Budget measure bearing fruits
Cross-border traders say they have started reaping benefits of the increase in the Common Market for Eastern and Southern Africa (Comesa) Simplified Trade Regime (STR) threshold.
The Comesa STR is a trade arrangement which allows cross-border traders in the 19-member Comesa region to enjoy duty-free status when they import goods originating from other member States that do not exceed $3 000 (about K2.5 million).
In the 2021/22 Budget Statement, Minister of Finance Felix Mlusu announced that to support growth of small businesses, government will increase the Comesa STR threshold from $2 000 (K1.63 million) to $3 000.
This means that small businesses are now importing qualifying items valued up to $3 000 without paying import duty, but excise tax and value added tax is payable where applicable.
In an interview yesterday to comment on the impact of the measure to date, Cross-border Traders Association of Malawi president Steve Yohane said traders battered by effects of Covid-19 pandemic have seen their business incomes improving.
He said: “Businesses in the country have continued to face various economic hardships which have certainly eaten into their incomes. This provision has thus helped us to cushion income losses.
“We can also comfortably say the development has, to some extent, reduced smuggling as traders do indulge in the malpractice due to the low income realised from their businesses.”
Yohane, however, decried lack of information among traders and some government agencies on the provision.
He urged government to continue softening policy regulations and introducing measures that are friendly to cross-border traders, saying this can help them to diversify economic activities and contribute to economic development.
On his part, Chamber for Small and Medium Businesses Association secretary general James Chiutsi said in an interview yesterday the measure has to a large extent helped traders to have more money in their pockets.
“The Comesa STR threshold enhancement has eased the burden on SMEs. We encourage government to continue considering SMEs to help them grow as they are a critical constituency in the economy,” he said.
Cross-border trade has been a major feature of the country’s economic and social landscape, with available data from Ministry of Trade indicating that they play a huge role in Africa.
While it is difficult to assess the magnitude of such trade due to lack of consistent measurement tools and accurate data, estimates suggest that cross-border trade continues to play a huge role in Africa, according to the United Nations Conference on Trade and Development.
In the Southern African Development Community region, for example, cross-border trade is estimated to be worth $17.6 billion (about K14 trillion) per year, which is roughly 30 to 40 percent of total regional trade.
But cross-border traders benefit only marginally from their trading activity due to a number of factors, including policy, institutional, cultural, economic and regulatory issues.
