Malawi journey towards export diversification

Tobacco, tea and sugar are Malawi’s major cash crops, accounting for over 80 percent of its exports. But with government’s call for export diversification, this is likely to change as a number of non-traditional products have been lined up for the export market.

Soya beans, paprika, pigeon peas, beans and groundnuts are some of the non-traditional products earmarked for the export market.

But Malawi can only achieve its dream of broadening export diversification programme if it puts instruments to boost trade and investment opportunities.

Of course, Malawi is a signatory to a number of multilateral and regional trade agreements such as the Common Market for Eastern and Southern Africa (Comesa) and the Southern Africa Development Community (Sadc).

The country also enjoys a trade partnership with the United States (US), European Union (EU) and other Asian countries such as China and India.

But Malawi’s worsening trade balance—the gap between imports and exports—is a clear testimony that the country is still lagging behind in trade.

Last year, Malawi’s trade deficit was pegged at K107.9 billion which is one of the worst in its trade history.

Unfortunately, Malawi has a number of trade policy documents and proposals that are still gathering dust at the Ministry of Industry and Trade which if implemented would, boost its trade with other countries.

The mismatch between import and export value is a cause for concern and a wakeup call that something has to be done to promote foreign direct investment (FDI) in untapped potential trade areas.

Of course, Malawi is a beneficiary of the African Growth and Opportunity Act (Agoa) where it exports textile and apparel.

But United States (US) Embassy economic officer Christopher Nyce recently said Malawi can do better to fully utilise the trade window open to 40 sub-Saharan countries.

“The ball is in Malawi’s court to ensure full utilisation of the Agoa facility which has helped diversify exports and expand economic opportunities for most African countries,” said Nyce.

Local trade experts also agree that the country is yet to tap from its agro-processing, mining, fish farming, wood and rubber as well as in the tourism industry.

The analysts also see huge potential in the cotton industry where investment opportunities remain idle, especially in ginning, spinning, weaving, knitting as well as in manufacturing of textile and garments.

A report by OCO Global Project presented in Lilongwe recently showed that Malawi continues to fare badly in attracting FDI inflow as well as in business competitiveness in southern Africa.

The project is developing a market plan for Malawi Investment Trade Centre (Mitc) to promote the country’s investment opportunities.

A 2013 World Bank Doing Business (DB13) report ranked Malawi 157 out of 185 countries in the world. Last year, Malawi was on position 151 on DB13.

“Malawi has fallen in the areas of registering property, starting business, getting credit, protecting investors, resolving insolvency, paying taxes and trading across borders,” reads a 2012 annual government economic report in part.

Malawi needs to address these challenges to attract FDI and promote the ease of doing business.

The Ministry of Industry and Trade is aware of the need to diversify the country’s export base.

“In the past, we have been utilising few lucrative markets such as the EU as you know we have recently launched the National Export Strategy [NES] which looks at how we can diversify our export markets,” said the ministry’s spokesperson Wiskes Nkombezi.

Nkombezi cited Asia as one of the big emerging markets Malawi can exploit in its drive to diversify its economy.

A concept paper prepared by Mitc shows that government is committed to diversifying the country’s export base to shore up its foreign exchange reserves.

“Mitc is not ignorant of the country’s weak and underdeveloped export sector currently characterised by reliance on a few cash crops for export earnings and inadequacy of resources and skills of exporters,” reads the report.

Crowning it all, Trade Minister John Bande says government has gone flat out encouraging both local and foreign traders to invest in any sector of the economy.

Bande banks his hopes on NES which he says will speed up export growth, especially of non-traditional products.

What matters, however, is concerted efforts from both the private and public sectors for Malawi to achieve its dream of creating wealth and employment for its people.