Mining & Trade News

As Malawi joins the rest of the world in commemorating the World Competition Day, the Competition and Fair Trading Commission (CFTC) says a policy addressing concentration and abuse of market power is an indispensable tool..

Addressing a gathering when celebrating the day, CFTC acting executive director Apoche Itimu, said the advent of COVID-19 has seen a sharp rise in the misuse of market power by large business enterprises that frustrate smaller ones from participating and competing fairly in the country’s trade activities.

Itimu noted that as the socio-economic impact of the pandemic continues to erode the gains posted as a result of globalization, existing economic inequalities within and between countries are also increasing the gap between the rich and the poor.

“It has been observed that big enterprises have become bigger while small ones have suffered the most and in some cases have even collapsed,” she said and suggested the need to address abuse of buyer’s power under the fair competition law and policy regarding aspects of labour, farmer welfare and supply chain contracts.

She also expressed dismay over unfair trading practices that impede the achievement of an inclusive digital economy. “The boom in e-commerce is essential for economic recovery and inclusivity,” she said also observing the need to protect the digital space

Itimu further warned traders not to engage on any anticompetitive trade practices, especially during festive season when many traders take advantage of unsuspecting consumers to sell or buy goods at manipulated prices

The celebrations were held under the theme “Competition Policy for an inclusive and Resilient Economy”,

Commemoration of the Competition is a tradition that dates back to December 5, 1980 when the United Nations adopted the international standard for competition laws attributed as “the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices” popularly known as the United Nations Set of Principles and Rules on Competition.

The Malawi Investment Trade Centre (MITC) has challenged local Small and Medium Enterprises (SMEs) to produce quality products that can compete favourably on both local and international markets.

Speaking during the official opening of a three-day mini trade fair in Lilongwe, MITC Board Member, Fumbani Nyasulu, who also represented the Principal Secretary in the Ministry of Trade, said local production of good and high quality products can easily turn the country from a gross importing nation into an exporting one.

“The government agenda is to export more and import less, hence, our call on SMEs not to only focus on the local market but to produce with the international markets in mind.

“We should be competitive enough to replace the imported products in the shops with quality and affordable local products,” said Nyasulu explaining that government has put in place measures that will assist local producers build their capacities in different value chains.

The mini trade fair has been organized to give the local SMEs an opportunity to come together and share experiences with their fellow sector players, said Nyasulu adding that the activity is also one of MITC’s functions of promoting trade and investment.

The fair has been organized in collaboration with African Development Fund (ADF), Small and Medium Enterprises Development Institute (SMEDI) and National Association of Small and Medium Enterprise (NASME). The theme of the fair is “SMEs Driver of Industrialization and Economic Growth.”

In his remarks, SMEDI Chief Executive Officer Rodrick Chataika pledged to continue building the capacities of local SMEs. 

“SMEDI will continue playing its important role of capacitating these SMEs through training programs, educating them in business entrepreneurship, management skills, financial literacy on how they can prepare their financial statements and accounting records and also financial proposals if they want to access funding from partners and also from different banks,” said Chataika, whose organization has entered several agreements intended to link SMEs to local banks for business financial support.

He further explained that SMEDI also links SMEs to potential markets, apart from providing incubation centers where entrepreneurs are trained to add value to raw materials and convert them into marketable products.

Chataika said the incubation centers also target local Artisanal Small Scale Miners (ASMs) to turn their raw gemstones into valuable products by professionally cutting and polishing them into internationally marketable products.

Endrina Maxwell, owner of Dwalle Supplies and General Dealers lamented limited capital as the main challenge obstructing her business to compete with bigger companies.

She however sees the formation of cooperatives as an alternative but said she would in the meantime want to run independently. “I want to grow as an individual,” she said

The announcement by the Bankers Association of Malawi (BAM) to introduce a 16.5 percent Value Added Tax (VAT) on various banking services that its members offer to their customers, attracted an immediate public reaction after it was made on Thursday.

The statement signed by BAM’s Acting Chief Executive Officer, Lyness Nkungula, says the association made the decision following a recent parliamentary amendment to VAT Act.

“Bankers Association of Malawi on behalf of its members…. would like to inform the general public that from 1st November, 2021 some of its banking services will attract Value Added Tax (VAT) at 16.5 percent,” reads the statement in part.

The development sparked a national debate with people protesting the pronouncement saying charging customers on every banking transaction only serves to stifle the economic well-being of Malawians, most of whom earn their livelihoods through precarious informal jobs.

Prevailing comments on the social media indicate that people expect the banks to start charging 16.5 percent VAT on bank transactions such as deposits and withdrawals.

“This means that the government introduced MK100,000.00 free tax band is now useless as it will be eaten away by the banks,” notes one commentator.

Economist, Prof. Ben Kalua explains that the introduction of the tax on banking services will not directly affect low income people because they rarely, if at all, use banking services.

“It is a welcome move since poor people are already financially excluded from using banking services,” says Kalua.

However, the Malawi Revenue Authority (MRA) has cleared the mist saying the BAM statement has misled the public because the tax measure does not in any way affect normal banking transactions such as deposits and withdrawal of money.

Briefing the press, MRA Deputy Commissioner, Henry Ngutwa, explained that parliamentary amendment is intended to ensure that banks must meet their obligation of settling 16.5 percent of what they charge their customers on non-related banking services such as printing bank services, ATM charges and fees for processing credits.

The revenue generating body has also said, following the clarification, it does not expect banks to increase their charges.

But commenting on the merits of the Act to clarify banking services and widen the tax base, Prof. Betchani Tchereni says the tax initiative is part of Malawi’s drive towards creating internal sources of revenue as the country drifts away from external sources of income.

“We really need to broaden our tax base,” he says observing that the country experiences pressure to implement its developmental programmes because its development financing is heavily and hugely dependent on external sources as less than 50 percent of its population pay taxes. “We really need to have our own sources of income so that we can do more infrastructure developments and provide social services of higher quality,” Tchereni says but was also quick to note that the proposed tax was likely to affect the customer base of various banking institutions as low income generating people will probably decide to seek for other money saving means in a bid to run away from the 16.5 percent banking VAT.

Real estate consultants, Knight Frank Malawi, has singled out high inflation as one of the reasons for the stagnation of transactions in Malawi’s property industry.

A research study conducted in the first half of 2021 shows that as the country’s monetary policy focused on maintaining single digit inflation, overall inflation increased from7.7 percent in January to 9.1 percent in June. At the same time, the Malawi kwacha depreciated by 5.92 percent.

The research notes that during the study period, the market was generally passive with the residential sector showing resilience while the demand for prime residential property for rent in the commercial sector remained stable with limited number of sales transactions.

However, the prime residential market is reported to have registered a rental decline of between 15 – 20 percent in both Blantyre and Lilongwe cities as some houses became vacant for a long period due to low demand resulting from a sudden flight of expatriates during the height of the Covid-19 pandemic.

“Unfavourable interest rates for housing finance reduced borrowing hence self-funded home construction remains strong in both high density locations and affluent suburbs of all the cities.” the report says

Knight Frank also highlights that the office market demand remained passive during the first half of the year as a result of the scaling down of small and medium enterprise occupiers and relocation of others to residential areas.

It says this year, office vacancy rates reduced slightly as compared to the same period last year though it became subdued in the period under review with vacancy rates of between 20 to 25 percent.

According to the consultants, the vacancy rate, lower rental payments by tenants and subdued business influenced by the covid-19 pandemic all pose a great threat to rental collection.

They further note that in an effort to mitigate the impact, some property owners reviewed rentals downwards by-5 to-10 percent as others maintained existing charges with very few increasing their rental fees.

Meanwhile, Knight Frank says there is an anticipation that the property market will continue to adapt to the current trend in second half of 2021 with little light to normalize in the short to medium term due to rising demand for space.

The Ministry of Trade has embarked on a drive to revive idle community factories created as cooperatives under the One Village One Product (OVOP) initiative.

Industry Minister, Roy Kachale Banda, has said that government has taken this step because it is aware how much these factories can contribute to the growth of the manufacturing industry in the provision of value addition to the products that the country otherwise exports in raw form.

Kachale made the remarks in Blantyre when he toured Mankhamba Bee Keeping and Kunthembwe Producers and Marketing Limited Cooperatives where he learnt that the two institutions are failing to operate because of lack of electricity and reliable water supply among other challenges, despite being equipped with the necessary facilities for value addition of a number of agriculture products.

” We will invite the Ministry of responsible for energy as well as officials from the Electricity Supply Commission (ESCOM) to a roundtable discussion to expedite the process of supplying electricity to the facilities”, said Kachale.

The minister also disclosed that his ministry is in the process of identifying experts to train cooperatives on best practices in processing competitive and quality products besides orienting them with business management skills, a common challenge among cooperatives.

Mankhamba Bee Keeping Cooperative has a warehouse but need machinery and electricity to start processing and add value to the honey they already produce while Kunthembwe Producers and Marketing Limited Cooperative has not been connected to the electricity grid, despite being furnished with a warehouse and equipment for processing groundnuts into cooking oil and groundnut flour.

Implemented mostly in rural areas to accelerate value addition processes, the OVOP initiative, also formed cooperatives to run the factories and create employment for the country’s rural population.

OVOP has contributed to growing rural economies and attracting people away from migrating to urban centres in search of economic opportunities.

Value addition is one of the key areas of focus for the attainment of the country’s long-term objective of ” an inclusively wealthy nation” under the Malawi 2063 agenda.

Malawi’s private sector needs to exploit the forthcoming 2nd Intra-African Trade Fair (IAFT) which seeks to rationalize inaccessibility of trade opportunities and market information across the continent.

This was observed on Monday, September 20,2021 during IAFT 2021 –Road show conference held at Amaryllis Hotel in Blantyre in preparation for the fair scheduled for November 15 to 21 2021 in Durban, South Africa

Minister of Trade Sosten Gwengwe, who was the guest of honour at the Show, told Mining & Trade Review that industry players should embrace numerous expos the ministry is currently convening in order to scale up trade volumes and increase investment opportunities across multiple platforms.

Gwengwe explained: “One of the key challenges in as far as trade and investment is concerned is financing because we have a lot of private sector entities that really wish to venture or expand their export trade but they are failing to peak due to fiscal constraints.”

“And today we are happy that AfreximBank has shown commitment towards supporting our private sector through various initiatives including conducting the 2nd IAFT preparatory roadshow in Malawi, and I understand some of the delegates will still remain in the country for some days where they are to have bilateral talks with local banking players.”

During the roadshow, it was also highlighted that the 2021 fair is to generate approximate of $40-billion in trade and investment deals involving 55 countries and over 5-thousand conference participants are poised to attend with over 1,100 exhibitors, and 10,000 visitors and buyers.

Promoted by Africa Export-Import Bank (AfreximBank) in collaboration with African Union as well as Africa Continental Free-trade Area (AfCFA), the fair is convened every two years to offer trade and market information, and to provide market linkages between buyers and sellers from across the continent.

Chief Operations Officer for Southern Africa AfreximBank Humphrey Nwogu explained that IATF is an ideal event to enhance trade in Africa as it brings together more professionals under one roof.

Nwogu explained; “In 2021, IATF’s theme will focus on the newly-launched AfCFTA – a single market for goods and services across 55 countries, aimed at boosting trade and investment, IATF Virtual will enable showcasing of goods, services and investment opportunities on an interactive online platform and the IATF Virtual will continue even after the Trade Fair has concluded.”

“As a bank, we realized that the major challenge that exists on the continent is market information on trade opportunities existing in other countries, so we thought this is a good avenue for countries to come together to showcase and identify potential opportunities available in respective countries.”

 “We are to convene business to business meetings, government to business meetings, and government to government meetings such that all deliberation will yearn to level trading field for equal trade opportunities.”

Nwogu also emphasized that AfCFTA is an ideal remedy for continental economic recovery due to tradeoffs and other incentives brought by the arrangement.

He said: “Looking at the fact that most countries are recovering from knock-on effects of novel coronavirus (Covid-19) pandemic, AfCFTA is an ideal remedy for post Covid-19 economic development plan across the continent as it promotes trading within the continent and projections are positive,” he said.

“Free trade area arrangement is ideal to benefit all, to cushion countries that may be in deficit during AfCFTA arrangement, AfrixemBank has set up $1 billion Adjustment facility which will enable disadvantaged countries to stabilize in early stages.”

Reserve Bank of Malawi (RBM) Governor, Dr. Wilson Banda, also said podiums such as IAFTA are ideal to strategically position the country for more investment and trading opportunities, but he further urged business entities to advance on quality of produce to attain bargaining ‘power to compete at continental level

“As a country, we are looking at improving trade and such meetings are essential in addressing trade issues. We expect the country to benefit at continental level, but to compete on continental level as government we have been lobbying with private sector to zeal much on quality improvement seconded by quantity, through investing in innovation and modern industrial technologies.”

Group MD for Nico Holdings who is also co-chairman of Public Private Dialogue forum Vizenge  Kumwenda concurred with Banda’s sentiments saying local traders should invest more in innovative ideas to be at par with foreign counter-parts on the continent.

“Private sector players should operate beyond local market, as we can no longer trade in isolation, we have to be aggressive enough and embrace the continental community through identifying investment opportunities in foreign countries to expand our boundaries.”

Currently, intra-African trade is only 16% of total African trade

The Malawi Government has unveiled its plans to support the country’s manufacturing sector as a way of achieving the pillar of industrialization contained in Malawi 2063 vision.

In his presentation when he appeared before Parliament’s Public Accounts Committee (PAC), Principal Secretary in the Ministry Peter Simbani told the members of parliament that the Government is initially reviewing the industry’s legal framework.

Simbani said understanding that industrialization is one of the MW2063 pillars, government unbundled the Ministry of Industry from the Ministry of Trade, Industry and Tourism to fully champion the agenda of industrializing the country.

He said: “First of all we want to look at our legal framework. On top of that, we want  to look into strategies that we have been having as a country so that going forward we develop policies and strategies that should really push us to what the vision tells us so that time by 2063 we become a middle income country.”

“Secondly, we are looking at rural industrialization strategy which is focusing on those rural areas that produce marketable products for example tangerines in Mwanza.”

“We want to organize people in those areas to form cooperatives so that they have added force to competently negotiate prices for their products.”

“We will also create secondary cooperatives that will be buying from these primary cooperatives. We have full package on how we want to move this agenda to where we want to be.”

He stressed that such Government interventions will see the Ministry’s contribution to Gross Domestic Product (GDP) increasing from the current nine percent to 12 percent by 2030.

Simbani said the Ministry’s interventions will focus on supporting growth of both large and small scale industries.

On large scale industries, the interventions will include installation of Special Economic Zones (SEZ) of which the Government has already identified sites in Area 55 in Lilongwe; Matindi and Chirimba in Blantyre and; Dunduzu in Mzuzu.

The Malawi Government is planning to construct factory shells in the SEZ and invite investors to come and invest in specific areas to start producing value added products.

He said: “For those that will come and be operating in these economic zones, they will enjoy incentives that the government is going to come up with.”

“Let me tell you that a bill is being prepared and it should come to parliament and once it is approved, gazetted and operationalised, all the incentives that are required for the investors to come in and operate will be in place.”

For the SEZ to start taking shape, the Ministry of Industry requires about MK5-billion from the treasury to compensate people in all identified sites.

In his recommendations, PAC Chairperson Shadreck Namalomba queried the Ministry on the progress on the development of industry parks saying there is no progress seen on the ground.

Namalomba stressed that the Ministry is not showing commitment in the development and that it is not giving proper projections on how some of them will commence. 

He said: “This is the Ministry of Industry and we are saying what is it that you are doing to take us there where the MW2063 wants us to be.”

“We want industrial parks in the country, when are you coming to say here are the parks and we are commissioning them?”

“This is the Ministry that needs to give Malawians radiate confidence out there, Malawians need to see what they are doing. Right now I can say there is much more that they need to do.”

In the MW2063 Agenda, industrialization is earmarked to transform the country’s economy from being predominantly consuming and importing to predominantly producing and exporting.

The manufacturing sector will have strong backward and forward linkages with agriculture, mining and services sectors.

Malawi will pursue an industrial revolution driven by strong human capital and utilization of local resources.   

Industrialization has stagnated in Malawi mainly because of high production costs due to: Inefficiencies in energy and transport; poor standards leading to non-competitive products on international markets; lack of appropriate skills and uptake of technology; high costs of doing business and deficient enabling infrastructure; low access to export markets; governance challenges with regard to policy making and implementation; and non-conducive environment for the growth of small and medium scale enterprises (SMEs), among other challenges.

Malawi’s largest publicly listed conglomerate Press Corporation says it is progressing with discussions with an equity investor for its subsidiary, landline operator Malawi Telecommunications Limited (MTL).

In a summary of unaudited results for the six months period ended June 30 co-signed by Chairman Randson Mwadiwa and Group CEO George Patridge, PCL says the fixed telephony company reported a 9% improvement in its results driven by improved gross margins and costs containment.

“Discussions with an equity investor in the fixed telephone business are progressing well,” state Mwadiwa and Partridge.

PCL’s telecommunications segment which includes MTL and another subsidiary cellular phone network provider, TNM, registered 25% growth in its profit after tax with the mobile phone company registering a 19% growth on its net earnings.

Mwadiwa and Partridge say the company has embarked on several strategic initiatives aimed at regaining its market share in the telecommunication segment, and expects its performance in the sector to show significant improvements in the second half of the year.

National Bank of Malawi, which makes up the conglomerate’s financial services segment, continued to be the main driver of the Group’s results, and delivered satisfactory results which were driven by a 36% increase in net service income.

PCL is also searching for an equity investor for its retail chain, People’s Trading Centre (PTC), which has continued to make losses due to a myriad of operating challenges.

“The search for an equity investor is continuing and some debts may have to be consumed by the group once an equity investor is identified,” state Mwadiwa and Partridge.

PCL’s subsidiaries in the energy sector Press Cane and Ethanol Company of Malawi (ETHCO) were on off season during the first quarter of the year but Mwadiwa and Partridge say the two companies are on track and are expected to deliver planned results.

Mwadiwa and Partridge say the focus of the group is on feasibility of new projects and to consolidate gains made in the existing restructured and streamlined portfolios.

“The Group is well positioned for growth and management is confident to deliver planned results.”

My Bucks Banking Corporation says Malawi’s macroeconomic outlook is expected to remain stable for the most part of the 2021 fiscal year.

In a summary of unaudited interim financial results for the six months ended June 30, 2021signed by Chairman Francis Pelekamoyo, the banking group explains that the growth path for 2021 rests much on what happens in the remaining months as the country continues to be challenged with the increasing cases of Covid-19 and low vaccinations roll out rates.

It reads: “Notwithstanding the challenges, the monetary authorities are currently projecting inflation to average 8.4% for 2021.’’

‘’As a group, we will remain upbeat and committed to offer a consistent and relevant customer experience so that we can achieve excellent customer experience.’’

The statement says the Bank has embarked on a journey to be a truly digital bank by offering enhanced digital platforms that will make customers satisfied.

It says that with the digital platforms come cost reductions and ease of doing business, while passing on the benefits to its customers.

In the year, the group will also focus on the rationalization of its cost base; the effective and the prudent management of risks and a liquidity; and the diversification of its balance sheet, balanced with the efficient portfolio allocations, which will also effectively result in the maintenance of a robust capital position.

The Bank has recorded a profit after tax of MK0.39 billion for the six months ended June 30, 2021, compared to MK1.8 billion for the six months period to June 2020.

The main driver of the reduction in year on year profit after tax is the exclusion of Nedbank Malawi acquisition gains from non- interest income in 2021, as this was a once off the event in 2020.

There was also a slow growth on all lines of revenue due to the impact of Covid-19 on the business of the bank.

“The bank has not yet fully realized the synergistic gains from the Nedbank Malawi acquisition, mainly due to the challenging business environment amidst the Covid-19 impact on the economy,” reads the statement.