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Malawi’s trade policy: What a trade friend we have in China

Locally manufactured furniture such as these, suffer the shocks of imports
Locally manufactured furniture such as these, suffer the shocks of imports

He is a happy man now. Ernest Kamponda—a local from Chilomoni Township, Blantyre—had always craved a lofty, leather couch made in China.

“This is what I was made of. I am made of class. I make sure I buy things that soothe my soul,” he says while comfortably seated on the white, leather couch he has just bought from China worth K1 million (about $2 500).

However, though his soul has been soothed, there is a deeper national economic story hidden in his happiness that, if not checked, is a herald of suicide.

For years, Malawi has been a country poisoned with a tenacious curse of importing expensive goods from developed economies without a deeper thought of the effects to the economy.

Equally tragic is that some of the goods Malawians import are also produced locally and, sometimes, they even fetch lower prices than those imported.

Just look around the sitting and living and bedrooms of most Malawians today. They are all covered with couches and beds and mats and wardrobes from China.

But how much are we exporting to China in relation to what we are importing?

Rising imports, falling exports

Malawi’s diplomatic marriage with China dates to 2008. And since then, in terms of trade, the mark of this romance has not been impressive.

Data provided by the Trade Law Centre (Tralac) indicates that Malawi’s imports from China obscenely jumped by a staggering 211 percent from $80 million in 2008 to $249 million in 2012.

At the same period Malawi’s exports to China show a visibly stunting growth of 500 percent from $8 million in 2008 to $48 million in 2012.

Unarguably, despite Malawi’s edge in the percentage the volume of trade imbalance in terms of exports and imports here show a poles-part difference—just the physical distance between Malawi and China.

Equally disturbing are the topping goods that Malawi imports from China.

Tralac indicates that Malawi’s top 20 imports from China in 2012, included furniture, women’s and girls’ suits, and seats—all of which are also made locally.

It is the monetary value of these top most imports that makes the picture even gruesome: In 2012, Malawi—a country that is always short of forex—imported furniture and related items valued at $21 million, seats worth $17 million, women’s and girls’ suits at $9 million, and travel goods, bags and wallets at $9 million.

But do you know the products and the monetary value of what we export? Last year, Malawi’s main exports to China were $24 million of not carded or combed cotton, and $19 million unmanufactured tobacco, and refuse tobacco. Imagine!

Beyond China, the general picture is, again, unfavourable. According to the United Nations Conference on Trade and Development (Unctad) data, Malawi’s 2012 exports slumped by 16 percent to $1.27 billion regardless of government promises that it will turn this country into an exporting economy.

The Unctad data, surprisingly, does not hide that imports rose by 12 percent to $2.95 billion. This is regardless of the Buy Malawi Campaign, an initiative to persuade locals buy locally produced goods and services.

Economists of repute have consistently warned nations against trade imbalances like the one facing Malawi—rising imports and falling exports. The argument is that with imports rising and dominating and exports tenaciously dwindling, the net effect lies in exporting jobs and livelihoods to the giants—in this case China.

Local small businesses crowded out

As Chinese goods continue to flex their numbers in the country, the situation on the ground, too, is turning ugly.

For instance, in December last year, Lyton Mangochi, a local small-scale business person at Karonga District market, led the group of traders in protest against Chinese traders.

He argued that the coming of Chinese traders at the boma and their cheap Chinese imported goods ‘removed’ them from business.

“Everybody now is buying from them. Their clothes are obscenely cheap than ours, as a result, most of us are out of business. We are surviving on selling thobwa,” he said.

In fact, even those in the craft industry—especially those producing sofas, beds, wardrobes, stools among others, have had serious challenges of business lately.

Elvin Mphande runs a small shop where he makes and sells sofas in Zingwangwa, Blantyre. He employs eight people.

“We are not doing business to succeed these days. It is just about survival. We have lost a number of customers. People are buying Chinese furniture these days.

“The challenge is that those selling Chinese furniture sell them on credit—people paying in installments. This cannot work with us because we have a small capital,” he complained.

He added: “If everybody will be buying from Chinese furniture, what is going to happen to us? What will happen to the creativity that we have? What is going to happen to graduates of carpentry from Technical Colleges?”

Policy interventions

Apart from government intervening in chasing Chinese Traders from district markets, Malawi has the National Export Strategy (NES) whose goal is to match long-term export and import trends.

The strategy targets to raise exports as a share of imports from 93.4 per cent in 2022.

The export strategy targets three export-oriented clusters for diversification including oil seeds products, sugar cane and manufacturers.

Ministry of industry and Trade spokesperson Wiskes Nkombezi commenting on the poor trade performance, said a country’s exports are based on its productivity.

Nkombezi noted that the implementation of the NES which the country launched last year is going on

smoothly.

Beyond words of policy

Although government has policies including the NES, and also pushing Malawians to buy local manufactured goods, experts have so far argued that there is more that has to be done.

Commenting on how Malawi can stand the Chinese pressure, Chancellor College Professor of Economics Ben Kalua called for a strategic move.

“China knows what it wants from Malawi and Africa. We have the raw materials and the market for its goods. But do we know what we want from it? For example do we know you and me, how much we owe China in the construction of the Parliament, of the Hotel and all the other projects? We don’t,” he said.

He added that Malawi cannot handle China alone.

“We need a concerted African block, or a regional one, to define what we want from China. We need to put an agenda on the table to work from. There is a lot Malawi can benefit from China in terms of market and transfer of technology. But this cannot happen if we don’t put our house in order,” he says.

Available data, so far indicates Kalua’s proposition might be effective.

The Tralac data indicates that on a regional level, the Southern Africa Development Community (SADC) showed some resistance to Chinese trade, thanks to the South African.

During the period, Sadc exports to China rose by about 35 percent from $61.3 billion to $82.7 billion. Notably exports from South Africa to China rose by a whopping 39 percent $32 billion to $44.6 billion.

Ecobank Value Chain head, Patrick Uka in an e-mail commenting in his own capacity, on Monday, noted that in Malawi we are good at launching initiatives and tend to forget completely about them.

“The best execution strategy is to have a clear action plan with specific tasks, dates and targets.

“Indeginisation is important if exports are to contribute to poverty alleviation. The simple reasoning is indigenisation preserves national wealth. You cannot talk about empowerment and not consider Indeginisation. If properly managed indigenisation could significantly reverse the poverty trends in Malawi,” he added.

Uka further said that regional agendas are relevant to Malawi but the country has not benefitted significantly from regional integration.

He however, noted that the World Trade Organisation is about unending talks but protects has always been there arguing Malawi requires strong negotiators.

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