Firms’ reliance on imported materials a setback—NSO
T
he National Statistical Office (NSO) says the country’s manufacturing industries continue to rely on imported raw materials, a development that results in huge factory price increases.
In its Producer Price Index (PPI) released on Tuesday, the NSO indicates that as a result of this, producer prices or factory gate prices of products tend to be elevated.
For instance, the PPI shows that producer prices increased by 1.4 percentage points to 32 percent at the end of 2023 from 30.6 percent in 2022.
The report further shows that the most significant price increase was recorded in November last year, the month when the kwacha was devalued by 44 percent.
Reads the report in part: “A notable rise was observed particularly in November and December 2023 attributed to the realignment of the kwacha with the US dollar.
“Among all manufacturing industries, the manufacture of other non-metallic mineral products registered the highest year-on-year producer price growth rate in December 2023, at 87.7 percent and this includes cement products.
“This was followed by the manufacture of beverages at 41.9 percent.”
In an interview on Tuesday, Mzuzu University economics lecturer Christopher Mbukwa said this trend shows that the local industry’s over reliance on imported raw materials leaves it vulnerable to exchange rate movements.
He said: “Up to now, most industries in Malawi use raw materials that are imported either from within the region or far abroad, as such, any devaluation affects their production costs directly.
“For instance, although devaluation is meant to make local products more competitive in Malawi’s case, this has been proven a non-starter because essentially, we do not have products that could benefit from currency weakening.”
Commenting specifically on the factory prices of cement, Chamber of Mines national coordinator Grain Malunga said is a result of local cement producers importing clinker and gypsum apart from packaging materials.
He said: “If you look at the country’s three main cement producers, Portland imports clinker while Shayona and Cement Products Limited import gypsum as raw materials for production.
“Apart from these raw materials, the companies also import packaging materials from Tanzania and that means the impact of devaluation was felt immediately.”
A 50 kilogramme bag of cement is currently selling at about K21 000 while some months before devaluation, the same bag was fetching K16 000, according to Malunga.
