In the face of stagnating export revenue, the International Food Policy Research Institute (Ifpri) has called for the broadening of export mandate and the removal of trade restrictions as one way of promoting structured markets.
Export mandates is where no commodity exported unless it goes through a structured market. Currently, export mandates are in place for two commodities: tea and tobacco.
Under the current export system, exporters from Malawi do not need permits to export crops with the exception of rice and maize on which export restrictions have been placed from time to time to ensure food security.
Export bans on maize are particularly notable and have been in operation in three-quarters of crop years since 2005/06.
In its August 2017 policy note titled The Case for Structured Markets in Malawi by Anderson Gondwe and Bob Baulch, Ifpri said expanding export mandates to cover other commodities such as soyabeans, pigeon peas and sunflower could help Malawi is to diversify its foreign exchange earnings in the face of declining demand for tobacco.
“Export mandates usually increase the volumes trade through formal exchanges, which helps commodity exchanges succeed. Malawi’s current export system is very susceptible to under-declarations and non-remittance of export proceeds, which results in loss of tax revenue for the government.
“Giving farmers access to structured markets increases options to farmers and can significantly improve the prices and revenues they receive by trading over a competitive platform. Trading over formal exchanges reduces the informality of trades and improves the reliability of trade statistics and wholesale price data,” Gondwe and Baulch write in the policy note.
The two also note that current policy of the government is not to levy tariffs on the export of raw materials except for commodities that are subject to periodic and ad hoc export restrictions.
“Removal of such export restrictions should increase the volumes traded via structured markets. So too would a more stable and transparent policy environment that would allow private sector traders and commercial farms to develop without fear of well-intentioned but disruptive government interventions.”
Speaking when he presided over the official opening of this year’s 14th National Agriculture Fair at Chichiri Trade Fair Grounds in Blantyre in August, President Peter Mutharika said his government will not lift the ban on maize unless all strategic grain reserves (SGR) in the country are filled up.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira recently said while it is important to be food secure at all times, setting minimum prices for produce and placing export ban on commodities, transfers revenue from farmers to consumers and vendors; thereby, removing incentives for farmers to make independent decisions on what they produce.