Rural people perk up their livelihoods
For years, Elias Gomile of Thyolera Village in Traditional Authority (T/A) Lundu in Blantyre has seen people around his village, including his father, weave basket chairs and other items and eke a living out of them.
Traders travel from far and wide to buy the cane items and furniture from his village.
Gomile, who is also the bookkeeper for Namgoneka Community Savings and Investment Promotion (Comsip) Cooperative, testifies that the money his father made from cane weaving sent him to school.
“Today I am a proud Malawi School Certificate of Education (MSCE) holder, a leader in this area when it comes to development,” says Gomile.
The group produces various cane products and sells to customers in Blantyre and surrounding areas, thanks to Comsip which champions the advancement of an entrepreneurial culture among rural and peri-urban poor communities.
Changing lives
Just like people of Thyolera Village, other members of Comsip clusters and cooperatives across the country are involved in various income generating activities on top of the group businesses that they operate.
The testimonies from members are no different from group to group as almost all of them indicate that being Comsip member has brought positive changes in their lives and that of their families.
Namvula Doctor, a 36 year old woman from Mtambo Village, T/A Makhwira in Chikwawa is a member of LivunzuComsip Cluster with 70 members.
She points out that apart from the fruits ripped through their cluster’s business which buys and sells goats to boost their capital with the plan of buying a rice mill; her own life has been positively impacted.
“Before Comsip trained us in business management and savings and loans, we were victims of loan sharks and had no peace of mind with all the pressure from our creditors. Now as Comsip members we get loans from our own groups and can repay easily at lower interest rates,” she says, smiling.
Apart from the group’s business of buying and selling goats, she also operates a personal business of knitting and selling cane hats.
Teething challenges
Nevertheless, there a number of challenges the Comsip members are facing in their respective business and farming endeavours.
From transport problems to lack of markets, forcing them to sell their products at lower prices, the members wish things could change.
Nyambwe Cluster secretary in Zomba, KelitaChigalu narrates about her group of 15 women members who have been renting a field and cultivating groundnuts.
Last farming season they yielded 42 bags but as is the case over the years, she says the groundnuts were sold at very low prices, not even compensating for the labour they put in.
However, as a group they still dream of the day they will buy a machine to process the groundnuts by producing cooking oil on their own and sell.
Namgoneka Cluster has not been spared the price exploitations. Spending about K5 000 on all the materials used for weaving a basket chair for instance, they sell for K7 500 to people who resell at high prices in other countries.
“If we had enough capital we would export the chairs ourselves. We might not really afford to export on our own to Europe where most of them are highly wanted, but at least we can export to Zambia, and that is close enough for us to go. Maybe then the returns would be more reasonable,” Gomile said.
Apart from that, he claims they travel long distances, 20 to 30 kilometres to get some of the weaving materials.
Saved by Comsip
Comsip Cooperative Union is a member owned union of savings and cooperative societies in the country which evolved from the Malawi Social Action Fund (Masaf III) as the implementing agency for the savings and investment activities under the community livelihood component.
“We have been in this business for a very long time, producing basket chairs, mirrors, tables, stools, baskets and other things. We are well known for producing basket products and this skill is passed on from generation to generation,” explains EllamanChingámba, the treasurer for NamgonekaComsip Cooperative.
Comsip Union currently has over 400 cooperatives and over 4 000 groups across the country. The union is serving a population of over 150 000 members organized in groups, clusters and cooperatives in all 28 districts.
Comsip information, education and communications officer Emmanuel Muwamba says among other objectives, the union is there to build a savings and investments culture among the rural and peri-urban poor communities as well as to nurture an entrepreneurial culture among them.
“We promote savings and investments because we realise that very few people are banked in rural areas. They cannot always travel long distances to access banking services. The idea is for them to save and promote their own families and be able to invest in whatever ventures they would like,” he said.
What’s in the proposed tax measures?
Minister of Finance, Economic Planning and Development Goodall Gondwe on Friday unveiled new tax measures in the proposed 2017/18 National Budget set to roll out on July 1. In this Part 1 of an analysis, Tax Consultant and 2019 Presidential Aspirant PETER MBAKUWAKU KUWANI analyses what the new measures mean:
The periodic presentation of annual financial budget normally brings about disagreement and hostilityon the society which was once speaking with one voice on the debilitating and dwindling social and economic wellbeing.
One of such divisive elements in the budget is the tax measure because some employees will be smiling out of the budget others will be wearing a gloomy face out of the same measure and indeed when other business players will be rejoicing others will be scratching their scalp.
The analysis and criticism on some of the proposed tax measures will be made basing on the prima face of the budget speech and access to detailed tax bills could have made a difference in unearthing the hidden grids of tax implications.
Having in mind the figurative expression that all that glitters is not gold, it is worthwhile and effectual spending valuable time to bisect and examine some of thetax measures presented by the Minister of Finance, Economic Planning and Development in the Malawi August House on 19 May 2017.
Excise Tax on TV Subscription
The introduction of a 10 percent excise tax on TV subscriptions will negatively impact on the disposable income of consumers making such payments to various TV service providers.
With government perception that gluing to a TV station is luxurious, consumers will react to the 10 percent excise tax measure on subscription fees by devising and employing cost saving tactics. The immediate reaction by some of the consumers will be total withdraw on TV subscription for being costly and unaffordable. The second reaction will lead to consumers opting for less fancy and low priced bouquets with fewer and limited entertainment channels. With minimal policing and enforcement on where TV subscription should legally be effected, other consumers will opt for making payment outside Malawian jurisdiction and enjoy the same service at a lower price.
As indicated and highlighted in the budget, the consumers who could not afford such TV subscriptions will opt for tuning in and watching local TV stations on programs which are seemingly unpalatable and boringin their daily lives.
When the repercussions are soberly reflected, the public will again realise and appreciate that the local TV stations subscribe some of the programmes from other channels and are ultimately beamed and viewed for free.
It is a fact that local TV stations have low volumes of business from adverts and the introduction of a 10 percent excise tax will further increase the cost of the subscribed programs with insignificant probability of recoupment.
Comparatively, the public broadcaster will sustain its business operations under such predatory business environment because of government subventions and competitive advantage on advertisement businessover other channels. Eventually, the private TV stations will find it too expensive to subscribe to other channels and instead will resort in solely producing locally produced programs which will be monotonous to viewershencescaring aware the already limited prospective advertisers.
The Buy Malawi concept has not yet reached maturity stage to be experimented and practiced on the trendy and fashionable digital generation.
In the long term, the introduction of 10 percent excise tax measure on TV subscriptions will strangulate and suffocate TV service providers’ businesses through loss of audience which will undergo metamorphosis along its lifecycle to bear lower volume of advertisement sales.
Consequentially, the profitability of the local Dstv channels will suffer contraction because of reduction in sales volume culminating from multiple consumers’detesting of the products and ultimately the entities will hardly sustain their business and the market exist could be the likely prescription to the crippling business operations.
Without provocation of minds behind the introduction of a 10 percent excise tax,it can as well be insinuated that when consumers pull out from the local TV subscription by going for the most friendly and cost effective alternative mode of subscription, the government will be bound to lose in the long term because the profitability of such channels will directly decline with sales revenue reduction.
Indirectly, government will hit itself below the belt by collecting 10 percent excise tax at the expense of a 30 percent corporate tax levied on company’s taxable profitsas a result of predatory tax regime.
The purported operation at a lower scale and the triggered closure of business entities could be superseded with staff retrenchment hence eroding further tax revenue through the forgone PAYE.
The unnoticed cross border TV subscriptions will precipitate into foreign currency loss to jurisdictions having preferential subscription fees as compared to locaDstv asking prices.
In an ideal situation, the multinationalDstv companies could emerge winners at group level because sales revenue loss by the local company will be shifted at a foreign entity through illicit TV subscriptions originating from disgruntled local subscribers.
Socially, the local populace will be denied entertainment and the substitute could be a boom insexual activities which is disastrous and detrimentalto a country where population is growing at an alarming rate.
The premise is that a10 per cent excise tax measure will operate in a vacuum and in that regard tax revenue will marginally increasebecause of a combination of excise tax element and the ripple effect of the same on output VAT.
Customs and Excise duty on minibusesand buses
The removal of customs and excise duty on minibuses and buses less than five years will lead to tax revenue loss when considered in isolation but whenanalysed in entirety, the removal of such taxes will increase import volume of minibuses and buses and this could translate into increase in tax revenue through import VAT.
Things being equal, the trekking in of multiple minibuses and buses could lead to mushrooming of local transport business and the operators under this industrycould contribute more tax revenue through corporate and indirect tax payment.
Commuter passengers will have to smile and celebrate the removal of customs and excise duty on minibuses and buses because this will lead to increase in commuter minibuses and buses hence enhancing competition amongst playerswhichcould translate into deceleration of minibus and bus fares.
This tax incentive will have to be categorically appreciated with cautionbecause the gesture could be meant to reward politicians and political party surrogates who are presumably operators of transport businesses.
Other than boosting tax revenue, the introduction of excise tax on minibuses and buses of more than five years old will mitigate the effects of dumping of old fleet of motor vehicles in Malawi which might have unquantifiable detrimental consequences to the environment. The excise tax is theantidumping policy tax measure which is in tandem with environmental law where the polluter must shoulder the burden by paying for the damage caused on the natural environment.
Please make a date with Part 2 in tomorrow’s edition of The Nation in the Business News Section
