Southern Africa: Removing barriers to trade

Gondwe is a veteran trader, but the technicalities of the transaction remain opaque to her. She casts frequent glances in the direction of the offices - a man posing as a clearing agent once duped her and disappeared with her money.

Her anxiety is broken by the chattering of the other women in her company.

"Somebody is running around with the form and I do not know how long it will take. I just have to wait," Gondwe says. "Four hours later, he returns and I also have to pay him for his work. It's torture."

Steve Kapoloma, taxpayer education and public relations manager at the Malawi Revenue Authority, says many small scale traders arrive at the border without enough money to pay the fees for their goods. Others arrive unsure what documentation is supposed to accompany their goods.

He concedes it makes little business sense for a trader with a consignment worth less than 500 dollars to be held up for four hours or longer at the border. He says that's why traders so frequently resort to smuggling, risking confrontation with law enforcement officials.

Smuggling also means a modest amount of customs revenue is lost to Malawi and its neighbours, but much more damaging is the effect on compiling reliable statistics on trade volumes.

"These figures assist in development planning and trade management," says Maurice Gondwe (no relation to Cecilia), a research and projects officer at the Malawi Export Promotion Council (MEPC).

The traders waiting patiently under the tree are deeply envious of their counterparts whose business takes them across the border between Malawi and Zambia: they are enjoying the benefits of the Simplified Trade Regime (STR).

At the Mwami/Mchinji Border Post, small-scale traders entering and returning from Zambia no longer need a clearing agent: a simple form has been designed specifically for small shipments.

Less than half as long, the simplified form's second page consists of instructions and a glossary of terms. So if the trader does not know what "Port of clearance", "Net weight", "Declaration by exporter/importer", "Quantity" and "Identification of transport" mean, the explanations are right there.

Import and export duties for consignments under $500 have been waived; also gone also is the requirement for a certificate of origin.

The Common Market for the Eastern and Southern Africa is behind the simplified regime. Peter Oldham, coordinator of Cross Border Trade at COMESA says Malawi and Zambia were the first of the regional trade body's 10 members to agree to pilot the STR back in 2006.

Oldham explains that a similar regime is being implemented in a slightly different form in the East African Community region. There Uganda took the lead, followed by Rwanda. The regime fosters shared interests amongst member states, Oldham says.

"The STR is a process whereby governments have to agree a common approach to dealing with small traders. Agreeing a common list of goods that are not dutiable and do not require a Certificate of Origin is recognition of common interest to promote trade," he says.

Economic policy analyst Mavuto Bamusi agrees there are numerous benefits, but has reservations. He fears the simplified trade rules could choke development of production in Malawi.

Bamusi says Zambian traders are more experienced and aggressive than Malawian traders. Trade volume between the two countries presently favours Zambia, according to COMESA's statistics. In 2008, Zambia's exports to Malawi amounted to 60 million dollars while its imports from Malawi valued only about 12 million dollars.

"STR may widen these imbalances which may affect local production, unless government puts in measures to protect the local industry," Bamusi says.

But the MEPC's Maurice Gondwe disagrees. "The agreement is challenging us to step up production and take advantage of the duty free goods slot."

The list of duty free goods is dominated by agricultural products including bananas, live rabbits, onions, sunflower seeds, live goats, tomatoes, potatoes, live sheep, smoked fish, and mushrooms. Malawi's agriculture sector is growing, he argues.

"Let's instead educate our traders that there is no more need for them to be smuggling goods. Things are now fairer for them and they stand a chance to make good profits and grow their businesses," he says.

Zambia reached agreement with Zimbabwe over a Simplified Trade Regime in June, and COMESA expects to see the STR implemented across members states by the end of 2010.

Cecilia Gondwe and her party at the Mwanza border post will have to struggle on, though. Mozambique is not part of the COMESA bloc and South Africa has not yet implemented the regime.

The second in a two-part series looking at the Simplified Trade Regime between Malawi and its neighbours.

Article published courtesy of IPS Africa