Despite various interventions to narrow the trade gap with the rest of the world through the second Malawi Growth and Development Strategy (MGDS II) implementation period, trade deficit more than tripled, it has been established.
The MGDS II review report shows that during the five-year period—2011 and 2016—the deficit jumped from K166 billion to K595 billion.
In nominal terms, though, the country seems to be exporting more over time as a result of fluctuations in foreign exchange rates, but there is not so much increase in real value of exports, according to the report.
The trade deficit—a negative balance of trade in which a country’s imports exceed its exports—came about despite government’s policies, strategies and effort to implement programmes in several key areas in support of trade, industry and private sector development.
These include a draft private sector strategy, National Investment Policy, National Export Strategy (NES) and an updated micro small and medium enterprises (MSME) policy.
In the MGDS II, government’s main goal under the private sector development, industry and trade was to develop and promote a conducive environment to enhance inclusive private sector growth and competitiveness.
This was to be achieved by way of developing and expanding the industrial sector with emphasis on value addition and employment creation, increase supply of value added goods and services for domestic and international markets and move up the value chains in key crops and increase agro-processed products for both domestic and international markets.
In an interview on Tuesday, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said the private sector is failing to make strides because the country has failed to promote the sectors that matter.
He said: “As a country, we have failed to promote the sectors that matter the most in the economy. We used to have vibrant industries back in the 1980s and the manufacturing sector alone was able to contribute 20 percent to the gross domestic product [GDP] that was before de-industrialisation.
“Again, as a country, we are exporting more agricultural raw materials which are prone to price volatility and the deficit problem is coming in because we are too dependent on primary commodities.”
The report says about 22 percent of GDP comes from trading and retailing activities, mostly linked to the rural economy while the manufacturing sector has been in decline, with low capacity utilisation and falling investment.
Currently, the manufacturing sector accounts for just about 10.8 percent of GDP with only 14 percent of output being exported.
While agreeing that the deficit is not good for the economy, National Working Group on Trade Policy chairperson Frederick Changaya said it is the responsibility of every Malawian to ensure that the trade deficit gap is closed.
“This is not good for Malawi, and it tells us that our consumption pattern as a country is not helping matters at all. Despite implementing various policies, it is our responsibility to patronise and consume our own products and maybe once we have a good charity at home, we can go and start exporting.
“Again, there is need for government to practise fiscal sanity and have our monetary policies tightened to our long term goals. With that, our products as a local industry will be as fair and the local industry will be able to thrive,” he said.
In 2013 alone, for instance, six countries, including Canada (16 percent); Belgium and South Africa (eight percent) and China, United Kingdom and the United States of America (six percent), accounted for half of Malawi’s exports in nominal value while in the same year, five countries accounted for 53 percent of Malawi’s imports in nominal value from the whole world, including South Africa (22 percent), Mozambique (12 percent), India (eight percent), United Arab Emirates (eight percent) and Zambia (eight percent).
According to the report, weak technological capacity, unfavourable business environment, weak process learning and lack of focus on priority clusters remain the main challenges for private sector development, industry and trade in the country.
In an earlier e-mailed response, Ministry of Industry, Trade and Tourism spokesperson Wiskes Nkombezi said that the problem has been that while government strives to grow exports, Malawians tend to increase imports as well thereby maintaining, and at times, expanding the trade deficit.
“As a ministry, we are interested in expanding the product coverage to diversify the export base. The National Export Strategy is helping us in this regard. Government on its part will continue playing its facilitative role and reforming the business environment and even beckoning more investors to come and establish their businesses in Malawi so that we produce more for both the domestic and foreign markets,” he said.
After the expiry of MGDS II, government is currently conducting consultations for the successor of the strategy.n