While trade and transport costs in Africa are high, those faced in Malawi are higher than in the wider region, a new report says.
Compared to the average cost in the region of $7 per ton per kilometre, in Malawi this reportedly ranges from $7 to $10.
These high costs, the paper titled A political economy analysis of the Nacala and Beira corridors, translates into other competitive disadvantages for the country.
“For instance, fertilisers cost about 25 percent more in Malawi than Zambia, even though both countries are landlocked, with 60 percent of the price differential explained by the high transport costs in Malawi,” reads part of report which was funded under a political economy research grant agreement between ECDPM and TradeMark East Africa (TMEA).
The paper said international partners are keen to invest in improving trade and transportation, with a view to promoting socio-economic development in the region, but find trade and transport highly political in both Malawi and Mozambique.
Hence, although Nacala Port is the closest to Blantyre and Lilongwe the most cost-effective on paper, it is not the favoured route for Malawian importers and exporters.
The study found that a majority of imports seem to come through South Africa, closely followed by Beira, while exports are majoritarily through Beira.
The study maps out the different factors and actors that shape current use of the Nacala and Beira corridors connecting Malawi to the Mozambican coast.
“High-level political relations have fluctuated through time, and though cordial, do not provide a solid basis for improving efficiency along the Nacala rail corridor, with domestic priorities on both sides dominating cross-border cooperation.
“Thus far, Beira has emerged in Mozambique as the more efficient port serving Malawi and the wider region where state-business relations have aligned with political objectives,” reads the report.
It notes that Nacala has been made efficient for coal exports but coordination for other trade is lacking, with political interests more geared towards a competition for control of rents.
Mozambican road transporters also have an upper hand over Malawian transport, though the market is highly segmented for imports and exports and different goods.
The paper recommends that external support to improve efficiency will need to be taken into account of the vested state-business interests round the ports and corridors, particularly in Mozambique, and rekindle multi-actor cross-border coordination mechanisms, ideally including different government bodies, private service providers.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has often raised alarm at the high cost of transportation for exporters and importers.
The implication, MCCCI, warned is that products from Malawi become uncompetitive on the international market because of price due to high transport cost to ship out goods as well as to import raw materials for production.