Malawi could reap more from its timber products, which currently contributes a paltry 0.1 percent to the gross domestic product (GDP), by embracing value-addition and reviewing outdated forestry management policies, it has emerged.
This follows data showing that in 2023/24 fiscal year, the country exported millions of kilogrammes (kg) of timber, plywood rubber and shutter ply, among others, but imported furniture such as flush doors.
Economist Steve Dunga of Northwest University in South Africa, who delivered a keynote address at the Economics Association of Malawi Annual Lakeshore Conference in Mangochi last week, said in an interview this means that Malawi is not adding value to its timber products, thereby losing a lot in terms of foreign exchange.
He said: “Imagine, Malawi exports timber and other forestry products in raw form, but at the same time imports furniture from China. What does it mean?
“There is need to implement bold decisions to ensure that the country utilises the vast potential by promoting industrialisation, which could see the country export furniture to attract more value.”
The Malawi Government Annual Economic Report 2024 shows that Malawi earned $4.3 million (about K7.5billion) from forestry products exports in 2023/24 fiscal year mainly to African countries.
Reads the report: “According to the revenue generated, 62.8 percent originated from exports of MDF boards [plain and laminated] followed by natural rubber at 12.9 percent and shutter ply 8.6 percent.
“Most of these forest products were exported to South Africa, Tanzania, Zambia, Mozambique and Kenya.”
At the same time, the report shows that 22 forest import licenses and 1 019 forest import permits were issued for importation of products such as poles and flash doors from Mozambique, Tanzania and South Africa.
In its study, Mwapata Institute observed that outdated and undervalued forest management fees and royalties are hindering the sustainable management and efficient use of forest resources, limiting the sector’s contribution to the country’s development.
In a study titled ‘A comparative assessment of plantation fees, prices and options analysis to improve revenue generation in Malawi’, the think-tank said the forestry sector’s contribution to the GDP remains negligible at 0.1 percent.
Among others, government fiscal policies such as taxes, the report noted, play a crucial role in either undermining the sustainability of forest plantations or incentivising private sector investments in forest management.
The study noted that in plantation forestry, unlike agriculture, the period between initial investment and economic returns is significantly long, often ranging from 15 to 30 years. Investors, therefore require adequate fiscal incentives to justify the wait
Reads the study in part: “In Malawi, the value added tax of 16.5 percent is levied on most forestry machinery, equipment, and tools, including fire trucks, tree-growing inputs, and personal protective equipment.”
In an interview on Tuesday, Pyxus Agriculture Malawi Limited managing director Ronald Ngwira said to increase the revenue from the sector, it is important to control illegal exports while encouraging sustainable ways of using forestry products.
He said “policies that encourage players to increase forestry plantations and curbing deforestation are central to the growth of the sector and improvement of its GDP contribution”.
Total revenue from forestry department amounted to K7.9 billion in 2023/24 fiscal year of which K6.2 billion came from the sale of logs, representing 78.7 percent with the rest from course fees, receipts on certificates, and government shares from co-management, according to the annual economic report.
