Smuggled Goods Flood Malawian Markets: A Looming Revenue Crisis
A pervasive examination of various markets has exposed a widespread failure of proper importation channels, potentially depriving the nation of substantial customs revenue.
LILONGWE, Malawi – An investigation has revealed that Malawian markets find themselves inundated with foreign-made products obtained through illicit means, writes Brenard Mwanza.
A pervasive examination of various markets has exposed a widespread failure of proper importation channels, potentially depriving the nation of substantial customs revenue.
Each weekday morning, a procession of men pedals into the capital city of Lilongwe, bearing sacks of baking flour and crates of Frozy drinks.
At Bwalo La Njovu in Area 2, a wholesale market clandestinely dealing in contraband from Mozambique thrives.
During a recent visit to the site, we observed a group of men being ushered into a waiting truck, sealing lucrative deals with another businessperson seeking to procure smuggled beverages.
A case of twenty Frozy bottles reportedly commands a price of K8,200, while in Lilongwe's townships and throughout Malawi, they fetch K400 to K500 per bottle.
The presence of Frozy on the market raises questions, as the Malawi Bureau of Standards (MBS) had previously banned it for alleged health hazards linked to high citric acid concentrations, later certifying it.
Ironically, the smugglers themselves acknowledge the illegality of their activities, driven by the pursuit of survival.
One anonymous cyclist revealed, "We cycle for almost six hours. We encounter the police on our route but typically offer them K300 at each checkpoint to ensure safe passage."
Yet, what contribution does the citizenry make to the government amidst rampant tax evasion?
Curiously, goods such as baking flour, also smuggled from neighbouring nations, require an import permit, as they are prohibited.
Economic expert Milward Tobias underscores that the smuggling epidemic exposes vulnerabilities in border control systems, manned by Immigration, Malawi Police Service, and Malawi Revenue Authority officers.
The Malawi Bureau of Standards (MBS) warns of numerous unapproved and unregistered products saturating the market, endangering consumers with substandard items due to a lack of authentication.
The Malawi Revenue Authority (MRA) voices concern that smuggling operations undermine government revenue, which is essential for fulfilling financial obligations, including infrastructure development, healthcare, education, security, and subsidised agricultural inputs.
Wilma Chalulu, MRA Marketing Communications Manager, stated, "Apart from intensifying patrols, we are engaging with communities to sensitise them on the dangers of smuggling."
However, Chalulu did not specify the extent of financial losses incurred by the authority due to this illicit practice.
The recent procurement of drones by the MRA is part of a broader strategy to combat smuggling, as many culprits utilise uncharted routes, rendering traditional enforcement measures less effective.
A study by the International Journal of Research Publication and Reviews identifies multiple motivations behind smuggling, including high profitability driven by price disparities between countries, exorbitant import and export taxes, a dearth of formal employment opportunities, supply-demand imbalances in formal systems, corruption among tax and security personnel, uncharted smuggling routes, weak border enforcement, and political influence.
Tobias proposes a solution, asserting, "To curb this malpractice, consumers must be educated not to purchase illegally imported goods, thereby eliminating the market for such contraband."
Despite rising average revenue collections in recent years, Malawi's domestic revenue performance lags behind the African continent's average standards.
Consequently, the nation must intensify efforts to bolster revenue mobilisation, raising tax-to-GDP ratios to meet international benchmarks.
According to the Customs and Excise Act, the MRA has the authority to seize contraband shipments and impose fines of no less than K100,000 or three times the goods' value for the offence committed, whichever is greater, with imprisonment for up to three years.
The government and relevant stakeholders must commit to rigorous enforcement, imposing stringent penalties on smugglers, and fostering a conducive environment for effective coordination and communication between enforcement units and the public to eradicate this malpractice.
To secure its revenue collection future, Malawi must fortify enforcement mechanisms, empowering the Malawi Revenue Authority and law enforcement agencies to combat smuggling.
Only through a resolute stance on this issue can Malawi avert an impending revenue crisis.