Smuggling of flour, cooking oil rising, say traders
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of cheap wheat flour and cooking oil from Mozambique is said to be on the rise due to porous borders, it has been established.
If left unchecked, industry experts fear this could collapse the local manufacturing industry.
Industry sources say smuggling is being heightened by the 16.5 percent value added tax (VAT) on wheat flour which was introduced in 2016 and that of cooking oil introduced in the 2020/21 National Budget.
In an interview on Saturday, one of the smugglers, Yamikani Mkwate from Mulanje said smuggling is now lucrative because flour and cooking oil from Mozambique are cheaper than in Malawi.
He said: “We buy 10 litres cooking oil from Mozambique at K9 000 while the same quantity here is sold at K13 500.
“Our customers prefer products from Mozambique because they are cheap.”
Mkwate said a 50 kilogramme (kg) bag of flour in Malawi costs about K25 000 whereas that from Mozambique, it sells at less than K20 000, a development he said is a boon for their businesses.
His colleague Thokozani Chikakuda, who has been smuggling products such as cooking oil, flour, carbonated drinks and cigarettes, said smuggled cooking oil and flour is a lucrative business this year.
The smugglers beat the police and immigration system by crossing Ruo River that borders Malawi and Mozambique in Mulanje.
In his reaction, Bakhresa Malawi Limited general manager Venkatesh Rao said the introduction of VAT has reduced capacity utilisation of wheat mills to below 25 percent while at the same increasing smuggling.
He said: “These issues are adding costs to the manufacturing of wheat flour in Malawi, making it uncompetitive against smuggled wheat flour and giving advantage to traders and others who are involved in unscrupulous activities for their benefit.”
“This will give a wrong signal to long-term investors who can do massive investments to generate employment and pay taxes,” he said.
An official in the cooking oil industry said when government removed surtax on cooking oil, prices for local cooking oil reduced and smuggling stopped as the commodity was affordable for locals, but with the re-introduction of VAT, things are expected to worsen.
But in an earlier statement, Malawi Revenue Authority said the re-introduction of 16.5 percent VAT was not expected to culminate in price increases on cooking oil as manufacturers would claim input VAT.
Smuggling is the illegal importation or exportation of goods subject to customs control.
