Business News

Malawi needs radical rethink on exports

Reserve Bank of Malawi (RBM) Governor Charles Chuka is surprised that the monthly import bill is well in excess of total annual tobacco revenue. It is not surprising because Malawi has over the years grown economically. Whether high growth rates were real or had benefits trickle to any folk is a different matter. I trust growth figures by our professionals.

Nonetheless we cannot stop people or businesses from importing items they like. After all, governments have no right to decide what private households consume.  Tea revenues, a second export crop are at a mere $17 million (K5.4 billion). Get the maths done the main two export items rake in $217 million (K68 billion). If these were the only exports, it would have meant $17 (K5 355) per person per year. That is not the point though as it appears simplistic but a mirror of some reality. No wonder, we are often at the mercy of a foreign tax-payer in form of aid, a reality check of 48 years of independence. Our exports have really struggled and the song about diversification has not matched the sound of the drum. The infrastructure is less impressive and the cost of capital high. Foreign investors have better competitive options, destination-wise despite their ability to source cheap finance in other markets.

Former president signature economic philosophy revolved around making Malawi an export growth-led economy. The structure of exports has not changed except for the dwindling export revenues from rain-fed tobacco growing and 90 year-old tea shrubs.  High economic growth was achieved but induced by subsistence farming, maize in particular. Export revenues continue to decline but a growing number of our people want to consume imports. Children that yearn for professional training but cannot access university are pursuing international courses that require foreign exchange. It can be avoided if University of Malawi (Unima) and Mzuzu University (Mzuni) admitted over 10 000 students a year, not less than 1 000 each. So do not get surprised that monthly  import bills now exceed total tobacco revenues.

European Union’s top diplomat bemoans the sluggish growth in exports to the 27-member bloc from Malawi despite the preferential access the country has enjoyed over the years. When are we really getting out of this tobacco jinx and put our focus on other areas? I don’t want to sound lack of creativity of some kind but rather giving the entire export policy a radical business mind push. It appears our approach is often guided by the desire to protect domestic industry that refuses to grow. This can be extended to our obsession with import revenue reflected in punitive tariffs. Unfortunately, it doesn’t bring in the much-needed forex neither does it stop us from importing. Malawians will continue to import whatever they desire. Free trade benefits consumers by offering wide choices to satisfy their desires. Tightening screws through the banking system in terms of forex allocations cannot stop such imports. Innovative informal channels to finance imports have rapidly developed in the last five years. We just have to live with it.

The tobacco era is long gone whether we like it or not.  Tobacco should be considered as one of those exports but not a lead in how we think. Somehow we seem not to get it. The evidence is compelling. Fights with buyers or concessions with them are bearing unpalatable fruits. Prices are still low and global anti-smoking campaigns are bearing desired results.

We seem to lose out to neighbouring countries which over the last decade have made much stronger strides in dealing with public corruption and reducing the cost of doing business. Road networks to all potential tourism sites remain in bad shape, a huge cost to run such facilities at a profit. It simply makes the job of tourism marketer difficult and reduces the intent to diversify the economy to cheap talk. But tourism is a potential that we love to talk about but little headway is being made. Yet, there is a lot of potential to export services such as tourism.

Serious drastic steps need to be undertaken, and need not be shrouded in the popular concept note thinking. It’s   a symbol of indecisiveness and short-term planning. Malawi will exist for long. We can get extra needed dollars or whatever unit is by attracting visitors that make Malawi a destination. Not folks for a Sadc or Comesa meeting, periodic visitors, but rather a cadre that continuously love to visit the country. It can only happen if there is a proper telephone infrastructure to ensure banks can easily roll out payment systems that make a global traveller comfortable. Similarly, it requires tourist businesses incurring minimal overheads, instead of spending hours on a diesel pump for a generator due to power outages. It kind makes returns unprofitable.

But again, tourism is just one industry whose development is hampered by poor infrastructure. In earnest, great economies have diversified widely, putting eggs in various baskets. Some lessons we can draw from China is light manufacturing. China has progressed towards high tech manufacturing. Labour costs are rising for some low tech industries such as textiles. Multinationals are looking to other countries.  Malawi could exploit such opportunities instead of exporting unprocessed cotton but rather finished textile products beyond the current capacity of Mapeto and a few EPZ companies. Our EPZ companies in the textiles are even failing to meet foreign orders due to high transport costs.

Whatever the case, the competition for foreign investment is stiff. To bring their money, an assurance of making good returns is not negotiable. Most of them will relocate to countries where the cost of setting up a business such as access to land, water and uninterrupted power supply is low. No one puts their money in environments where bribery rules to get a service in time.

Related Articles

Back to top button