Power challenges – A thorn in Malawi’s import substitution bid?

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Malawi’s trade balance in 2017 stood at a negative US$1.4 billion, meaning the nation consumed more foreign products than it exported.

The country is virtually trailing to every nation it is trading with. According to the Nation Statistics Office, exports grew by 159% against 245% of imports between 2009 and 2014.

In its analysis of the 2014 Diagnostic Trade Integration Study, The International Trade Centre highlights that Malawi’s exports have been declining for the past 15 years mainly because of lack of diversification, and inability to utilize both regional and global markets.

SADC alone has the potential to grow Malawi’s exports by 39%, that is an export potential of UD$155 million dollars. But the opportunities remain enormous, the European Union (EU) granted Malawi a unilateral preferential market access, meaning the country can export there without following any stringent custom procedures. China, USA through its Africa Growth Opportunity Act, India and many other markets remain open to Malawi.

This is virtually a paradox, but why?

Ministry of Industry and Trade spokesperson Wiskes Nkombezi  has on several occasions pushed the blame to the private sector for failing to see the opportunities available on the market, saying that the duty of the government is to provide a conducive environment necessary for investment.

The search for answers on this predicament took me to Kamwendo cooking oil cooperative in Mchinji, which stands 92 kilometers west of Malawi’s Capital city Lilongwe.

Kamwendo cooking oil cooperative

The 57 members’ cooperative is imbued with passion, and vision. They have been producing cooking oil for quite long with so simple machines. Looking at their passion and vision, the Malawi Enterprise Productivity enhancement Project felt the need to work with these passionate members under the European Union (EU) funded project through the Common Market for Eastern and Southern Africa (COMESA) to the tune of €1,498,199.

It is part of COMESA Adjustment facility (CAF) and a mechanism towards efforts to support regional integration.

Kamwendo cooking oil cooperative was assisted with two processing and refinery machines which would assist the group’s vision of reaching out to all corners of Malawi and the international market, virtually substituting imports and creating some foreign currency for Malawi.

But the vision seems to have hit a snag.

Since the commissioning of the factory in 2017, it has not been connected to electricity. The cooperative was told to buy a transformer, or pay over MK10 million for an electricity connection. But Chairperson of the Cooperative Maximiano Zembeni says the group cannot afford.

“We have written ministry of Trade to assist us on the demands made by Electricity Supply Corporation of Malawi on the connection of electricity but there has never been a response since then”

Zembeni says the cooperative uses a generator at the moment to help them with power, a source of power which costs three times more than the ordinary hydro-power from Escom; ultimately killing the cooperative’s vision of making profits and exporting to the international market.

With no money for the connection, no response from Ministry of Trade and Malawi Enterprise Productivity Enhancement Project, the cooperative now hides in the dark, with no hope.

This situation however makes production very costly and leaves their product “Thanzi Cooking Oil” at the mercy of international competition from products benefiting from economies of large scale.

The cooperative’s concerns are however not isolated, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Chief Executive Officer Chancellor Kaferapanjira has always made it clear that the private sector will continue to struggle as long as government does not come up with a sustainable solution to curb the power challenges the manufacturing sector faces.

Kaferapanjira believes a reliable source of power will not only help to create jobs for young people, He emphasizes that this is one key way of ensuring that manufacturing is thriving to increase exports

One of the consumers and also proponents of the buy Malawi Strategy Weston Masuku stresses that he only buys certain products once he is assured that they are made in Malawi.

Masuku however is worried that some products are unreasonably high, which at times weakens his passion to promote the buy Malawi strategy

“The quality of most Malawian products I have come across is satisfactory, there are of course a few products, of poor quality for that matter whose prices are high and this tends to put me off” he says

Masuku is however not aware that behind the scenes, products like Thanzi cooking oil are somehow expensive due to uses of a generator which props up the price beyond the reach of most customers and even making it non competitive against products made outside the country.

Executive Director of National Small and Medium Enterprises William Mwale however wonders why the Factory could be installed without connecting to electricity.

Mwale points out that the matter has not been brought to their attention, Mwale further advises Kamwendo cooking oil cooperative to contact the organisation to strengthen their voice.

Power in Malawi is an issue to the extent that only less than ten percent of the population is connected to the electricity grid. Efforts are being made to tap power from Mozambique by 2021. This might be too late though for some companies which may not survive the competition.

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