Malawi maize prices fall 1%

National average maize prices dropped by one percent from K115.68 in August to K114.47 in September, after rising since June this year, Ministry of Agriculture and Food Security monthly retail prices indicate.

If the decline in maize prices persists and is substantial, it is likely to have a positive effect on cost of living and drive down inflation rate in which 50.2 percent is food and non-alcoholics.

However, the ministry’s spokesperson Sarah Tione in an interview on Tuesday noted that the maize price decline could just be a blip pointing out they needed to wait for a longer trend to explain the price fall.

She could also not attribute the maize price fall to winter cropping which she said is ready noting that although they do not have the actual output figures of the winter cropping, farmers are already selling dry or green maize from their fields.

“To grow the winter cropping, farmers rely on residual moisture and irrigation. The crop is meant to supplement the farmers’ rain fed produce. The produce is also meant to supplement the farmer’s incomes,” said Tione.

But the Famine Early Warning System Network (Fewsnet) September 2013 report notes that current price differentials between Malawi and neighbouring countries are driving the direction and extent of informal trade flows citing that prices are currently lower in Mozambique than Malawi, resulting in increased trade flows compared to what was observed at the same time last year.

The report further notes that maize prices are currently higher in northern Malawi than in Tanzania, and exports into Tanzania are well below the volumes observed in 2012.

Fewsnet in the report said it observed increased informal imports of maize from Mozambique and Zambia compared to 2012 and consequently mitigating some of the effects of atypically low market supplies during the first half of the 2013/14 marketing year.

However, Fewsnet in the report notes that staple food prices are not expected to decrease but instead, in the absence of any major market-based humanitarian interventions, they are likely to increase even further as the consumption season progresses.

The network, in the report, noted that trader uncertainties about the National Foreign Reserve Agency (NFRA) or Admarc interventions are likely to contribute to speculative type behaviour.

Fewsnet also noted that trade continues between Malawi and neighbouring countries, despite the official trade bans in place in Malawi and Zambia.

Mozambique’s port of Beira under the spotlight

CHIKONDI CHIYEMBEKEZA

That Malawi is a landlocked country needs no mention, and because of its landlockedness, the cost of imports and exports are on the higher side. Because of the inefficiencies of the country’s transport corridors, it is the consumers of goods and services who feel the brunt because businesspeople have no choice but to factor in the transportation cost when pricing their goods.

Transport experts argue that more than 40 percent of the cost of imported goods in Malawi is taken up by transportation costs—one of the highest in the sub-Saharan Africa, resulting in goods being expensive on the local market.

Malawi’s transport corridors

Malawi has transport corridors such as Nacala, Sena/Beira, Northern/Dar es Salaam, Mtwara and the now abandoned Shire Zambezi Waterway which can be utilised to the fullest if government is keen to ensure that it reduces transportation costs.

Goods such as fuel, medical drugs and fertilisers, among others, are imported using the corridors while commodities such as cotton, sugar, tobacco and other agricultural products are exported through the same corridors.

But most of the roads and rail links to these corridors are in dire need of repair and, in worst case scenario, needs complete overhaul.

The impact of under utilisation of the transport corridors is that consumers of imported goods from countries such as South Africa, Tanzania and even the Far East are paying more owing to the high transportation bill which is passed on to them.

For example, if an imported shirt is worth K2 500, taking out the transportation bill of 40 percent, the real cost less transport could have been K1 500, all things being equal.

Malawi mainly relies on the ports of Beira and Nacala in Mozambique, Dar es Salaam in Tanzania, and to a lesser extent Durban in South Africa, for its imports and exports of goods.

Former president late Bingu wa Mutharika, realising that Malawians suffer the consequences of the country being landlocked, started developing, against all odds, what he called the Nsanje World Inland Port, from where light ships from Mozambique’s port of Chinde, about 240 kilometres could come from. This could probably be the shortest connection to the port of Beira.

A recent visit to the port organised by the Association of Business Journalists (ABJ) with sponsorship from the National Bank of Malawi, revealed its strategic importance and how beneficial it is to the Malawi’s economy.

According to officials there, operations at the port are undergoing a rapid transition to keep pace with a rate of change that has seen container volumes rise by more than 50 percent and general cargo increase by nearly 49 percent—with annual trade topping four million tonnes.

Acquisition of new plant, the introduction of sophisticated computer software and the imminent delivery of two post Panamax ship to shore gantry crane, have all added their own impetus to the push for cargo-handling performance par excellence.

Cornelder de Mozambique (CdM) is a company which was given the concession to operate the port’s major container and general cargo terminals.

CdM sales and marketing manager Felix Jamie Machado told business journalists that the port was not only built for Mozambique, but also its four neighbouring countries of Malawi, Zimbabwe, Zambia and Democratic Republic of Congo (DRC).

Advantages of Beira corridor

The port of Beira is the nearest conduit to and from the world markets for these four landlocked States.

From Blantyre and Lilongwe, Beira port is at a distance of 812 kilometres (km) and 950 km respectively, effectively making it the cheapest route to the sea for Malawi because of the distance.

This is compared to the ports of Durban in South Africa which is at a distance of 2 323 km from Blantyre and 2 678 to Lilongwe and Dar es Salaam in Tanzania at 2 031 km to Blantyre and 1 667 km from Lilongwe.

Machado observed that the port of Beira has a number of advantages to the three countries.

From the port, there are rail links through the Machipinda, Forbes to Zimbabwe, Chirundu to Zambia, Zobue, Mwanza to Malawi, Calomwe to Dedza, Cuchamano via Nyamapanda to Zimbabwe and Cassacatiza through Chanida to Zambia.

The Beira corridor, according to Machado, is also in the southern African region.

It has strict access control, full electric fencing, single gate access and Closed-circuit-television (CCTV) security system.

It also has ‘excellent’ connectivity. The port is no longer a mere feeder port but well integrated into the Southern and Eastern African shipping networks and has direct calls from the world’s largest shipping lines.

The Beira corridor has maximum economic potential for neighbouring countries including Malawi.

“The Beira corridor can make the hinterland economies more competitive with lower cost of transport. It connects four Sadc [Southern Africa Development Community] economies to the world and can become a hub for investment in manufacturing, logistical distribution centres, agriculture and agro-processing and free trade zone and industrial parks,” said Machado.

The corridor itself is rich in agriculture and mineral resources such as coal, iron ore, manganese ore and copper.

Besides that, infrastructure is being developed to give these resources access to the world market.

Beira corridor has challenges too

Despite all the goodies the corridor has, coupled with its strategic location, it is also dogged with a number of challenges.

The port official said there is need to improve further on service delivery particularly on delays and long documentation procedures, poor state of road and rail infrastructure that needs upgrading.

“There is lack of harmonisation and of documentation and procedures [customs], load limits, road user’s charges and third party insurance. Customs regulations need to be improved,” he said.

There is also high dependence on road transport and there are numerous restrictions to access the port.

Since the road network is in poor condition, experts have argued on the need to improve the rail network to ensure that 80 percent of the goods move by rail to the port, with the remaining 20 percent by road.

Currently, between 500 and 600 trucks pass through the Beira corridor every day, calling for a complete overhaul of the rail network.

Expansion plans

CdM, is currently building a $2.5 million [K987 million] tobacco warehouse that will also cater for Malawi’s tobacco destined for export.

The warehouse, currently nearing completion, is being built in consultation with the tobacco merchants in Malawi.

The country is set to greatly benefit from this warehouse because tobacco will be stored there before being shipped to its intended destination.

An official in the tobacco industry noted that with the tobacco terminal in place, it means Malawi’s tobacco merchants will benefit in terms of onward transmission to export markets.

This will also mean that when a ship comes, its full capacity will be utilised at one go.

According to Beira port master plan, the company also plans to improve access to the facilities, expand the existing terminals as well as building new ones to handle fertiliser which is in the final stages and also build a dry bulk terminal.

The concessionaire is also planning to build a new 600-metre quay and have invested $200 million [K79 billion].

“We don’t want containers to stay longer at the port. On the storage side, we are expensive because we don’t want to promote storage,” noted Machado.

A penalty of $20 [K7 900] per day is charged if the goods exceed the designated number of days at the port.

The dry bulk terminal, according to the master plan, will handle a number of products such as coal, chrome, manganese and handle mobile ship loaders and have proper drainage and dust suppression.

The fertiliser terminal is expected to cost $15 million (K5.9 billion) and will have a bulk handling and storage capacity of between 6 000 to 8 000 tonnes per day and a storage buffer of between 70 000 and 100 000 tonnes.

Malawians’ perception of the port

At the height of the fuel crisis two years ago, Malawi authorities blamed congestion at the port for the acute shortage of the commodity.

But Machado dismissed those assertions, arguing that the port, in its present state has the capacity to handle cargo and that issues of congestion do not arise.

He also said of the four countries that use the port, none is given priority.

“Any consignment or container doesn’t have a country name. There is also no indication for any priority for goods destined for Mozambique, except frozen consignments which are given priority,” he clarified.

Machado cited an incident in which the Mozambican government was in a dilemma on what to prioritise between frozen consignment and fertiliser, and the authorities there settled for the former.

He said what is required is for the documentation and receipts showing that payment is made in order.

“Sometimes freight forwarders and middlemen play their games,” he said, suggesting that they delay the process for reasons best known to them.

Malawi’s exports can stay at the port for 17 days without pay compared to 12 days for imports before they are cleared and if they exceed the allocated days, a charge of $20 [K7 900] per day is levied on the consignment.

“We understand the idea of an inland country. We don’t want to kill them,” said Machado, stressing that the more free days on exports are aimed at encouraging the countries to export more.

Conclusion

Undoubtedly, the port of Beira is of strategic importance to the Malawi economy. And to fully benefit from it, experts contend that Malawi just need to improve its rail and road infrastructure. For example, if Malawi works on its internal rail road system, access to the port of Beira could be shorter, hence, cheaper than is currently the case. The Malawi Government has indicated plans to concentrate on the Sena corridor, which is one of the links to the port. The abandoned Shire-Zambezi Waterway, which is part of the Nsanje World Inland Port, could also offer alternative to cheaper transportation mode to Beira.