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MALAWI: Informal Trade Crucial For Job Creation

Pilirani Semu-Banda

BLANTYRE, Aug 15 2007 (IPS) - Every day a bus, usually packed to capacity, leaves Malawi for South Africa. Most of the passengers are traders, off to sell wooden curios in the main South African cities of Johannesburg, Durban and Cape Town.

A few stop in Harare, Zimbabwe, with pieces of cloth and food products such as flour and sugar.

From South Africa, the traders bring back items of clothing, shoes, electronics and personal accessories. Those who go to Zimbabwe, buy butter, jam and tomato sauce to sell in Malawi.

Some traders also cross the borders into Mozambique, Zambia and Tanzania, bringing back goods. Those that have substantial amounts of money even fly as far as Kenya, Hong Kong, Dubai and Thailand to bring back electronics and apparel.

Maria Kachale (32) has been engaged in cross-border trade since 1999. From the proceeds she has built a three-bedroom house and bought a second-hand car.

Kachale says it is not easy to be in the trade business. She spends a lot of time on the road. ‘‘It takes two full days to drive between Malawi and South Africa and that alone is very tiring.’’

The businesswoman, who stays in Malawi’s capital Lilongwe, also covers long distances scouting for customers to buy her merchandise and for goods to bring back to Malawi.

She says before the economic problems in Zimbabwe, traders had a choice of either going to the now poverty-stricken country or to South Africa. ‘‘Zimbabwe is a bit closer to home but now we do not have much choice but to travel all the way to South Africa since it is a more lucrative trade destination.’’

Another person involved in informal cross-border trade is the 27-year-old Zalimba Khoviwa who stays in Mulanje, a district in the south of Malawi which borders on Mozambique. Since the age of 19 years, Khoviwa has been cycling across the border to buy maize, pasta, toothpaste and soap in Mozambique which he re-sells in his area.

‘‘A number of us help in providing maize, which is a staple food in my area. Most times we do not grow enough to feed ourselves,’’ says Khoviwa.

Khoviwa is among some 500 informal cross-border traders in his area, according to a November 2006 survey by the National Association of Businesswomen (NABW) which promotes small-scale economic activities in Malawi.

NABW national credit coordinator Lackson Kapito says Lilongwe and the main commercial city of Blantyre are home to approximately 10,000 such traders while the country’s third largest city, Mzuzu, and the lake district of Mangochi have 2,000 each.

Kapito estimated that at least one hundred people from the 23 other districts in the country have been involved in cross-border trade. The country has a population of 12 million of whom 65 percent of the population live below the poverty line of less than a dollar per day.

Economic analyst Mavuto Bamusi speaks highly of the effective role that informal cross-border traders are playing in the Malawian economy. He says this type of trade offers economic opportunities to women and youth in the country who would otherwise not be employed.

‘‘The concern is that they usually face all kinds of social and economic injustices, such as harassment by public authorities, especially the tax department. They undergo unnecessary checks which are unregulated and they are forced to pay exorbitant taxes,’’ says Bamusi.

He says the other disadvantage is that most of the traders are not literate and are ignorant of tax rates on different types of goods. ‘‘Unfortunately, there is no formal grouping that looks after the interests of these traders, so they cannot fight for their rights,’’ Bamusi points out.

These experiences contradict the mission statement of the country’s revenue services, the Malawi Revenue Authority (MRA), which states that it contributes to national development through cost-effective, equitable and effective enforcement of revenue laws and to continuously providing quality service to all stakeholders.

Another economic analyst, Abel Mwanyungwe, agrees with Bamusi about the function of informal cross-border trade. He says it is important to the country as it provides informal employment to many people who end up contributing to the country’s economy as they pay tax and are able to sustain their livelihoods and that of their families.

Mwanyungwe worries over the lack of market research and information on informal trade which, he says, leads to most of the traders not knowing the demand for their merchandise.

‘‘The economic environment in the country is not friendly to them,’’ he points out, explaining that banks demand collateral, being hesitant to provide loans to informal trade. Hence traders have difficulty accessing loans for capital.

Mwanyungwe also says that even if the traders were to easily access loans, they would face prohibitive interest rates, currently ranging between 23 and 26 percent.