An interview with Chief Executive of Malawi Confederation of Chambers of Commerce and Industry (MCCI) Chancellor Kaferapanjira.
The Minister of Trade and Industry Ken Lipenga described this year’s 19th International Trade Fair as a success story; as a chamber how do you rate the success of the just ended Trade Fair in comparison to the previous fairs.
What we are doing as a Chamber is obviously to encourage businesses to focus so much on getting orders from outside Malawi. Each International Trade Fair has got a different theme and what we encourage the participants to do is to make sure that they focus on the one primary objective of the fair, which is to provide the forum for the businesses to find markets from outside Malawi and not necessarily in Malawi. And secondly we focus so much on the theme as well and this year the theme was, ‘Building capacity for export competitiveness’ and therefore we encourage participants to make sure that they look out for things that they lack in terms of their competitiveness, for example, we had a number of companies from outside Malawi that provided technology, that came up with new ideas et cetera et cetera and those are some of the issues that our businesses lack.
Comparing the 19th International Trade Fair to previous fairs, I think overall it was good because more than 50 per cent of the participants that secured deals, got deals from outside Malawi and to us that is an encouragement. There were a number of other participants that focused on getting local deals, too, because they don’t have enough capacity to produce for the export market but in as far as we are concerned our success will be judged by the achievement of the primary objective, which is to make sure that those that participated have actually secured foreign orders and since more than 50 per cent got foreign orders we are happy. And we think that is much more than what previously happened.
We have seen that though companies got foreign orders in the past, they failed to satisfy demand on the international market because of economic constraints. How can that scenario be avoided this time around?
The challenge to Malawi becoming an export oriented economy, I can say, is at a minimum of four levels. Firstly, at what is known as meta-level, which is social level thinking. In Malawi we have always believed that foreign markets are not necessary. We have always looked inside. And we think that we can survive by doing business internally. This you can tell if you look at the total exports of the manufactured products in Malawi. Out of all the goods that are manufactured in Malawi only 14 per cent is exported and that tells you that Malawian companies think that the market is in Malawi and then they are not astute enough to look for markets outside Malawi and that thinking percolates every level of society unfortunately and that is why a lot of times you hear companies complaining about liberalisation. Liberalisation opens up the market, opens up the economy and obviously it creates a lot of competition internally but it also offers a lot of opportunities to our companies to find markets outside. And one of the reasons our business have not capitalised on those opportunities is that they don’t look at export market as their market and therefore other countries take advantage of them. That is at the meta level.
We also had challenges at the micro level which are issues to do with inflation, interest rates, issues to do with lack of stabilisation of exchange rates, the fluctuation of the exchange ratee etc. And we have seen recently that those issues are being addressed and we are happy of the direction that government has taken in managing the economy.
Then at what is technically called meso level. These are issues to do with the capacity of government institutions to service the private sector. And also issues to do with the specific policies that address private sector challenges. In Malawi we still have a number of challenges to do with the capacity of institutions. We have the Malawi Bureau of Standards, which is very key to Malawi turning into an export oriented economy and yet it lacks accreditation, meaning that its standards are not accepted by some countries. We have weak institutions such as MIPA which is supposed to assist private sector, we have institutions like the Malawi Export Promotion Council, which is almost dead and yet it is supposed to find markets for Malawian products. And we have other institutions for example the police, if you count the number of roadblocks between Blantyre and Lilongwe you find that they are about eight and 16 check points that makes business very uncompetitive. If a truck leaves Mzuzu or Karonga and if it is going to Zimbabwe to export certain goods it can two or three days just travelling within Malawi because of these check points and that is not good for business. Those are some of the challenges that make our business on uncompetitive. And you asked why our companies are not able to fulfill all the orders that they get, some of the issues that make them uncompetitive are those ones.
In addition to institutions, we also have specific policies. The Malawi Growth and Development Strategy has outlined eight priority sectors. The so-called core sectors, which are the tobacco, tea and sugar. These are the existing sectors, and what we say they
There is need in those areas to find what else needs to be done. Value addition for example, so that there is more that is done here. We are selling our tea at more expensive price than what we do right now may be we are processing much further than we do right now may be the packing is done here before exports and those are the possibilities.
Then there are five other key growth sectors in addition to these three. There is tourism manufacturing, agro-processing, mining, and integrated cotton industry. If these sectors have indeed got to lead the economic revolution of this country, there is need for government to give special attention to give specific investment incentives not necessarily in the form of tax holidays and stuff like that but making sure that any equipment meant for use in that area comes duty free and VAT free for example. Of course a lot of machines now come duty free but you still pay VAT, which makes the machines very expensive.
The final level is the micro- level. This is the willingness of businesses to do something also. It is not all government that has to do things, that has to be blamed the private sector also has challenges in Malawi. And these are issues to do with levels of technology modernisation. A lot of our businesses are very old-fashioned. The machines are very old some 20 years, and one of the reasons could be that they used to make things for the local market and therefore they don’t care what quality come out that is something that has to be done by the private sector not necessarily government. We have issues related to that of quality of our products. We have issues of the asking price. When our products are manufactured normally our businesses price their goods highly. When you look at the prices of our goods compared to the others, one tends to believe sometimes we tend to be shortsighted. We are looking only of today we are not looking into the future. And because of that you have a very small market because very few people can afford your products and that’s one of the challenges that make our product not very attractive outside.
You have issues of training of staff. The majority of companies except a few, the big ones, do not train their staff. Look at all the textiles companies and the government companies, I don’t know how much education they give their people and yet that is very critical. If you have to penetrate the export market you need to ensure that you have people that are able to make quality products. When you look at all the challenges you see why we are failing to explore the export market. And what we believe in as the chamber is to encourage our businesses of course to encourage the government to keep uniting the people, focusing the people in one direction. The vision 2020 imitative was a good one because it was meant to focus people in one direction
But certain things are happening, for example in last year’s budget the mister of Finance removed duty and even VAT on machines meant for mining, which is a good thing.
And you expect some thing to happen in other sectors in forthcoming budget?
That what we have been informed by the minister. We highlighted this to him and he actually appreciates. We also know of the government’s initiative to create the Malawi Investment Fund to replace MDC. You recall tat there was talk about the Malawi Development Bank and now the idea is that we need the Malawi Investment Fund. And that is the government initiative. Government might not be the majority shareholder but the fact that government has started that initiative tells us that government is serious about providing specific assistance to some specific sectors of the economy.
In your assessment as a Chamber what are the potential areas that might assist the country’s economy to grow?
As a country we have a lot of potential and I think our companies just need to change their mindsets. Now that the economic management seems to be pointing in the right direction, I think that the areas that I mentioned earlier, in tobacco for instance, it is very expensive to have a number of tobacco plants but I think that is the way forward. We think that farmers should take a stake in processing plants because that is where there is more money and that would mean a lot of money would stay in Malawi and would not go outside. So we need a lot of activities at the higher level than just growing. Still talking about tobacco, our transport industry has to learn to get orderly because we got so much from South Africa. Those trucks that come here from South Africa are mostly the ones that transport tobacco to South Africa. And the reason is that it is much much cheaper because somebody has already paid for the truck to come into Malawi and they just need very little to cover the costs. Our businesses have to learn the tricks of doing that kind of businesses so that more of our transport companies can carry our goods to South Africa because they need to get more money. In technical terms you have to widen the value chain by going beyond what we are doing now to get more value into the system. We should stop at just producing, we need also to go into processing, and we need also to be transporting this. For tea, I think it is for the same we need more processing to be done here as tea manufacturing plant that would mean that there is more economic activity being done in Malawi. Those eight sectors that government and ourselves identified as having the potential to drive this economy forward are important ones but what is very key is that we should in each area move a little further within the value chain so that more activities are being done in Malawi other than outside and I think that is how we are going to move. Let’s move towards having textile plants, let’s move towards having our own garments companies that are sourcing materials from textile plants, lets have design companies because that’s how we would make money.
Looking at the listing on the local exchanger, our economy seems to be dominated by the financial sector other than the producing sector. Isn’t that a threat to the growth of manufacturing sector?
Looking at the figures, the most profitable sectors in Malawi one is the financial sector then the retail sector. Basically we are talking about service sectors. Those are the most profitable. And why are they most profitable and yet what we need is production and manufacturing in order to move forward. There are a number of reasons, One I think it’s because there is a bit of monopoly. Two, they benefit so much from government borrowing a lot from them. And since that stopped we can actually see the change now. They are trying to come with a little more products that they can offer to products. But you can notice that even right now they are focusing on lending from individuals rather than businesses. If you invest into a machine or commercial farming it will take three to four years for you to start making money out of it. That’s the nature of business
The Minister of Trade and Industry Ken Lipenga described this year’s 19th International Trade Fair as a success story; as a chamber how do you rate the success of the just ended Trade Fair in comparison to the previous fairs.
What we are doing as a Chamber is obviously to encourage businesses to focus so much on getting orders from outside Malawi. Each International Trade Fair has got a different theme and what we encourage the participants to do is to make sure that they focus on the one primary objective of the fair, which is to provide the forum for the businesses to find markets from outside Malawi and not necessarily in Malawi. And secondly we focus so much on the theme as well and this year the theme was, ‘Building capacity for export competitiveness’ and therefore we encourage participants to make sure that they look out for things that they lack in terms of their competitiveness, for example, we had a number of companies from outside Malawi that provided technology, that came up with new ideas et cetera et cetera and those are some of the issues that our businesses lack.
Comparing the 19th International Trade Fair to previous fairs, I think overall it was good because more than 50 per cent of the participants that secured deals, got deals from outside Malawi and to us that is an encouragement. There were a number of other participants that focused on getting local deals, too, because they don’t have enough capacity to produce for the export market but in as far as we are concerned our success will be judged by the achievement of the primary objective, which is to make sure that those that participated have actually secured foreign orders and since more than 50 per cent got foreign orders we are happy. And we think that is much more than what previously happened.
We have seen that though companies got foreign orders in the past, they failed to satisfy demand on the international market because of economic constraints. How can that scenario be avoided this time around?
The challenge to Malawi becoming an export oriented economy, I can say, is at a minimum of four levels. Firstly, at what is known as meta-level, which is social level thinking. In Malawi we have always believed that foreign markets are not necessary. We have always looked inside. And we think that we can survive by doing business internally. This you can tell if you look at the total exports of the manufactured products in Malawi. Out of all the goods that are manufactured in Malawi only 14 per cent is exported and that tells you that Malawian companies think that the market is in Malawi and then they are not astute enough to look for markets outside Malawi and that thinking percolates every level of society unfortunately and that is why a lot of times you hear companies complaining about liberalisation. Liberalisation opens up the market, opens up the economy and obviously it creates a lot of competition internally but it also offers a lot of opportunities to our companies to find markets outside. And one of the reasons our business have not capitalised on those opportunities is that they don’t look at export market as their market and therefore other countries take advantage of them. That is at the meta level.
We also had challenges at the micro level which are issues to do with inflation, interest rates, issues to do with lack of stabilisation of exchange rates, the fluctuation of the exchange ratee etc. And we have seen recently that those issues are being addressed and we are happy of the direction that government has taken in managing the economy.
Then at what is technically called meso level. These are issues to do with the capacity of government institutions to service the private sector. And also issues to do with the specific policies that address private sector challenges. In Malawi we still have a number of challenges to do with the capacity of institutions. We have the Malawi Bureau of Standards, which is very key to Malawi turning into an export oriented economy and yet it lacks accreditation, meaning that its standards are not accepted by some countries. We have weak institutions such as MIPA which is supposed to assist private sector, we have institutions like the Malawi Export Promotion Council, which is almost dead and yet it is supposed to find markets for Malawian products. And we have other institutions for example the police, if you count the number of roadblocks between Blantyre and Lilongwe you find that they are about eight and 16 check points that makes business very uncompetitive. If a truck leaves Mzuzu or Karonga and if it is going to Zimbabwe to export certain goods it can two or three days just travelling within Malawi because of these check points and that is not good for business. Those are some of the challenges that make our business on uncompetitive. And you asked why our companies are not able to fulfill all the orders that they get, some of the issues that make them uncompetitive are those ones.
In addition to institutions, we also have specific policies. The Malawi Growth and Development Strategy has outlined eight priority sectors. The so-called core sectors, which are the tobacco, tea and sugar. These are the existing sectors, and what we say they
There is need in those areas to find what else needs to be done. Value addition for example, so that there is more that is done here. We are selling our tea at more expensive price than what we do right now may be we are processing much further than we do right now may be the packing is done here before exports and those are the possibilities.
Then there are five other key growth sectors in addition to these three. There is tourism manufacturing, agro-processing, mining, and integrated cotton industry. If these sectors have indeed got to lead the economic revolution of this country, there is need for government to give special attention to give specific investment incentives not necessarily in the form of tax holidays and stuff like that but making sure that any equipment meant for use in that area comes duty free and VAT free for example. Of course a lot of machines now come duty free but you still pay VAT, which makes the machines very expensive.
The final level is the micro- level. This is the willingness of businesses to do something also. It is not all government that has to do things, that has to be blamed the private sector also has challenges in Malawi. And these are issues to do with levels of technology modernisation. A lot of our businesses are very old-fashioned. The machines are very old some 20 years, and one of the reasons could be that they used to make things for the local market and therefore they don’t care what quality come out that is something that has to be done by the private sector not necessarily government. We have issues related to that of quality of our products. We have issues of the asking price. When our products are manufactured normally our businesses price their goods highly. When you look at the prices of our goods compared to the others, one tends to believe sometimes we tend to be shortsighted. We are looking only of today we are not looking into the future. And because of that you have a very small market because very few people can afford your products and that’s one of the challenges that make our product not very attractive outside.
You have issues of training of staff. The majority of companies except a few, the big ones, do not train their staff. Look at all the textiles companies and the government companies, I don’t know how much education they give their people and yet that is very critical. If you have to penetrate the export market you need to ensure that you have people that are able to make quality products. When you look at all the challenges you see why we are failing to explore the export market. And what we believe in as the chamber is to encourage our businesses of course to encourage the government to keep uniting the people, focusing the people in one direction. The vision 2020 imitative was a good one because it was meant to focus people in one direction
But certain things are happening, for example in last year’s budget the mister of Finance removed duty and even VAT on machines meant for mining, which is a good thing.
And you expect some thing to happen in other sectors in forthcoming budget?
That what we have been informed by the minister. We highlighted this to him and he actually appreciates. We also know of the government’s initiative to create the Malawi Investment Fund to replace MDC. You recall tat there was talk about the Malawi Development Bank and now the idea is that we need the Malawi Investment Fund. And that is the government initiative. Government might not be the majority shareholder but the fact that government has started that initiative tells us that government is serious about providing specific assistance to some specific sectors of the economy.
In your assessment as a Chamber what are the potential areas that might assist the country’s economy to grow?
As a country we have a lot of potential and I think our companies just need to change their mindsets. Now that the economic management seems to be pointing in the right direction, I think that the areas that I mentioned earlier, in tobacco for instance, it is very expensive to have a number of tobacco plants but I think that is the way forward. We think that farmers should take a stake in processing plants because that is where there is more money and that would mean a lot of money would stay in Malawi and would not go outside. So we need a lot of activities at the higher level than just growing. Still talking about tobacco, our transport industry has to learn to get orderly because we got so much from South Africa. Those trucks that come here from South Africa are mostly the ones that transport tobacco to South Africa. And the reason is that it is much much cheaper because somebody has already paid for the truck to come into Malawi and they just need very little to cover the costs. Our businesses have to learn the tricks of doing that kind of businesses so that more of our transport companies can carry our goods to South Africa because they need to get more money. In technical terms you have to widen the value chain by going beyond what we are doing now to get more value into the system. We should stop at just producing, we need also to go into processing, and we need also to be transporting this. For tea, I think it is for the same we need more processing to be done here as tea manufacturing plant that would mean that there is more economic activity being done in Malawi. Those eight sectors that government and ourselves identified as having the potential to drive this economy forward are important ones but what is very key is that we should in each area move a little further within the value chain so that more activities are being done in Malawi other than outside and I think that is how we are going to move. Let’s move towards having textile plants, let’s move towards having our own garments companies that are sourcing materials from textile plants, lets have design companies because that’s how we would make money.
Looking at the listing on the local exchanger, our economy seems to be dominated by the financial sector other than the producing sector. Isn’t that a threat to the growth of manufacturing sector?
Looking at the figures, the most profitable sectors in Malawi one is the financial sector then the retail sector. Basically we are talking about service sectors. Those are the most profitable. And why are they most profitable and yet what we need is production and manufacturing in order to move forward. There are a number of reasons, One I think it’s because there is a bit of monopoly. Two, they benefit so much from government borrowing a lot from them. And since that stopped we can actually see the change now. They are trying to come with a little more products that they can offer to products. But you can notice that even right now they are focusing on lending from individuals rather than businesses. If you invest into a machine or commercial farming it will take three to four years for you to start making money out of it. That’s the nature of business
1 comment:
Emmanuel,
Good job on the interview - Mr. Kaferapanjira did well too. I would like to emphasize the importance of access to proper infrastructure for Malawi to become a competitive market for investment. We need good road networks, telephone access to rural areas etc BUT most of all - "THE INTERNET IS THE BIGGEST EQUALIZER" for the markets in this century. With good internet use, the smallest guy can access billions (with a b) in world markets and our small holder production industry can face the real challenge to meet the voluptious demands of markets like America. Internet service in Malawi is ridiculously expensive - internet cafes must buy equipment and then pay in excess of $350 per month to Burco. Who will they sell this service to? It is unaffordable and yet we know it must come to Malawi or else we will be the last dinosour left on the globe. Investors visiting or contacting Malawi must be able to access web sites of Malawi businesses, and other improtant information, must be able to transmit data cheaply back and forth. A micro lending bank that I talked to in California was unable to find most of the SACCOs or rural community lending agencies in Malawi on the internet and it was a case of we cannot get sufficient information unles we go there, this makes the cost of information in Malawi to be very high compared to other markets - well life is so demanding and busy nowadays to plan travel to collect such data alone and we live in a free market where investors must chose based on many criteria one of which is COST.
I think our governemt must actively invest in this technology and deliberately make it available to most of our population to open their worlds. Our students must research online resources and libraries like the rest of the world is doing - please pass on my comments to Kaferapanjira and any one in Malawi interested.
Lawrence Matengula
Houston, TX
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