From farms to borders via warehouses: protecting farm produce exports from unscrupulous traders

Lilongwe, March 24, Mana: When it comes to Malawi’s major exports, agriculture, especially on the farm produce side, has always been the mainstay. The exports from this sector include tobacco, tea, sugar, cotton, macadamia nuts, rice and groundnuts, among others.

While tobacco, tea and cane sugar together have been known to generate over 70 percent of export earnings (tobacco alone has been providing over 60 percent of foreign exchange earnings), it has not been the case with the other exports.

The country has, for a long time, been losing a lot of forex, as some traders have been taking advantage of lack of structured markets for farm produce like beans, maize, cowpeas, groundnuts, and soya beans and use other illegal means to export the commodities.

It is against such background that government introduced Malawi Revenue Authority (MRA)-controlled export warehouses last year to curb tax evasion and smuggling of farm produce.

Government amended some sections in the Customs and Excise Act, and one of the amendments requires exporters of some farm produce to export their goods through prescribed warehouses in line with the law.

With this law, government has ensured that all farm produce exit the country by following the right procedures and that exporters reconcile the forex with the Reserve Bank of Malawi. For exporters who go against this provision, there is punishment, in accordance with the law.

President Lazarus Chakwera, in this year’s state of the nation address he delivered on February 09, reiterated his administration’s quest to control the loss of forex from farm produce export proceeds.

“To ensure the repatriation of foreign exchange earned from produce exported from Malawi, my administration has restricted export licenses to selected commodities and to those exporters that use MRA bonded warehouses,” he said.

This export warehousing process entails storing goods in a warehouse for a certain period of time. The goods are inspected before being exported.

According to MRA head of corporate affairs Steven Kapoloma, more businesses are now coming to the Authority to get license to own and operate the export warehouses.

In the central region alone, more than 70 of such warehouses are operating, exporting farm produce like groundnuts, soya beans and rice, among others.

“We are overwhelmed by the number of people that want to own and operate export warehouses. Because those that were the pioneers of these export warehouses have reaped the benefits, more people are coming into their warehouses and using them to export,” said Kapoloma during a recent tour to some of the export warehouses in Lilongwe.

The warehouses initiative, says Kapoloma, has improved the process of tracking the farm produce export proceeds, from buying the commodities from the farms all the way to exporting them through the borders.

“We are able to track the movement of the produce from the farm gate to export warehouses all the way to exporting outside this country.

“We are able to track the quantities as they are getting into the warehouses and as they are getting out. This is a very good control measure as far as proceeds of our exports are concerned,” he adds.

Before introducing the export warehouses, according to MRA’s Lilongwe Exports Station Manager Queen Nkhata, most farm produce were frequently being smuggled out of the country.

“We have really improved with this new initiative put in place. Previously it (exporting farm produce) was not as controlled as it is. Farm produce were just taken out of the country without proper arrangements.

“With these new procedures, we are now controlling these farm produce from customs controlled warehouses. So, we are seeing some improvements and we are sure that we'll do even better,” Nkhata says.

Apart from what Nkhata is saying, that these export warehouses are helping to curb illegal exportation of farm produce, the warehouses are also, as Kapoloma has already indicated, benefitting the operators.

James Nyasulu is warehouse manager for African Commodities Trading in Lilongwe, and he hails the warehouse initiative, saying it has raised their business to higher standards.

“Before the export warehouses, our standards were a bit low because we didn't have time to grade the products.

“But with the export warehouses, we now have time to bring in the commodities, grade them and then export them,” he says, adding that their commodities have never been turned down for quality reasons, as it used to be the case before the warehouses were introduced.

Rachel Banda, an accountant at Giant Sprouts Ltd, an Exports and Imports company that owns a groundnuts export warehouse along the Bypass Road in Lilongwe, concurs with Nyasulu, waxing lyrical about the warehouses.

She says: “Before the warehouses, we could not take good care of our products like the way we do now. There was no proper security, and there was a lot of damage to the goods; we were making losses.

"But with the warehouse, there has never been a time when we lost any goods. The quantity that we bring in is the same quantity that we export. And we stock huge quantities because of the warehouse. So, the warehouse is helping us a lot.”

Of course MRA is encouraging farm produce exporters in the country to export their goods through these customs controlled warehouses for revenue collection purposes. This is in addition to protecting forex.

According to MRA, farm produce is among the goods most smuggled from the country. It, therefore, makes a lot of sense to put proper mechanisms in place to guard against the vice.

With good measures in place, the outlook for proceeds to be realized from exporting farm produce looks bright.

Speaking to the media when he toured Gala Macadamia Farm (Gala Macs) in Lilongwe on Wednesday last week, Minister of Agriculture Sam Kawale said exporting macadamia nuts has potential to generate a lot of revenue for the country.

Through Gala Macs alone, said Kawale, it is expected that US$30 million can be generated annually through exporting the commodity. For this reason, government intends to empower more farmers to embark on macadamia farming for export purposes.

This is the sort of potential that government, through MRA, is trying to protect through the export warehouses.

However, after restricting export licenses to farm produce exporters who use MRA bonded warehouses, which is what President Chakwera says his administration has done, perhaps it is high time government rather focused on more ways of incentivizing this kind of exporters.

These should be ways on top of what the Ministry of Trade sometimes does by coming in to help traders secure export markets for their commodities. This can be done better, with well-structured mechanisms in place, and in a more coordinated way.

A lot surely needs to be done by all stakeholders to ensure that those trading in exporting the country’s farm produce embrace the customs controlled warehouse initiative, which has proved beneficial to both government and traders.