Malawi’s small and medium-scale enterprises (SMEs) have expressed reservations on prospects that they will benefit from an extension of the zero tariffs agreement between the East African Community (EAC) and the rest of the Tripartite Free Trade Area (TFTA) members states.
Market analysts argued that most SMEs do not even know what they need to do to export their products.
The TFTA, a trade bloc still under negotiations, comprises the Southern African Development Community (Sadc), the Common Market for Eastern Southern Africa (Comesa) and the EAC member states. The TFTA upon its formation would establish a market involving over 525 million people with an output of over $1 trillion (K330 trillion).
The extension of the trade agreement means that imports into the EAC countries which include Burundi, Kenya, Rwanda, Tanzania and Uganda from two key African trade blocs will continue enjoying zero tariffs for one more year.
The extension is based on the EAC Customs Management Amendment Bill, 2012 passed in December which replaces the EAC Customs Amendment Act 2004, which expired last December.
The arrangement is meant to remove intra-regional trade distortions in the three regional trade blocs and to stimulate movement of goods, capital and people.
Commenting on the extension of the trade arrangement, Business Consult Africa managing director Henry Kachaje said such an agreement although welcome; do not benefit small businesses in the country.
“Many medium sized and small businesses are lagging behind in international trade and most of them are not fully appraised on the contents of the trade agreements Malawi has with its bilateral and multilateral partners.
“But large businesses take advantage of the trade agreements. We have few businesses that are doing export trade mainly in tobacco, sugar, tea, coffee, and soya beans,” he said.
Kachaje stressed the need to sensitise small businesses to opportunities under the agreements.
“There is need for a more aggressive strategy to sensitise the business community in Malawi to trade agreements. The country has a national working group on trade policy (NWGTP), a forum where private sector and government engage in constructive discussions, consultations and updates each other on general trade issues.
“The challenge has been lack of participation by small and medium enterprises in such forums. If all businesses involved in international trade were involved in this forum, they would be adequately informed on the developments,” he said.
Kachaje, however, urged businesses to seek information on trade from for the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) and the Malawi Investment and Trade Centre (Mitc).
Indigenous Business Association of Malawi (Ibam) agrees with Kachaje on the lack of understanding by SMEs on the trade agreements.
Ibam president Mike Mlombwa said in an interview on Friday that SMEs are not conversant with the trade agreements and their benefits and, as such, they do not take advantage of such agreements.
“Government should ensure that businesses are aware of the trade agreements that Malawi enters into and what they need to do to export to such markets.
“As business people, we are also concerned with how the export licences are awarded. Most of our members have tried to get an export licence, but to no avail. What procedures and criteria do they use to award these licences?” wondered Mlombwa.
He added that it was important to empower local business, especially small ones with knowledge on what it takes to export goods.
Ministry of Industry and Trade spokesperson Wiskes Nkombezi in an interview asked for more time to consult on the matter.
Malawi is a member of Comesa and Sadc, among others, and has a number of trade protocols on both goods and services.
Experts have, however, pointed out that for local businesses to benefit from the arrangements, Malawi needs to improve on its general business environment and reduce on its supply side constraints.
Malawi general business environment is dogged by numerous problems such as frequent power blackouts, archaic business regulations, bureaucracy and poor infrastructure among others.
Last year, Malawi slumped six steps from rank 151 to 157 out of 185 economies on the World Bank Doing Business 2013 (DB13) an indication that doing business in Malawi is getting more difficult in comparison to other countries.