Malawi is losing $85 million (K48 billion) in foreign earnings and more than K15 billion ($25,550,600) in tax revenue every year because some traders are informally exporting commodities and under-declaring proceeds to government.
An expert in the industry says illegal legume exports are denying Malawi much-needed foreign exchange.
In an interview with Business Review on Tuesday, AHCX Commodities Exchange general manager Davis Manyenje said the country is losing revenue because “there is lack of policy and organisation in the commodity value chain”.
AHCX data shows that K15 billion in tax revenue, which Malawi Revenue Authority (MRA) is supposed to collect at a corporate tax rate of 30 percent, is also lost in these clandestine exports.
Said Manyenje: “All this thanks to the nature of the commodities market. There is need for policy change for us to reorganise the whole commodities value chain.
“The current situation on the Malawi commodities market is dominated by intermediaries, a development that creates room for some people who export the produce and under declare inward proceeds leading to a loss of about $85 million, which translates to tax losses from proceeds of beans, soya, ground nuts and pigeon peas.”
He said that is why, last month, AHCX and Malawi Investment and Trade Centre (Mitc) flighted adverts in the local press requesting farmers to consider production of high demand commodities such as Pigeon peas (100 000 metric tonnes) [MT], soya beans [80 000 MT] sugar beans (15 000 MT], sunflower (30 000 MT) and groundnuts (80 000 MT), whose demand is predominantly export.
“The demand that is out there is quite high and with the current level of production, a formalised export market should rake in about $250 million from legumes only.
“We need to reorganise the whole market chain to benefit the producer and help orgnisations such MRA collect enough taxes,” said Manyenje.
He says legume exports alone can significantly shore up the country’s foreign reserve position and stabilise the kwacha, which in turn should cushion the economy from imported inflation.
“If this is supported by sufficient food reserves, overall inflation should be contained or in actual fact be on a reverse trend, which should see interest rates drop to manageable levels.
“Sustaining this over the next three years should see macroeconomic stability prevailing, all things being equal. Farming will be viable as it will be commercial,” he added.
AHCX hopes that once put in place, the commodity policy will ensure transparency; increase demand led production and will create a basket of commodities, which will help the country diversify its export base. n