Long, winding road to export-led growth

Source: The Times Group Malawi
Author: William Kumwembe

Malawi, a land- locked country in the southern African region, grapples with glaringly high trade deficits each year.

The country has an annual trade gap of $2 billion with imports seen at $3 billion and exports at a meager $1 billion.

It does not produce enough for export to offset cost of importing commodities such as fuel, fertiliser and medical drugs, which top the list of the imports bill.

Others include kaunjika (second hand clothes), foot ware, cement, iron sheets, furniture, electronic gadgets, and even toothpicks. Simply put, in Malawi, almost everything is imported.

On the other side, the country's exports basket comprises low value and unprocessed agricultural commodities with, tobacco -- which is also losing its charm by day -- being as top export crop, followed by sugar, tea and coffee.

More policy documents, less results

The country is implementing various policies including the National Export Strategy (NES II) in its desperate attempt to narrow the ever yawning trade gap and ensure an export-led economic growth.

Launched in December 2021 with a five-year implementation life-span, the second NES is crafted to facilitate an increase of exports as a percentage of gross domestic product from 14.6 percent to at least 20 percent.

The strategy's main objectives include increasing the contribution of exports to the economic and social transformation, promoting diversification of products and markets, and enhancing international competitiveness of Malawi's industries, enterprises and products.

It is drawn in such a way that it makes the country a competitive, compliant, diversified and sustainable sourcing destination for goods and services for the regional and global marketplace.

The strategy also aims to unlock Malawi's full export potential and to contribute towards achieving aspirations in Malawi 2063.

Speaking at the launch of the blueprint in Lilongwe, President Lazarus Chakwera said focus was on diversifying the country's [agrarian] economic base, with mining and tourism poised as potential complements.

"...once we do this, the trade balance will tilt in our favour, leading to the creation of jobs and wealth; the enhancement of our revenue collection; the unlocking of foreign currency inflows; and above all, lifting millions of our rural people out of abject poverty," Chakwera said.

But just like its predecessor document, the NES II's aspiration to shift towards export-oriented industrialisation seems to be yielding less than anticipated results. And the diversity concept remains an idea.

Figures show that as at close of 2021, trade value picked up, albeit marginally, to $1.019 billion from $880 million in 2018. However, it went down again in 2022 to $940.8 million.

The Malawi Investment and Trade Centre (MITC), a government entity mandated to oversee trade promotion, has since said the country is poised to realise the NES II dreams within the set timeframe.

But the fluctuations in trade numbers within the first two years of NES II implementation period has made commentators doubt possibility of Malawi's attainment of the growth aspirations within the projected five-year timeframe.

Low hanging fruits in agriculture sector

They say diversity demands aggressiveness and not merely shifting to the other deemed high potential sectors.

Mining and the other sectors should, therefore, play complementary role, and not be perceived as alternatives or a replacement to agriculture.

Malawi needs to first awaken the sleeping giant in the agriculture sector. There are still many low hanging fruits in the sector, enough to change the country's misfortunes, if well harnessed.

The nation should hastily move towards mechanising the production chain, not with tools best fit for museums like the hoes and not through populists' policies that only focus supporting subsistent farming with billions of Kwacha each year, but with no tangible value for money.

The process requires a paradigm shift; from the rain-fed agriculture -- which has been frustrated by harsh weather conditions due to climate change -- to irrigation farming, for multiple productions within a year.

The comercialisation drive must be taken beyond the rhetoric.

It entails enhancing output, which does not always require mass producers, but a radical and systematic approach, where skilled and well capacitated producers dominate the space.

The agriculture sector needs massive public and private sector-led interventions and investment, towards value-addition, processing and manufacturing to meet the ever evolving international market test.

Huge market place; what to offer?

Malawi -- a net-importer -- is partly banking on the African Continental Free Trade Area (AfCFTA), among others, for a market opportunity for its export products.

The AfCFTA -- the continent's single biggest trading bloc -- would create a market of more than 1.3 billion people and a combined gross domestic product of up to $3.4 trillion.

If fully implemented, the AfCFTA could leverage intra- African trade and increase trade among member states by up to 110 percent.

In addition, the AfCFTA could lift up to 30 million people out of extreme poverty and up to 68 million people out of moderate poverty.

To survive in such a space, it takes building a competitive edge and a competitive advantage.

Malawi needs both.