It is 22 years since Malawi became one of 40 sub-Saharan African countries privileged to have duty-free access to the United States of America market through the African Growth and Opportunity Act (Agoa) trade window.
The Agoa trade window covers textile as well as non-textile products such as leather, chemicals and other agricultural products from the beneficiary countries. It was designed to contribute to economic growth through good governance and free markets.
Under Agoa, whose lifespan was recently extended to September 30 2025, there are some 5 240 tariff items eligible as long as such products going to the US market were wholly obtained in case of grown, fished or mined produce or indeed “sufficiently manufactured” in an Agoa country such as Malawi.
The initiative defines “sufficiently manufactured” to mean that where third-country materials are incorporated in a product, there should be at least 35 percent of the goods’ value added in the beneficiary country, with up to 15 percent of such value attributed to US inputs.
Published data shows that Malawi exported 9.23 percent less to Agoa in 2021 at a value of $31.31 million (about K32 billion) from $34.5 million (about K36 billion) in 2020. In 2019, Malawi exported goods worth $51.67 million (about K53 billion), a jump from $40.23 million (K41 billion) in 2018 and $43.3 million (K47 billion) in 2017.
During the financial year 2021/22, Malawi emerged as one of the least beneficiaries of Agoa after Zambia, Namibia, Gabon and Uganda.
Not a surprising turn of events, I must say as for years Malawi has largely failed to take advantage of such international trade opportunities, always registering a trade deficit, a situation where a country imports more goods and services than it exports. It is also called the balance of trade.
International trade is critical to economic growth of a country as it provides a platform for market expansion as well as access to goods and services that may otherwise not have been locally available. It also contributes to competition which gives consumers a wide choice and even better prices!
Where does Malawi get it wrong despite developing and implementing several strategies, including the National Export Strategy? Being an agro-based economy, agricultural commodities dominate the country’s export basket with tobacco, sugar, tea, coffee, macadamia nuts and pigeon peas, among others, accounting for the largest exports for the economy.
Besides, the other thing I have noted over the years with Agoa is the apparent lack of sensitisation on the opportunities it offers.
I recall the Ministry of Trade and Industry developing the National Agoa Response Strategy and Action Plan for Malawi which projected the country’s exports through the unilateral preferential trade initiative to increase from $51 million in 2016 by at least 20 percent during the next five years. But going by figures outlined above, this has not worked.
Through the National Export Strategy II (NES II)(2021–2026), Ministry of Trade and Industry expects an improved trade balance by ensuring that Malawi exploits opportunities that have remained untapped for a long time in the various bilateral, regional and multilateral trade agreements.
But wait a minute. We have heard such assurances before in most of the Malawi Government documents only to have little on nothing to show at the end of the day.
Export strategies should not be mere lip-service or pieces of paper left to gather dust on book shelves at Capital Hill. They should be living documents backed by practical action plans that can work in the Malawi situation to achieve results. Building the industrial sector to reduce imports that can easily be produced locally is one of the good starting points, of course with investment in reliable access to electricity as well.
International trade opportunities abound out there. It is just a question of getting organised. I feel with commitment and some level of aggressiveness, Malawi can do better.