Outdated forestry fees limit Malawi’s potential
Out dated and undervalued forest management fees and royalties are hindering the sustainable management and efficient use of forest resources in Malawi, limiting the sector’s contribution to the country’s development.
A study ti t l ed ‘A Comparative Assessment of Plantation Fees, Prices and Options Analysis to Improve Revenue Generation in Malawi’ released last week, shows that the forestry sector’s contribution to the national gross domestic product (GDP) stands at a paltry 0.1 percent.
Presenting the study in Lilongwe, Maggie Munthali, a research fellow at the Mwapata Institute and the report’s principal author, noted that limited investment in seed technologies, bushfires and weak tax systems, among other factors, limit the forestry sector’s productivity and contribution to economic growth.
Government fiscal policies such as taxes, the report notes, play a crucial role in either undermining the sustainability of forest plantations or incentivising private-sector investments in forest management.
Well-designed fiscal pol icies can combat deforestation and forest degradation while promoting sustainable forest management. The effectiveness of these fiscal mechanisms varies by country, depending on specific circumstances, according to the study.
The paper notes that in plantation forestry, unlike agriculture, the period between initial investment and economic returns is significantly long, often ranging from 15 to 30 years.
This extended gestation period poses a substantial constraint to forest plantation investments, adding to the uncertainty and risk. Investors, therefore, require adequate fiscal incentives to justify the wait.
“In Malawi, the value-added tax (VAT) of 16.5 percent is levied on most forestry machinery, equipment, and tools, including fire trucks, tree-growing inputs, and personal protective equipment,” reads part of the report co-financed by the United States International Agency for Development and the British Foreign, Commonwealth and Development Office.
In an interview, Mwapata executive director William Chadza urged the government to consider implementing an automatic inflation adjustment procedure based on the study’s findings.
This, he argued, would ensure that forest plantation fees and prices remain competitive and reflective of market conditions, avoiding the need for frequent legislative amendments.
In an earlier interview, Vice- President Michael Usi, who doubles as Minister of Natural Resources and Climate Change, said realigning plantation prices to their real market value will help attract meaningful investment to the forestry sector, including opportunities to boost carbon financing.
Ministry of Natural Resources and Climate Change Principal Secretary Yusuf Nkungula, praised the Mwapata Institute for providing valuable recommendations on pricing. However, he bemoaned political interference for the delays in implementing cost-reflective prices.
“We tried to adjust the prices two months ago but Parliament blocked us,” he said. “They felt we should consult the private sector, which was a bit tricky considering that discussing the prices with the interested parties would create a conflict of interest.”
The PS stressed that they would engage the private sector and the Ministry of Justice to create a legal framework that can support sustainable and effective pricing in the forestry sector.
Modern Cooking for Healthy Forests climate change and environmental management specialist Michael Chirwa expressed pride at the recommendations by the researchers.
By implementing the study’s key findings, a revised fee structure that adequately values forest resources will incentivise sustainable management practices, attract investment, and generate much-needed revenue for the government
