Mining & Trade News

Standard Bank Group has forecast that higher agricultural production expected this year due to favourable rainfall patterns will result in good economic performance for Malawi despite the prevalence of the coronavirus (Covid-19) which continues to weigh on the country’s economy.

In a summary of audited financial results for the year ended December 31, 2020, the Bank says business activities slowed down in the year 2020 due to economic challenges caused by Covid-19 pandemic.

It says the downward business trend resulted in drought in foreign currency, the challenge the organization believes will persist this year due to the the pandemic.

“The negative economic effects of Covid-19 pandemic will likely continue in 2021 and currency pressures are expected to continue, largely driven by weak foreign currency inflows which can partly be attributed to the ongoing pandemic,” reads the statement in part.    

The statement also says, besides Covid-19 effects on the organization’ activities, volatile political environment during the first half of the year also impacted its operations.

In 2020, the statement says, inflation rate was notably low, the development that has been attributed to lower food inflation rate in the year whose gross inflation rate was 8.6 percent from 9.4 percent in 2019. In the same year, food inflation and non-food inflation averaged 13 percent and 4.7 percent from 14.3 percent and 5.3 percent in 2019.

The statement says during the same period, the local currency weakened against the Unites States Dollar, which was partly due to reduced supply of foreign exchange on local foreign exchange markets.

“2020 was a challenging year due to the impact of the coronavirus on the macro-economy and the group’s operations. However, despite the challenging operating environment, the group posted a strong set of results,” reads the statement.

The statement further says, after paying its taxes, the group registered a profit of K23.7 billion, which was 50 percent above the profit the bank made in 2019.

During the year, the Bank experienced six percent growth in net interest income, which was a result of growth in loans and advances to customers that grew by 11 percent, despite reduced appetite in the lending space due to the pandemic.

The Tobacco Commission (TC) has advised tobacco growers in the country to give adequate care to their crop to reduce post- harvest losses saying most local farmers do not adequately benefit from their yields as about half of it is lost before it is sold.

TC CEO Joseph Chidanti Malunga says in a Press Statement that tobacco farmers should ensure appropriate harvesting time and set up good storage facilities to avoid post-harvest losses.

He also advises tobacco growers to avoid engaging minors in their activities, the conduct he described as illegal.  

“During these operations growers should not use children under the age of 18 years, for this conduct is against the rights of children. Growers who will be noticed using child labour, will have their licenses revoked and their tobacco will not be receipted at the auction floors,” warns Malunga in the statement.

TC also advises tobacco growers to sell their leaf at the Auction Floors other than to vendors in order to benefit from better market prices.

The Ministry of Agriculture has repeatedly complained over the increase in the number of illegal tobacco vendors who buy the leaf from farmers at lower prices to sell to the Auction Floors.

The Commission stresses in the statement to the general public and tobacco growers that tobacco vending is an offence under Tobacco Industry Act, and anyone caught in the act will be convicted by the court of law.

“The Commission reminds the general public and tobacco growers that tobacco vending is an offence under the Tobacco Industry Act and any person involved in the practice will be convicted by the court of law,” states Malunga..

Government through the Agricultural Development and Marketing Cooperation (ADMARC) has provided Auction Holdings Limited (AHL) with financial resources to ensure smooth running of operations at all the four AHL deports.

“In this regard, tobacco growers are being assured that all AHL Tobacco Auction Floors of Limbe, Lilongwe, Chinkhoma in Kasungu and Mzuzu will operate normally without threat that the industry remittances would be affected as AHL Group facilities are duly secured by AHL Group and Government,” says Malunga.

Malunga recently told Mining and Trade Review that the Commission will ensure that tobacco farmers are offered better prices for their leaf this season.

The Malawi Stock Exchange (MSE) has urged the private sector, including mining companies, to utilize the local stock market in accessing a wide pool of funds through multi-platforms provided by the entity, especially during this period when a lot of companies have been affected by the Covid-19 pandemic.

MSE Operations Manager Kelline Kanyangala said after observing the country’s growing infrastructure developments that are capital intensive, MSE has been motivated to step into play with investment capital for private companies.

Kanyangala said strategic utilization of MSE funding can fast track the recovery process, reduce unemployment and increase individual’s disposable income since, as a platform for business investment capital, it is designed to facilitate growth of the private sector. 

She explained that currently MSE has three platforms that companies can utilize; The Main Board is for well established companies; the Alternative Capital Market Board targets small and medium enterprises while the Debt Board is for entities that would prefer not to use equity financing.

“Raising capital through the Exchange offers various benefits for a company including access to a wider pool of funds, access to cheap capital, increased visibility, enhanced corporate governance among others,” she said stressing that the role of the MSE is more pronounced now during the economic recovery process.

In a bid to secure its insurers, MSE has been offering Covid-19 compliant guidelines to listed stakeholders to facilitate holding of virtual meetings at a time when face-to-face meetings are discouraged due to Covid-19. Plans are underway to engage the listed firms on how best to utilise the Exchange in raising additional capital.

“The Covid 19 pandemic had a significant impact on the traded volumes transacted in 2020,” said Kanyangale. “In as much as the performance was positive, we so believe it could have been better had we not experienced Covid 19,”

She also expressed optimism to register new listings on the market having engaged several firms on the importance of being listed.

“We have had a number of engagements with potential issuers who had expressed interest to raise capital through the equity and bond platforms. It is too early to confirm on anything but we are hopeful that we will register new listings on the market,” she said

Established in 1994, MSE started equity trading in 1996 with National Insurance Company Limited (NICO) as the first listed firm and it has so far listed 16 companies.

The Competition and Fair Trading Commission (CFTC) has warned traders in the country to stop claiming that some of their products cure the novel coronavirus (Covid-19) pandemic.  

CFTC Executive Director James Kaphale says in a statement that it is unfortunate that some traders in the country have been promoting and marketing certain products as cure or treatment for Covid-19 but currently no Covid-19 cure has been identified and approved by World Health Organization (WHO).

Kaphale says: “According to international health authorities, there is no clinically tested and approved product which can cure Covid-19.”

“Any trader found presenting that their product can cure Covid-19 would be violating the Competition and Fair Trading Act and the Consumer Protection Act.”

“Similarly, any trader found pricing excessively would be infringing the law.”

One of the mandates for the Commission is to protect Malawians from unfair trading practices.

Kaphale, therefore, says since the outbreak of the pandemic, CFTC has been actively monitoring the market and inspecting business premises to ensure that opportunistic pharmaceuticals companies and traders were not taking advantage of the pandemic to infringe on the rights of consumers.

He says during the campaign, the Commission observed that some pharmaceuticals companies and traders were taking advantage of the pandemic to exploit consumers through deceptive conduct and excessive pricing of essential personal protective equipment (PPEs) used in the management of Covid-19.

Kaphale says: “To deal with the suspected infringements, the Commission has instituted formal investigations against five pharmaceutical companies and traders.”

“The Commission will impose stiff sanctions against any pharmaceutical company or trader found engaging in deceptive practices or any other trade malpractices such as excessive pricing in the supply of products used in the management of Covid-19.”

Meanwhile, Kaphale has appealed to consumers to observe laid down health rules as a way of mitigating the spread of Covid-19.

The Malawi Government reduced tax on any essential imported products used in the management of Covid-19 pandemic including hand sanitizers, face masks, hand washing soaps, oxygen and oxygen regulators.

Malawi has registered over 30 thousand covid-19 cases, with total deaths at 1021 and total recovery at 17184.

During the second wave of the pandemic, majority of the confirmed cases are from local transmissions which means abiding by preventive measures could be a remedy to tame spread of the virus in the country.

According to section 43 (1)(d) of the CFTC, a person shall not, in relation to a consumer, engage in conduct that is likely to mislead the public as to the nature, price, availability, characteristics, suitability for a given purpose, quantity or quality of any products or services.

Further section 43 (1)(g) of the CFTC explains that a person shall not, in relation to a consumer, engage in unconscionable conduct in trade of goods and services.

The Malawi Revenue Authority (MRA) says it is impressive with its revenue collection figures despite the prevalence of the novel coronavirus (Covid-19) pandemic which has hit the industry.

MRA’s Head of Corporate Affairs Steven Kapoloma told Mining & Trade Review in an interview that the impressive performance is as a result of interventions that the tax collector has put in place to widen the tax net.

Kapoloma explained that to ensure that it continues meeting its targets, the body is persistently working on bringing new members into the tax net, conducting public awareness meetings on the importance of tax remission and protecting its clients from Covid-19.

Despite the pandemic, MRA managed to collect a significant amount of money during the first half of 2020/2021 financial year. From July to December 2020, it collected K530.86-billion against the overall target of 1.1-trillion the development he described as impressive and attributed to the spirit of dedication of MRA officers.

“We believe the performance will improve in the third and last quarter because we have put in place a number of interventions aimed at increasing revenue collection, despite Covid-19 pandemic,” said Kapoloma.

In a bid to reduce Covid-19 transmissions among its clients and employees, MRA ensures that people visiting their offices follow all government set preventative measures.

Kapoloma also said the organization has decongested its offices through the use of automated service delivery kits such as electronic payments.

He said those at the borders have been provided with a pre-clearance facility which allows importers and exporters to submit their declarations and supporting documents for processing before the arrival of their goods.

“We have online transaction platforms that allow importers and exporters to process Customs transactions on line and real time, which use Customs Management Systems called ASYCUDA. The systems also interface with government agencies such as Directorate of Road Traffic and Safety Services (DRTSS), Reserve Bank of Malawi (RBM), Malawi Police Services (MPS) and International Police (INTERPOL),” said Kapoloma.

He, however, bemoaned the increase in cases of tax invasion and smuggling of goods but said the tax collector is tirelessly working on combating the malpractices.

Kapoloma sounded hopeful that the organization will soon win the fight against tax evasion and smuggling, through sensitizing the general public on the importance of tax remission.

He said MRA also encourages the general public to report to their offices anyone evading tax and smuggling goods.

“MRA conducts routine intensive patrols through the Flexible Anti-Smuggling Teams (FAST). We have fixed roadblocks operating in all the three regions of the country, which are in addition to mobile roadblocks we mount from time to time to control smuggling.

MRA is a public agency which was established by Act of parliament 1998 to assess, collect and account for tax revenues

Malawi is advancing with preparations to become part of the Africa Continental Free Trade Area (AfCTA) after President Dr. Lazarus Chakwera signed and ratified the AfCFTA instruments on November 1, 2020, which government is now working on depositing with the AU.

The approval of instruments required to operationalize the AfCTA are expected to be signed off by African governments by January 2021 to show their commitment to the trade arrangement.

The AfCFTA is one of Africa’s reform efforts upon realizing trade imbalances with other continents and the subsequent economic loss suffered since the colonization era.

According to Minister of Trade, Sosten Gwengwe, the AfCFTA reinforces the dreams of the founding fathers of the African Union to see a united and more integrated Africa that would ensure that African wealth remains in Africa to benefit the African population.

Among the instruments required to operationalise the AfCFTA include: Rules of Origin that entails laws, regulations and administrative rulings applied by governments to determine the country of origin of goods, services or investments and whether they qualify for a preferential tariff regime.

Through the arrangement, tariff offers shall be applied to scheduled products and time frames within which a country can liberalise its trade in the free trade arrangement. To date, 41 countries and customs unions, including Malawi have submitted their tariff offers.

Gwengwe disclosed that Malawi submitted its initial offer covering 90% tariff liberalisation in November 2019 and the final offer is now ready after being validated by stakeholders, led by the Malawi Confederation Chambers of Commerce and Industries (MCCCI), on November 21, 2020.

“All strategic products and sectors have been designated either under sensitive or excluded list for purposes of liberalization,” said the Minister explaining that the country is at an advanced stage in preparing the National schedule of specific commitments and is expected to submit it before January 1, 2021.

Gwengwe said that another advantage of the AfCFTA is its role to eliminate Non-Tariff Barriers (NTBs) as a way of enhancing and facilitating intra Africa trade.

“The AfCFTA mechanism will facilitate reporting, monitoring and negotiating of the removal of NTBs across regions and the continent as a whole. This facility will provide real time communication on the existence and types of NTBs among all parties to reduce time and cost of cross border trade,” Gwengwe said.

He added; “Although our product offering is primarily classified under sensitive and/or excluded, we still have access to a wider market than before especially to the North, West and Central parts of the continent.”

The minister further disclosed that Malawi will soon launch the National Export Strategy II that will encourage private sector develop competitiveness in niche areas where Malawi can have comparative advantage.

Gwengwe said his ministry, with the help of the United Nations Economic Commission for Africa (UNECA), have formulated a strategy on National Implementation of the AfCFTA to mitigate against any challenges that may arise out of the operation of the trade agreement.

On November 1, 2020, President Dr Lazarus Chakwera signed and ratified the AfCFTA instruments, which government is now working on depositing with the AU.

A total of 54 out of 55 countries have signed the agreement with exception of Eretria. 34 countries have since ratified the agreement.

The AfCFTA is expected to bring together 55 African countries with a combined population of 1.2 billion people including a growing middle class and combined GDP of more than US$3.4 trillion.

Traders in Personal Protective Equipment (PPEs) have bemoaned low sales following continued drop in the number of coronavirus (Covid-19) cases in Malawi, which has prompted many Malawians to stop using PPEs.

Anthony Chiputula who sells face masks in Lilongwe city complained in an interview that since government started announcing a drop in number of Covid-19 infections in its updates, his business has nosedived.

“The decline in number of local Covid-19 cases has greatly affected my business, as only few individuals are interested to buy and use face masks,” said Chiputula

Esther Botolo who sells hand sanitizers in the same city concurred with Chiputula that the number of customers who visit her shop to buy hand sanitizer has gone down. She attributed the decline to the decline in Covid-19 infections which has made people to relax in the fight against the global pandemic.

“The business of selling hand sanitizers is no longer attractive as was the case at the time Covid-19 cases were high,” he said.

Adam Taulo, a tailor in face masks business also complained that his business has drastically gone down. He explained that he usually had huge orders at the time Covid-19 cases were high, which he said is not the case currently.

“My business is struggling a lot, because people no longer place huge orders for face masks. I know this is happening because most of people have stopped adhering to Covid-19 preventative measures,” lamented Taulo.

Meanwhile ministry of Health has asked all Malawians to continue adhering to all Covid-19 preventative measures, saying there is a possibility that the country may experience a second wave of the pandemic as is the case in other countries.

In an attempt to mitigate challenges being faced by women entrepreneurs in the country, the Malawi Government has embarked on institutionalization of a number of business and industrial reforms.

Speaking during the first Annual COMESA Federation of Women in Business (COMFWB) Trade Fair in Lilongwe, Minister of Trade Sosten Gwengwe said the reforms have been instituted in a bid to change the country’s trade composition and promote industrialization realizing the major role women has in the business sector.

He said: “The Government of Malawi is implementing the National Industrial Policy (NIP) and National Trade Policy (2016 policies).

“The NIP has the objective to maximize domestic value addition and structural transformation which is a theme adopted at the continental level, the Tripartite and regional levels.

“Particularly, in setting a new path for the structure of the economy from dominance by agriculture and towards a larger share of manufacturing in Gross Domestic Product (GDP), the NIP adopted the clusters that were identified in the country’s National Export Strategy and adds clusters that Malawi has capacity in and vital for import substitution.”

He said the Government has instituted National Trade Policy to address constraints on the supply side in order to grow the economy at national level.

Gwengwe added that the policy will also build the country’s business sector to respond to improved market access and build a competitive economy.

The Ministry of Trade is implementing a number projects with assistance from various development partners such as the European Union, World Bank, United Nations Development Programme (UNDP), UK’s Department for International Development (DFID), United States Agency for International Development (USAID), among others.

The projects include the Enhanced Integrated Framework, Export promotions, the Micro, Small and Medium Enterprises Business Incubator, Malawi Enterprise Productivity Enhancement Project, Trade Related Facility, among others.

He stressed that the projects will provide capacity and technical support programmes to businesses including Small and Medium Enterprises so that stakeholders can improve their knowledge and skills in value addition activities as well as build linkages with both domestic and international markets.

Gwengwe urged local entrepreneurs to be participating in the regional trade fairs and exhibitions saying such creates a platform to integrate into regional value chains and overcome some supply side constraints.

In his remarks, Minister of Agriculture Robin Lowe said there is need to resuscitate agribusiness development in the country as it has potential to spur socio-economic development and growth.

“However, this is possible if all players in the agriculture sector, including financial institutions and farming communities get committed towards investing and improving their performance in agribusiness and pulling in the same direction, “ he said, “This requires collaboration and coordination of various interventions including banking services that can benefit agribusiness and agriculture sector growth in Malawi.”

Lowe said the country requires employment of some strategies for it to restore its glory in agribusiness.

The strategies include: promoting agribusiness financing; promoting savings and investment culture by having rural based campaigns and awareness meetings; facilitating innovative financing mechanisms and arrangements for farmers; facilitating provision of risk-reducing initiatives in the agriculture sector including crop insurance, warehouse receipt system and other initiatives and; promoting electronic banking initiatives.

He also said the country needs to institute promotion and financing anchor farm model initiatives which heavily relies on financing.

Lowe said farmers and all players in the agriculture sector lacks support from the banks for them to excel in the industry.

He said the country also needs to invest in developing skills of managing various processes across value chains and value chain development; and promote development of the market infrastructure.

The aagricultural sector employs 85% of the population, contributing 65% of export earnings and 28% of Gross Domestic Product (GDP).

Barely two weeks after the Indigenous Business Persons Association of Malawi (IBAM) called on the State to support Small and Medium Enterprises (SMEs) affected by Covid-19, Minister of Industries Roy Kachale says government is monitoring the situation and geared to offer different rescue interventions.

In the wake of a steady drop in the number of Covid-19 positive cases, IBAM challenged government to inject stimulus financial packages to resuscitate struggling businesses that have the capacity to meaningfully contribute to the national economy once the pandemic is gone.

 “We cannot specifically point at one area in the industry that has been negatively affected by the pandemic, but for sure SMEs have suffered a lot,” Kachale said.

He pointed out that access to finance and markets are major solutions towards the challenge being faced by the SMEs.

“Government is working hand in hand with development partners to bail out the country from the siege,” he said explaining that developing partners are willing to finance the survival of the country’s SMEs.

 “Since the future looks brighter and that there is interest to support the industry, we need strict measures to ensure that the money is used for its intended purposes,” he said.