Trial and Error

Published: 01-APR-03

Caught between a rock and a hard place, Malawi is pursuing several initiatives towards economic recovery. Our correspondent HOBBS GAMA in Blantyre examines some of the ongoing efforts. Another bilateral agreement to activate cross-border as well as international trade was signed recently between Malawi and Tanzania. Both countries say the customs pact will bring about the increase of tax revenue.

Malawi sees tax reforms as one of the ways of getting in much needed revenue to pay for poverty alleviation programmes. The IMF and the World Bank support the current programme. Malawi is a member of the 21 nation Common Market for Eastern and Southern Africa (COMESA). As a land-locked country transporting its goods through the Indian Ocean ports of Durban in South Africa; Beira and Nacala in Mozambique is quite expensive. Tanzania is deemed ideal due to the proximity of the Ports of Dar es Salaam. Malawi has therefore established a cargo-handling depot at the Port of Mbeya - to create another passage for imports.

Earnest Mtingwi, commissioner for the Malawi Revenue Authority (MRA), says the memorandum of understanding with the Tanzania Revenue Authority (TRA) will deliver efficiency in custom transactions. It will also enhance revenue collection between the two authorities while facilitating legitimate cross-border trade.

Mtingwi explained that the pact is expected to foster international corporation in matters mainly related to the application and enforcement of customs laws. It will also impact particularly to confirmation of origin of goods.

"Our agreement we will check and prevent contravention of customs laws in order to achieve greater accuracy in the collection of customs and duties," says Mtingwi.

Under the agreement, each authority will supply to the other updated list of goods, which are likely to be subject to illegal trafficking, considering rampant ongoing smuggling in the area.

In line with international shipment. inspection and customs standards Malawi and Tanzania are to adopt new technology with a view to increase collection of tax, check tax evasion, fraud and corruption among customs and excise officers.

MRA was set up three years ago to widen its revenue collection base of

The interests of the poor, marginalised and vulnerable people, especially in remote rural areas, might be ignored by profit-orientated managers

the government. Its operations have been beset by numerous problems of corruption. To date the authority has fired 45 of its officers on corruption charges while 45 others were suspended pending a probe by the official Anti-Corruption Bureau (ACB). The officers allegedly connived with exporters to evade a K80 million duty.

MRA has recently staged a countrywide civic education programme to urge the population on their obligation to comply with tax payment. MRA has also embarked improv

ing working conditions of its employees to avoid temptation of receiving kickbacks. However, analysts doubt whether increments of incentives would check corruption, urging the authority to instead train staff to attain high standards of professionalism expected of them.

Says Anthony Mukumbwa, director for the independent auditors - Target Consulting Limited (TCL): "The idea to increase salaries to curtail bribery is a good one. But one wonders how much of an increase is enough to prevent an officer to yield to bribe. The more you get the more hungry you become."

The Central African Republic and Uganda are some of the countries pursuing tax collection reforms and reaping some fruits.

African countries generally have an uphill task when it comes to tax collection. Business analysts say there is an urgent need to embrace new technology in order to curb fraud and corruption in the areas of shipment and inspection.


The government of Malawi is undertaking privatisation of its loss- making entities as recommended by the International Monetory Fund (IMF) and other Western donors. Since its launch in 1996 the privatisation programme has had mixed results. The most recent headache is the attempt by the government to sell off the Agricultural Development and Marketing Corporation (Admarc). Admarc is the state-run sole distributor and marketers of all agricultural produce including maize the staple cereal for the 10 million population.

Malawi's Privatisation Commission (PC) says Admarc is making huge losses by selling subsidised grains to the public. PC has however failed to convince its critics. As a result, the country's civil society comprising eighteen organisations have formed a task force to block the sale of Admarc charging that government had a social responsibility to feed its people.

World Vision International, Consumers Association of Malawi (Cama), the Malawi Congress of Trade Unions (MCTU) and Churches Action in Relief Development (Card) are among the group receiving financial and technical support from UK charity Oxfam to fight their claim.

The group argues that the moment Admarc goes into private hands the interests of the poor, marginalised and vulnerable people, especially in the remote rural areas will be ignored by profit-oriented managers. It also warns that the private traders might not be interested to venture into the rural areas because of lack of profitable markets for their grains. Consequently the rural poor who make up 80 percent of the population will suffer.

Dr Khwima Nthara, an economist consultant with the University of Malawi, has been commissioned to assess the impact of the proposed privatisation of the grain board. A joint communique is to be presented to parliament outlining the impact of the sell of the national grain handler.

"It would be folly to rush for wholesale privatisation," notes Dr Nthara, "There is need to strike a balance. We recommend that Admarc should not be privatised. Instead it should operate as a commercial entity under the current status of a statutory corporation," says the consultant.

Oxfam programme representative, Nellie Nyang'wa, says the speedy privatisation will disadvantage the poor. She claims that privatisation of Admarc was a livelihood and security issue. Oxfam was therefore protecting the underprivileged from private traders manipulation of the price of maize, should subsidies be removed.

"The basis of taking maize as a commercial product is not understandable. The issue of Admarc is therefore central to the lives of the people of Malawi," Nyang'wa emphasised.

She joined the queue of other stakeholders who blame the West for imposing privatisation in poorer countries while their farmers received generous subsidies.

Dr Nthara also warned that Admarc was politically influenced. He said it was necessary to create for board of directors who were not unduly loyal to the executive arm of government.

Senior government officials including cabinet ministers are alleged to have used their influence to purchase large quantities of maize, which they hoarded and resold during critical months of the year.

Nacala Corridor Development

A new and ambitious project to facilitate trade in the Southern African region may give Malawi much needed relief. The construction of a fuel pipeline from the Indian Ocean port of Nacala in Mozambique is seen as offering great prospects to fuel-starved Malawi.

Currently Malawi, Mozambique and Zambia are jointly undertaking the Nacala Development Corridor (NDC) spatial initiative project to rehabilitate a stretch of 77 kilometers Nacala Railway line which lay devastated during over 20 years of civil war in Mozambique. It will also be extend to Zambia through revamping of another 27-kilometre distance from Malawi to the western border district of Chipata.

The three countries are receiving funding from the World Bank. Britain and the US that have already made available �5.6 million and $16 million to support the project. South Africa, the region's economic giant is providing a secretariat for the NDC project. Pretoria also financed the Nacala Investors Conference held in February in Nampula. Canada has also pledged substantial financial support.

A lot, according to experts is to be gained from the corridor, which is deemed to have high investment potential in agriculture, mining, manufacturing and tourism with high employment opportunities for inhabitants along the railways line.

Coming from the Nampula conference. President Bakili Muluzi of Malawi said his country appreciates the many benefits after completion of the NDC project but was quick to point out that construction of a fuel pipeline from Nacala to Liwonde railway station, a distance of 90 kilometres was the chief priority of his government.

According to Malawi government's plans that earned support of investors, besides the pipeline and fuel storage facilities a refinery will be build at Liwonde together with a dry port. A road to run parallel to the railway line connecting Nacala and Liwonde is among the infrastructure.

"With the pipeline transport and fuel costs will be enormously reduced while Malawi will be assured of regular availability of fuel. I particularly urge the private sector to take advantage of this and other rewards of the Nacala development" said Muluzi.

The bulk of Malawi oil moves through road transport in tankers from the South African port city of Durban and Tanzania. Malawi could save up to 20 percent of its production costs through the use of Nacala with constant supply of fuel to run machinery in the industries and spur provision of goods and services, according to studies.

"The cost of commodities and essential services requiring fuel energy will lower as well as speed up industrial growth," Muluzi said.

Domestic supply of fuel would increase from 35 to 55 percent say ministry of transport officials.

Diesel, petrol and paraffin prices have been increased by 13.1 percent, 9.45 and 5.98 percent. The depreciation of the Kwacha the local currency, now trading at K90 to one US dollar has added to the difficulties confronting consumers.

The Consumers Association of Malawi (CAMA), is protesting the increases, claiming that they are unjustified.

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