we become self-sufficient and reduce dependency on Imported Products,” Mpoka said.

A local economic expert says operationalization of the Control of Goods Act (COGA) by the Ministry of Trade will enhance local industrial productivity and ensure transparency on trade system.

Ministry of Trade has enacted COGA, a law to regulate Malawi’s importation and exportation of goods through imposition of restrictions, banning or allowing of exports or imports under licences.

According to the Press statement from the Ministry,” the law came into operation on July 10, 2020 following Publication of the Act in Government gazette on July 16,2020.”

“The new Act serves as a departure from old Act in that it brings in predictability, certainty and transparency which will facilitate Investment into doff sectors of the economy without interruptions,” reads part of the statement.

Speaking in an interview, Former Executive Director for Economic Association of Malawi(ECAMA), Edward Chilima hails the Ministry for effecting the law saying it is amongst trade interventions that were supposed to be imposed long time ago.

He says: ” This is a welcome development as it is to bring sanity on imports and exports, having noted that many tend to import goods of which basically we are not supposed to be importing, since these can be locally produced and distributed.”

“This will ensure that we import and export goods in line with national development and economic goals, as some goods are also not supposed to be exported to other countries for strategic reasons.”

Chilima, therefore, urges the Ministry to intensify monitoring measures to press on stakeholders involved in trade including Banks, Malawi Revenue Authority and Immigration department to adhere to the Act.

Meanwhile Malawi’s exports to the East African market are expected to be enhanced during and beyond the Covid-19 pandemic period, following Britain’s offer to support the Trade Mark East Africa (TMEA) project with $50 million.

TMEA was established as a non-profit making institution for aid for trade delivery in East Africa.

Among others, the project is to foster reduction of costs and time of trade and ensuring that Malawian products are competitive on international markets.

Experts have advised the Malawi Government to improve its domestication of its obligations under Regional Trade Agreements (RTAs) to seal gaps between its domestic legislation and its obligations in terms of its RTA commitments.

International Trade Law Consultant George Naphambo said currently Malawi does not have necessary legislation in place required for the imposition of trade remedies such as Anti-dumping duties, Countervailing duties and Safeguard measures in terms of the relevant World Trade Organisation Agreements.

He was speaking during the closing session of validation workshops on studies conducted on Malawi’s Bilateral and Regional Trade Agreements at Ryalls Hotel in Blantyre.

The studies were executed by Zimbabwean Firm Trade and Development Studies Centers, under the European Union (EU) Technical Assistance initiative aimed at supporting Malawi government in Bilateral, Regional and Multilateral Trade Agreements.

Naphambo said the trade pacts require important safety valves for dealing with unfair trade and increasing imports as a result of trade liberalisation which calls for the need for Malawi to draft the required laws and regulations to domesticate its World Trade Organisation (WTO) obligations and RTA commitments in line with trade remedies and establish a competent authority to initiate and investigate applications for the use of trade remedies.

“This will also entail the drafting of the necessary legislation and regulations to domesticate the WTO provisions on trade remedies. Malawi as a Least Developed Country (LDC) should also push for trade remedy provisions in RTAs that are less stringent than the requirements of the WTO trade remedy provisions,” he said

Naphambo also recommended that “Malawi needs to enter into mutual recognition agreements with regard to standards and technical regulations and domesticate such agreements in order to ensure that Malawi exporters have access to markets of other RTA Member States without having to also comply with the standards and technical regulations of other Member States.”

Meanwhile, Malawi is in violation of its obligations under the Southern African Development Community (SADC) Free Trade Area (FTA) due to its failure to liberalise its tariffs on South African imports of sensitive products in accordance with its schedules of commitment under the SADC Trade Protocol.

“As this failure to implement its obligations does not qualify for a derogation under the SADC Trade Protocol and is not covered by the available legal exceptions in the Trade Protocol, Malawi will have to address this issue through consultations with South Africa and other SADC Member States.”-He explained

Naphambo said “as part of such consultations Malawi should explore alternative funding mechanisms for its revenue shortfall from continued liberalisation under RTAs, which is the main reason behind its failure to timely implement its SADC tariff reduction obligations.”

Public Relations Officer for Paramount Holdings Limited Dick Juma recommended to the private players to be more proactive in their operations to position Malawi on positive side as regards to trade agreements at both bilateral, regional and multinational level.

Juma also urged the policy makers to address Non-Tariff Barriers (NTB) that exporters in Malawi are currently encountering which is in violation of the relevant RTAs’ legal provisions on NTBs.

He said “Malawi should focus on implementing and strengthening the mechanisms for reporting and resolving NTBs available under existing RTAs and the Tripartite Free Trade Area (TFTA) and Africa Continental Free Trade Area (AfCFTA) agreements.”

A study by economic researchers has recommended to the Malawi Government to tread carefully when offering tax exemptions in line with regional trade pacts in order to check the bludgeoning trade deficit.

The Economic Researchers have also advised the government to address smuggling of foreign products into the country to address revenue losses and scale up Malawi’s benefits from trade liberalization in order to grow the economy.

The researchers from a Zimbabwean firm, Trade and Development Studies Centers, made these recommendations at Ryalls Hotel in Blantyre as part of the results of the study on the impacts of Malawi’s Bilateral and Regional Trade Agreements which was financed by the European Union (EU) under a Technical Assistance initiative aimed at supporting Malawi to benefit from Bilateral, Regional and Multilateral Trade Agreements.

A report on one out of five studies carried out by the firm titled “Impact assessment of full trade liberalisation for South Africa, Africa continental free trade area and the COMESA/EAC/SADC/Tripartite free trade area on revenue, industry and Malawi’s economy,” indicated that between 2009 and 2018, the country’s total trade revenue increased by 11% from US$3,209 million to US$3,587 million.

However, the report further stated that “total exports fell by 26% to US$ 880 million in 2018 while imports increased by 34% to US$ 2, 707 million over same period. “

“The trade deficit more than doubled from US$835 million in 2009 to US$1,827 million in 2018 thus putting pressure on Balance of Payment (BOP) position,” reads the report.

Director of Trade and Development Studies Centers Dr. Moses Tekere said there is need for Malawi to place high revenue sensitive products under the exclusion list of African Continental Free Trade Agreement (AfCFTA) which includes South Africa if Malawi is to register optimum results out of full trade liberalisation.

“The South Africa effect is critical in Malawi’s regional trade arrangements including the AfCFTA. Malawi should therefore harmonize its exclusion list under AfCFTA with the list of products currently attracting positive tariffs from South Africa to remain in the exclusion list,” he said.

He said there is also a need for legal and institutional capacity building of institutions implementing trade remedies to deal with instances of unfair competition from imports that threaten local industry.

Tekere also recommended that Malawi scales up support to Small and Medium Enterprises (SMEs) and business institutions on export market readiness.

Principal Secretary in the Ministry of Industry, Trade and Tourism Dr. Ken Ndala commented that Malawi’s trade policy aims at creating an open economy with relatively low tariffs and free from non-tariff barriers therefore participation in the trade agreements reflect Malawi’s commitment in promoting more open and liberal trade as a key component of its development agenda.

Ndala said:  ” Malawi’s market ultimately relies on accessing other countries’ markets and attracting investments from other countries. Therefore, as a country, we strongly support initiatives towards trade and investment development and promotion as a vehicle to create incomes, jobs and prosperity.”

However, Ndala said the ministry has noted that there is low capacity and uptake for private sector to market access opportunities arising from trade agreements and great reluctance to support trade liberalization and regional trade negotiations for fear of losing domestic markets.

He said: “The way forward is for firms to embrace the reality and we hold hands in focusing and repositioning towards expanding to other markets. This is more the reason we undertake trade negotiations to facilitate exports while also safeguarding our nascent and strategic industries.”

“We continue to implore upon the private sector to be supportive of these negotiation processes.”

Malawi is among the five countries that are yet to initialize interim Economic Partnership Agreements (EPA) negotiations in the Eastern and Southern Africa (ESA) region and is also one of the countries that have signed but not ratified the Tripartite Free Trade Area and the Africa Continental Free Trade Area.