Malawi could lose about $11 million a year (K8 billion) in revenue due to the expected liberalisation of tariffs under the African Continental Free Trade Area (AfCFTA), a study has shown.
The study was unveiled in Blantyre on Monday when Ministry of Industry, Trade and Tourism, in partnership with the European Union (EU), held a validation workshop on studies conducted on Malawi’s bilateral and regional trade agreements.
It sought to assess the impact of full liberalisation with AfCFTA on revenue, industry and the country’s economy.
In his presentation at the meeting, Trade and Development Studies centre director Moses Tekere, who was team leader for the study, said there are greater trade and market opportunities that will be born out of the AfCFTA, but there are challenges that Malawi has to take into account because tariffs on imports coming from Africa will be removed.
He said: “The major conclusion in the study is that there will be some revenue loss of up to $11 million by government and some industries will be affected, but there will also be positive outcome from the liberalisation process.
“What Malawi needs to do is to take a strategic trade liberalisation, which takes into account the sensitiveness of industries, especially those that need to be afforded some protection before the circles are opened up.”
On his part, Ministry of Industry, Trade and Tourism Principal Secretary Ken Ndala observed that the domestic market is small and limited. He said to expand the market and growth potential of the private sector, Malawi should enter into trade arrangements that seek to open foreign markets for exports.
He said there is low capacity and uptake for the private sector to market access opportunities arising from trade agreements and great reluctance to support trade liberalisation and regional trade negotiations for fear of losing domestic markets.
“We are at a point in time where with or without trade liberalisation, domestic firms will continue to face stiff competition in the domestic market,” he said.
EU team leader for economic and public affairs Jose-Maria Medinna Navvarro said he was sure there are fears on competitiveness of local industries in a much liberalised market, but added that AfCFTA is an opportunity which would allow the private sector to grow.
“It [AfCFTA] could shift the balance on the logic of comparative advantage to competitive advantage for many African countries,” he said.
Presently, figures show that 85 percent of goods traded in Africa come from outside the continent and only 15 percent of goods traded in Africa are produced locally.
So far, 54 countries have signed the agreement except one while 27 countries ratified the AfCFTA agreement.
The AfCFTA aspires to bring 55 African countries with a combined population of more than 1.2 billion people and a gross domestic product (GDP) of more than $3.4 trillion in one market.