Malawi Government slammed! Policies threatening local cement and coal industries – Mining & Trade Review (May 2016)

The piece “Malawi Government slammed! Policies threatening local cement and coal industries” featured below was initially published in Malawi’s Mining & Trade Review Issue Number 37 that is circulating this May 2016.

The full edition is available for download here.  This monthly publication is edited by Marcel Chimwala.
2016-05 Mining & Trade Review Cover

Malawi Government slammed!

Policies threatening survival of local cement industry

…Coal industry dying on its watch

By Marcel Chimwala

Local industry captains have taken a swipe at the Malawi government for failing to protect the country’s strategically important cement and coal industries whose survival is hanging on a thread due to stiff competition they are facing from dumped products from neighbouring countries.

Experts interviewed by Mining & Trade Review expressed concern that while neighbouring countries such as Tanzania are seriously protecting their local industries, Malawi is proving a soft spot in the region as the government has issued licences to importers of cement allowing massive imports into the country, which are posing huge competition to the local infant industry.

Likewise, the coal industry in the country is collapsing with companies such as Intra Energy Corporation and Eland Coal Mines suspending their coal mining operations in the northern region due to market challenges following an influx of cheap coal from Mozambique.

Former Principal Secretary for Trade and Industry who also served as Minister of Natural Resources, Energy and Environment in the late Bingu Wa Mutharika’s administration, Grain Malunga, said cement and coal industries are strategic industries which need protection from government since they are big employers and are crucial for economic development of any poor country.

The imported cement impacts negatively on Malawi’s infant cement industry. Any country that wishes to grow economically protects its infant industry until the industry has matured,

said Malunga, who is also a founder and executive member of the Malawi Chamber of Mines and Energy.

He also said it is rare for industrial minerals such as limestone to benefit from Foreign Direct Investment and therefore it is important to promote local investors to develop these minerals for import substitution, and employment creation.

Cement Products Limited Managing Director, Aslam Gaffar, said the massive importation of cement is a threat to the existence of the local industry citing that the situation would force his company to consider suspending its Mangochi factory expansion plan, which is set to create more jobs for Malawians.

If the government does not do enough to check the massive cement imports, we will consider suspending the second phase of our factory expansion which, if completed, will double our production capacity to 20,000 bags per day,

said Gaffar.

Minister of Industry and Trade Joseph Mwanamveka, however, said the government is permitting cement imports to encourage competition and protect consumers from overpricing by the local producers.

He said the country cannot ban imports because it is a signatory of protocols for the World Trade Organisation, Common Market for Eastern and Southern Africa and Southern African Development Community which require the country to open up to trade with other countries.

The Minister also said the issuance of cement imports is not in contradiction with the ‘Buy Malawi Campaign’ as it gives freedom to Malawians to choose whether to buy Malawian made cement or the imported one.

Malunga, nonetheless, maintained that it is inconceivable to argue that imported cement will bring competition to local cement pricing when these local companies are struggling to access investment capital and favourable taxation.

He said:

The best that this imported cement can do is to slow growth of the local industry and effect loss of jobs. Government should put in place investment incentives to promote the growth of the industry and ensure that those investment incentives promote competitive pricing of local cement.

Likewise, the coal industry has seen restriction of export of coal to Tanzania because Tanzania is protecting its coal industry. It is unfortunate that Malawi is happy to kill its coal production by putting favourable conditions to importation of coal from Mozambique. Coal is a strategic commodity which requires serious support to its development for energy generation and steam generation for agro-processing and manufacturing.

He said the prevailing situation is a clear testimony that the country is not prudent enough to utilise its foreign exchange wisely as all these imports we see locally have created jobs for the exporting countries.

Malunga said the government needs to engage industrial economists and strategists to come up with an implementable industrial policy related with manufacturing for import substitution, manufacturing for export and value addition of its natural resources for greater economic benefits.

On the coal mining front, Managing Director for Rukuru Mining Bruno Kloser asked the government to regulate the coal industry as a way of protecting local investment.

It may be difficult for Malawi to ban coal imports and the only way to nurture the coal mining industry in Malawi is to regulate the industry and ensure that there is no excessive importation. We believe that quality coal like that from our deposit will find a market in this case,

said Kloser, whose company is prospecting for coal in northern Malawi.

Meanwhile, Eland Coal Mine has suspended its operations while Intra Energy has announced that it is pondering over the sale of its Nkhachira Coal Mine in Malawi and other local operations due to market challenges as a result of massive importation of coal from Mozambique by Malawian coal consumers.

Intra Energy stopped exporting Malawi coal to Tanzania due to restrictions by the Tanzanian government on coal imports in order to protect that country’s coal industry.

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