How Malawi can Break Through a $3 Billion Market
Updated: Jan 21, 2020
Ann Landers, a pseudonym used for an American columnist, once said, “opportunities usually disguise themselves as hard work, so most people don’t recognize them.” For Malawi, so will the developing trade tirade between the United States of America and China appear as the gaps between the misaligned nations continue to widen on a matter of turf-oriented ideology. This website can bet easily how distinguishing the opportunity created by the rift between the two behemoths of global economics from newsworthy entertainment will be a tough nut to crack for Henry Mussa, our Industry, Trade and Tourism Minister. The latter, we reckon, would be Mr. Mussa’s easy inclination. Not because he is lazy, but that the system he heads has produced too much paperwork that it has ceased to think.
But one part of the unraveling trade war between the USA and China is poised to hit so hard is one that Malawi might just potentially profit from, agriculture. Therein the details lie the most compelling realities that having a Malawi Embassy in China, while hosting its Chinese opposite in Lilongwe, might be a missed opportunity if no such discussion as one that unfolds in this article is one Mr. Mussa avoids.
When Donald Trump’s administration imposed tariffs on aluminium and steel from China, Xi Jinping’s government retaliated with the raising of tariffs on pork and soyabeans imported from America, among other choice commodities. So, to start with pork, the trade war threatens to stifle up to all of 496,000 metric tons of products sold by American pig farmers across the Pacific. To the USA at large, the economic effect might very well be small. But to the American farmer, this means forfeiting approximately $1.1 billion in revenues.
On the other hand, more dramatic are the expected losses that will affect soyabean-growing States, mainly clustered in America’s mid-West, a home to most of the country’s farms. The top 10 soyabean-producing States (Illinois, Iowa, Minnesota, Nebraska, North Dakota, Indiana, Missouri, Ohio, South Dakota and Arkansas, in descending order per bushels of soyabean produced), collectively produced 95 million metric tons of the legume in 2017. America has normally spared a quarter of this for its trade with China. Using April 2018 US prices of soyabeans, $442 per metric ton, it means trade revenues worth $10.5 billion that American soyabean farmers risk losing as the touting of fists continues.
Now, trade wars are normally not to be encouraged, not even for major global actors like the USA and China. Yet, at the same time, they create an opening where countries like Malawi can increase their production and raise their quality standards. If this website were to challenge Mr. Mussa to direct effort so Malawi’s pork farmers would fill even a fifth of the Chinese pork import bill, Malawi’s annual foreign exchange earnings would rise by at least $250 million. If Mr. Mussa were to realize that his country ranks 40th globally – and fourth in Africa – as a soyabean producer, stretching the capacities of Malawian farms to producing a quarter of the legume demanded by China from the USA would see soyabean producers increasing their production from about 80,000 metric tons to 1 million metric tons. If it were to materialize, this would rein in an additional $2.6 billion from soyabean alone.
It is not too difficult to see how earnings of $3 billion by our agriculture industry would be lifechanging. Agriculture would be lifechanging without tobacco, as a matter of fact. Not as a means of desperate survival as we have done it in the past so many years. These earnings would only be with one trading partner, in one of many lines of trade. But of course, the changes to reconfigure both pork and soyabean farmers would have to be swift and calculated, and the business negotiations behind them would have to be shrewd. They would have to strike the right balance between industrial entities that would produce at scale, yet with enough outsourcing capacity to engage the historically lamented smallholder farmers. The new agreements with China would have to span several years of incremental production and supply until the desired trade amounts are reached, to allow adjustments on local agriculture and economy to take place with some humanistic grace. And to achieve such an agreement would be the work of good diplomacy.
It is not like Malawi has never done it before. Until 1975, we only knew one aid and trade partner in the one colonial master we had had, the United Kingdom. At the turn of 1975, Malawi signed the Lomé Convention as a way of consolidating its relationship with the European Economic Community (EEC) States. What followed was the soaring of trade with the world, with tea and sugar quickly bringing in 83% of total export earnings by 1983. Malawians might remember this as the golden period during Malawi’s young post-independence age when Kamuzu International Airport routinely received British Airways, the Royal Dutch Airline (KLM) and the Union de Transports Aériens (UTA) from France, among other major airlines of the day. Our airport was busier, much busier, than it is today. As these alien aircraft shipped visitors and Malawians alike across the globe, so did they ship tonnage after tonnage of tea and other commodities from our farms to where they fetched the best buck.
Aircraft may not haul a couple of millions of tons of Malawian soyabean into the air profitably in a possible Sino-Malawian agriculture trade deal. A new supply chain for that may have to establish partly on land and majorly span the international waters towards the East. However, pork and pork products, if we can swiftly learn to add value, would probably fare better under air travel than the transport combination just mentioned before. This is because of the possibility that lifting a hundred thousand metric tons may require about 892 flights (about three flights everyday for a year), if we go by the load capacity of some of the largest aircrafts the world flies today. And with the mainly one-way trade with China already fully bloomed, imported goods would be airlifted into Malawi, making it possible to run the aircrafts back to Malawi economically. This could very well be called scale economies. And a great decision.
The sad news is that, today, Mr. Mussa is fixated on an ensuing parliamentary election. He might very well be preoccupied with politics so much that his job description creates noise in his ambitions for another term. The problems facing the contestability of his master, the Minister of Agriculture he would need to convince to go for such a daring leap, happens to also be the man holding the presidency and a large number of years to his age. And if there is truth to an audio clip that exposes a dark conversation between the Democratic Progressive Party’s (DPP) General Secretary Griselda Jeffrey and Kondwani Nankhumwa, our Local Government Minister, then Mr. Mussa is more preoccupied with finding a lasting exoneration to continue earning a Minister’s salary and some much-needed dignity.
This confluence of politics and development will continue to challenge Malawi for so many years to come. And for as long as politicians are appointed to leadership positions in the executive with no standards to measure performance, appointees as Mr. Mussa will see such opportunities pass them – together with Malawi’s 17 million people – by.
For Malawi, Anne Landers may continue to be very relevant.