Local businesses operating in the country have said the move by the government to reduce the value addition requirement from 35 percent to five percent for Small and Medium Enterprises (SMEs) is welcome, as it would boost the growth of small-scale businesses.

For a long time, businesses have been on the neck of Malawi Revenue Authority (MRA), particularly on the value-addition requirement under the Industrial Rebate Scheme.

Mlombwa: We suffer from policy issues

Some businesses complained that the value addition requirement, at 35 percent, is a nightmare for local manufacturers to enter into the Industrial Rebate Scheme where import duty and excise tax and in some instances VAT, is not paid on raw materials.

But Minister of Finance and Economic Affairs Sosten Gwengwe in the proposed 2022/23 National Budget, announced the administrative measure in which value-addition requirement has been reduced from 35 percent to five percent for SMEs and special sectors such as pharmaceuticals from 35 percent to 10 percent for all companies producing for local consumption.

“This policy is done continuing with the spirit of supporting and promoting local industries and to get as many cooperatives as possible on the industrial rebate schemes,” said Gwengwe.

In an interview on Wednesday, Indigenous Business Association of Malawi president Mike Mlombwa said traders have been heavily battered by the Covid-19 effects; hence, measures to improve incomes for businesses are commendable.

He said: “Apart from problems relating to doing business such as lack of finance for trade, we suffer from policy issues despite the fact that we economically transform the economy.

“The policies in the budget, in particular the value-addition requirement reduction, are a huge relief and a positive step towards achieving local production.”

According to Mlombwa, the softening policy regulations and introduction of policies that are friendly to local businesses will help them diversify economic activities and contribute to economic development.

Meanwhile, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) in its commentary on the proposed changes commended government for the development said the move will promote growth of local businesses, encourage local production and promote import substitution.

Small scale businesses have been a major feature of Malawi’s economic and social landscape, with available data indicating it plays a huge role in the economy. While it is difficult to precisely assess the magnitude of their trade due to lack of consistent measurement tools and accurate data, estimates suggest that SMEs continue to play a role in the country.

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