Malawiâ€™s giant textile manufacturer, Mapeto DWSM, has warned that care needs to be exercised on the removal of excise duty on imported second-hand clothes when applying it on manufacturers and traders of ready to sell textiles.
The companyâ€™s general manager, Martin Mpata, in an interview this week, argued that if the two are treated equally in all procedures, then the manufacturer stands to lose.
“We have noted the removal of the excise duty on imported second-hand clothes with keen interest. Our feeling is that care should be exercised in applying it between the manufacturer [industry] and the trader of ready-to-sell textiles in order for the industry to grow and continue to employ hundreds of people as opposed to a handful of shopkeepers,” he said in an e-mailed response to a questionnaire.
Malawi government has reviewed the excise tax regime in the country in line with best practice and also aligned them to regional rates in order to curb smuggling.
Finance Minister, Dr. Ken Lipenga, in his 2012/13 budget presentation, said government believes this will culminate into increased employment and production for the local and export market and the improvement of other forms of taxes.
Among others, government removed excise duty on second hand clothes and textiles.
But Mpata observed that the danger with this is that the imports for the industry are purely used as raw materials and, therefore, cannot be cleared at the same declared price as that of the trader who imports for immediate sale.
“If this is the case, it will encourage everyone to import finished fabrics at the expense of the industry and mass employment,” he said.
He suggested that authorities obtain free on board (FoB) prices on textiles for both finished and raw (grey) from the sources of supply such as the Far East.
“This works for the motor vehicles and, therefore, it should also work for the textile industry. The textile industry is not looking for protectionism, but a fair play on an equal playing field. It should also be viewed from the benefits that the government will get from the two sets of operation,” said Mpata.
Chairperson of the Textile and Garments Association of Malawi Fred Kanjo could not be reached for comment on the implications of this tax measure to the textile industry.
But trade analysts have long argued that making imported textiles cheap is a recipe for disaster that could trigger a collapse of the textile industry and render thousands jobless.
The local textile industry is still reeling from the expiry of the Malawi-Mozambique-Tanzania-Zambia (MMTZ)-Southern African Customs Union (Sacu) trade agreement which expired in December 2009.
MMTZ-Sacu agreement allowed countries such as Malawi to export their textile and garments to the Sacu market comprising of Botswana, Namibia, Lesotho, South Africa and Swaziland duty free.
The industry, which employs more than 6 000 people, has at least six textile companies, including Crown Fashions, Knitwear Industries, Giant Clothing Limited, Win-Win Garments, Crossbow Clothing and Exclusive Fashions.Â